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O’Charley’s — the Nashville, Tenn.-based casual-dining restaurant and bar chain — made the difficult decision this month to close 18 restaurants, or just around 17% of its total portfolio. The 50-year-old chain decided to prune lower-performing stores as a result of the challenging post-COVID inflationary environment, particularly commodities inflation, which led to compressed margins.
Ultimately, O’Charley’s CEO Craig Barber told Nation’s Restaurant News, the difficult decision came down to preserving cash flow, and being able to start the brand anew with a more asset-light portfolio.
“This was about the long-term health of the O’Charley’s brand,” Barber said. “We’re here after 50 years, we know our customers have an affection for us, and we know we have great products and deliver great value, but if the four-wall economics don’t work, then we can’t continue to keep stores open that aren’t producing cash-flow….I'm really pleased with how the team has reacted both from a store-level performance perspective, but also in terms of marketing and messaging to our guests and potential guests.”
Throughout this process, O’Charley’s is making progress on improving cash flow and sales margins, bit by bit and week by week. One of the most crucial strategies for the company moving forward is being smart about pricing and discounting. For example, the brand used to have a “Free Pie Wednesday” deal that went away and came back this year, but now requires the purchase of an adult-sized entrée before you get the free slice of pie. Additionally, back when the deal was first introduced a decade ago, O’Charley’s was offering free slices of pie that were costly, and now the pie deal only extends to pie flavors with cheaper upfront costs for the company.
“When I arrived here, discounts for O’Charley’s were in the double digits and we moved that into the low-single digit percentages,” Barber said. “Now, we have to make sure that we still have the offerings that get our guests in the door, and we’re making good progress on that. We started offering a new promotion around shrimp lovers and repackaging the great shrimp we always had as a combo offering….the progress we’ve made is substantial and meaningful.”
Balancing pricing and promotional strategy with business needs is just one piece of the puzzle. Barber said the company has also worked on its outside partnerships to improve traffic, particularly on slow days. For example, O’Charley’s began recently partnering with NASCAR through its Coca-Cola partnership to launch the “Pit Stop Promotion” and encourage guests to come in on Mondays, which is typically the slowest day of the week for most restaurants.
But as O’Charley’s looks to get back to business basics with a now-smaller portfolio, would the brand ever consider expanding yet again?
“I think we would absolutely love to build some more restaurants, particularly in markets where we have a good synergy between leadership and the operational ability to absorb [new locations] without being disruptive or distracting,” Barber said. “I think growth is on the table. I don't think it's on the table this month, but it's on the table…. The O’Charley’s brand has survived because of our opportunity to deliver on the promise of the brand.”
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