Visits to casual dining restaurants were at a 6-year low in the year ending February 2014, according to The NPD Group. Since 2009 casual dining traffic has been declining at a rate of 2 percent each year, totaling a loss of 7.1 million visits. Price sensitivity, the customer experience, increased competition from fast casual outlets and rampant industry promotion contribute to the casual dining segment’s declines, NPD said.
According to a news release, major casual dining chains have fared better than smaller chains long-term because of their ability to advertise and deal more. Visits to major casual dining chains have been flat for the last five years compared to visit declines of 3 percent for small chains and independents, according to NPD’s foodservice market research. Major chain restaurant units increased by 1 percent in NPD's Fall 2013 restaurant census, and small chains and independent decreased units by 1 percent.
The offering of incentives/deals has been an important visit driver for the major casual dining chains for several years. These promotions helped to stem traffic losses during and subsequent to the recession of 2008/2009. Throughout the past six years, major casual dining chains ramped up their promotional offers, reaching an all-time high of 29 percent of all visits in 2013, the release said. This is higher than that noted for the major quick-service restaurant chains (27 percent), which historically have been the most aggressive in the deal arena.
The deal rate at casual dining independents has held relatively steady at 17 percent since 2006. There have been short-term improvements in the traffic, but casual dining traffic has not improved overall.
“It appears casual dining operators’ promotional offers have been in place for too long. For example, the ‘two for $20’ craze is now available in some variation at nearly every casual dining chain,” NPD Restaurant Analyst Bonnie Riggs said in the release. “Some liken it to an echo chamber because there’s no competitive differentiation. Relying on existing promotional tactics may no longer be a viable option.”
Riggs explains that casual dining concepts have been pigeonholed into a less frequent, more special meal occasion destination. Consumers are visiting less expensive restaurants and casual dining’s competition is both lower- and higher-priced restaurant alternatives. Price concerns are also affecting ordering behavior at casual dining restaurants, or menu offerings aren’t meeting the customers’ needs.
“Casual dining operators must reinvent offerings that have lost their luster and introduce new promotions and menu items to attract customers and encourage repeat visits,” Riggs said. “Consumers will wait you out once you have shown your willingness to provide regular discounts. Until you reach the price point that delivers the value they have come to expect, they will stay away or find other restaurants that meet their value expectations.”