The casual dining space offers the best improvement opportunities amid restaurant industry volatility, says Analyst Brad Ludington, forecasting that those players who focus on strengthening their brands will outperform those offering heavy discounts.
“I think the brands that have stuck to their brand identities and their core competencies throughout the recession will fare better, rather than the ones that went just for deep discounts to try to buy some traffic at that point in time,” said Ludington, who works at KeyBanc Capital Markets.
Not only is it difficult to tell customers who received discounts during the economic downturn that they will pay the full price when the economy starts heating up, Ludington says, it’s also a risk for restaurants that lured customers during promotions who weren’t necessarily compatible with those restaurants’ core consumers.
“I believe the better way to go about that has been through limited-time offers or bundling of menu items, or even adding a little something extra onto the purchase,” said Ludington, citing The Cheesecake Factory’s (CAKE) introduction of what are seen as “incremental purchases,” small plates and snack menus.
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