Old Casual-Dining Chains Stuck in the Middle Restaurants like Applebee’s and Chili’s Squeezed from Above and Below as Tastes, Income Change

Casual dining is in the throes of a midlife crisis.

A quarter-century ago, consumers feasted on unlimited breadsticks and big desserts at Applebee’s, Olive Garden and Chili’s. Today, many Americans are trading those restaurants in for cheaper, faster fare or splurging a bit for a trendier experience.

Midprice sit-down restaurants — known in the industry as casual dining — have seen on average about 2 percent fewer customer visits each year since 2008. That translates to a total drop of almost 600 million annual visits, to 6.4 billion in 2012.

“They’ve been around quite a while, and … many of them have not stayed as relevant in meeting consumers’ wants and needs of today,” said Bonnie Riggs, a restaurant analyst with NPD Group.

The world’s largest casual-dining company, Darden Restaurants, has been hit especially hard. Company executives cut sales and earnings expectations last month, acknowledging to analysts their major brands such as Olive Garden and Red Lobster have suffered because they’ve been too slow responding to shifts in how Americans eat out.

“It is clear to us that, given our current business situation, we are indeed in a new era,” Chief Executive Officer Clarence Otis told analysts.

Applebee’s and IHOP owner DineEquity reported declining traffic at both brands for its fourth quarter, while Chili’s parent Brinker International toned down its profit forecast.

“We know casual dining is not the bright, shining star that it used to be,” Brinker Chief Executive Officer Wyman Roberts told analysts.

Tony Roma’s has dwindled from 157 U.S. restaurants to 40 during the past decade — though the company says it’s still opening new locations.

The industry is trying to reinvent itself with lower-price meals that are quicker and more healthful.

Darden said recently it plans to speed up Olive Garden’s lunch service, jump on culinary trends more quickly, attract younger diners with more technology and lure back lower-income customers with good deals.

Americans cut dining-out budgets dramatically during the economic downturn, from which many haven’t fully recovered.

“It’s a lot of money” to dine out at Red Lobster or Romano’s Macaroni Grill, said Jhonatan Arias, 26. “If you have the money to sit down and splurge, then we go to a place like that.”

Last week, he took a noontime break at Tijuana Flats, a “fast-casual” chain that has gobbled up customers at a steady pace.

Visits to those restaurants, which include Chipotle and 4 Rivers, rose by 8 percent last year compared with 2011, according to NPD Group.

Fast-casual restaurants sell fare that’s a step up from fast food. But customers still order and pay at the counter.

“It’s quick. It’s easy. It’s less expensive,” said Fraley Sadlo, who frequents Tijuana Flats and Einstein Bros Bagels with her sons.

Applebee’s is testing a lunchtime express service in its hometown of Kansas City, Mo. Customers can order and pay at kiosks, so they don’t have to wait for servers to bring checks when they’re done.

The old chains are getting threatened by new “polished casual” restaurants.

Places such as The Cheesecake Factory appeal to younger, more affluent diners who “want something new, contemporary, more social and more exciting,” said Darren Tristano, executive vice president of research company Technomic.

In recent years, Darden has been moving in the same direction, launching Seasons 52 in 2003 and now acquiring Yard House, an upscale bar and grill chain.

Restaurants that stay with the traditional model risk losing customers such as Sadlo, the mom who visits fast-casual places with her kids.

For date night with her husband, she moves up to more-expensive, often independent restaurants.

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