Swiss Chalet is owned by Cara Operations Ltd., which is a good dividend-growing company.Kevin Van Paassen/The Globe and Mail
Feeling the bite of emerging rivals touting healthier and more international fare, often in hipper settings, many incumbent restaurateurs are rewriting their business recipes.
The growing urgency among eateries to move in new directions comes in a relatively stagnant overall restaurant market, with sales in decline at sit-down, full-service eateries.
Executives at mid-priced sit-down restaurant chains, such as Swiss Chalet and Kelsey's, both owned by Cara Operations Ltd., and Boston Pizza International Inc., feel the heat as consumers shift to more affordable fast food or grocery stores' takeout alternatives to find savings, or splurge on pricier fare at eateries positioned as exotic or having more flair.
"Restaurants really need to rethink their business model," said Robert Carter, executive director of food service at market researcher NPD Group.
Faced with the fast-shifting trends, restaurants are rushing to expand beyond their traditional offerings and locales to win back customers. The changes are prompting chains to make acquisitions to boost business; team with UberEATS or other delivery and takeout services to cater to time-stretched consumers; and offer healthier-sounding fare, new ethnic flavours – and even potato chips seasoned with Swiss Chalet sauce.
Boston Pizza, which last summer started to put more of a spotlight on its hamburgers, launched a revamped urban-restaurant design last month with high-top tables and stools and interactive digital screens, counting on the downtown Toronto facelift near the Rogers Centre to act as a prototype for its push into city centres from its usual suburban haunts.
"It's really signalling some change," said Alan Howie, an executive vice-president at Boston Pizza, whose sales at restaurants open for a year or more – a key industry measure – dropped 3.1 per cent in its fourth quarter of 2016 and 0.3 per cent for the year.
Industry numbers reflect the need for change. Last year, sales at sit-down restaurants overall slipped 2 per cent to $22-billion and traffic fell 4 per cent to 1.3 billion visits; sales at fast-food outlets rose 4 per cent to $26-billion and traffic picked up 1 per cent to 4.5 billion visits, according to NPD data.
Pumped-up offerings at grocery takeout counters are snaring business from conventional restaurants as well: Those retail sales jumped more than 10 per cent in 2016 to $3.8-billion, NPD research shows.
Executives at Boston Pizza and Cara, which owns an array of restaurant chains including Montana's, East Side Mario's and Casey's, have blamed soft same-restaurant sales (at locations open a year or more) on weak oil-based economies in Alberta, Saskatchewan and Newfoundland.
Cara, whose same-restaurant sales fell 2.8 per cent in its fourth quarter and 1.6 per cent in 2016, also pointed to "uneven" performance among its many banners.
"Despite this progress that we've had in 2016 and this massive transformation that we've had since 2013, we obviously aren't satisfied with our same-restaurant sales results," Bill Gregson, chief executive officer of Cara, told analysts in March.
Cara has its eye on acquisitions, having made a number of them over the past few years, including St-Hubert chicken and Original Joe's last year, cutting costs to improve the bottom line. Mr. Gregson said he's interested in picking up a so-called fast-casual restaurant chain, which tend to have a healthier halo to its food, as well as a full-service chain with "different types of food that we don't have, Asian or Mexican, that kind of stuff."
Cara is investing more in digital marketing and technology and stepping up its e-commerce, while testing UberEATS delivery at about 20 of its eateries with plans to partner with other such services to have "hundreds" of its eateries in the program this year, he said.
Richmond, B.C.-based Boston Pizza has been stepping up its takeout and delivery service, which has been growing significantly, Mr. Howie said. The new urban prototype store has a separate section just for "grab and go" orders, with flexible seating to allow for sliding doors to create private spaces for groups, he said.
Imvescor Restaurant Group Inc., which boasts chains including Baton Rouge, Pizza Delight and Mikes, is slimming down its menu to speed service and focus on winning items, said Frank Hennessey, Imvescor's CEO. Pizza and pasta specialist Mikes, for instance, now touts fewer than 70 items on its menu, almost half the 130 it offered in 2014, he said.
It's also working to strengthen its service at a new prototype Baton Rouge restaurant in Oakville, Ont., having servers return to patrons' tables three to five times – rather than once or twice – to check up on customers and take extra orders to bolster sales, he said. Customer-satisfaction scores have risen, prompting Imvescor to decide to roll out the enhanced service at its other restaurants, he added. "In a sit-down restaurant, we serve you – that means something. It's not just an order taker."
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