Coronavirus could send casual dining chains like TGI Fridays and Applebee's into a dark downward spiral

Coronavirus could send casual dining chains like TGI Fridays and Applebee's into a dark downward spiral

Olive Garden

Irene Jiang / Business Insider

Sales at Olive Garden and other casual dining chains are plummeting amid the coronavirus outbreak.

  • Casual dining chains like Ruby Tuesdays, Applebee's, and TGI Fridays are struggling amid the coronavirus pandemic.
  • Same-store sales are predicted to drop by more than 70% at many chains, with companies struggling to simply survive as customers stay home.
  • Some experts predict that even when restaurants are allowed to reopen, many customers will be wary of the crowded bars and packed seating areas that have long been crucial to boosting sales at casual dining chains.
  • "When is Olive Garden going to be packed again? When are they going to seat people like they used to? I don't see that happening for quite awhile. Probably years," said Roger Lipton, a restaurant industry analyst, investor, and advisor.
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As the restaurant industry braces for the permanent closure of up to 200,000 locations, some of America's most beloved chains could be causalities of the coronavirus pandemic.

Sit-down casual dining brands like TGI Fridays, Ruby Tuesdays, and Applebee's will see massive sales slumps in the coming months, according to analysts and industry experts.

Fast-food chains (also called QSRs, or quick-service restaurants) like McDonald's and Burger King have emphasized drive-thru. Pizza chains like Domino's and Papa John's are able to cash in on delivery orders.

Meanwhile, casual dining brands have long depended on filling dining rooms and bars with customers. With bans on restaurants' seating areas and customers sheltering in place, sales have plummeted.


"It's terrible," Pacific Management Consulting Group founder John Gordon told Business Insider.

"At fast casual or QSR ... people can get their food and go," Gordon said. "But in casual dining, it's one in which you have to spend an hour or two there. And, it's intense person-to-person contact. If you're one of those people that are afraid to be with other people, then that's scary."

'Uncertainty is at never-seen-before levels'

Applebee's 13

Hollis Johnson/Business Insider


Early reports from restaurants confirm a massive drop in business.

Brinker International reported on Thursday that, through March 8, Chili's same-store sales for the most recent quarter were up 3.3% over the prior year and Maggiano's same-store sales grew by 0.6%. However, the coronavirus pandemic quickly erased this growth, with Chili's ending the quarter with same-stores sales down by 5.3% and Maggiano's dropping 9.9%.


Darden Restaurants said it was already seeing a massive decline in sales at its casual dining chains, which include Olive Garden and LongHorn Steakhouse. Same-store sales were down by more than 20% in the week ending March 15. From March 16 to 18, same-store sales were down 60% compared to the same period last year.

A recent Cowen note cited a call with Jordan Thaeler, founder of foot traffic tracking company WhatsBusy, who said that casual dining was down 75% in late March. For comparison, fast causal dropped 65% and fast food dropped by roughly 50%.

67% of people decreased their casual dining chain visits in the week that ended on March 27, according to a Gordon Haskett survey of more than 300 households across the US. 62% said they decreased their visits during the week that ended March 20, and 35% said their visits dropped in the week ending March 13.

Predictions for what comes next are similarly grim, with Gordon Haskett analyst Jeff Farmer writing that "uncertainty is at never-seen-before levels" for same-store sales in the casual dining industry.

This week, Gordon Haskett updated estimates to predict that BJ's Restaurants' same-store sales will drop 73% in the second quarter, Outback Steakhouse and Carrabba's Italian Grill's parent company Bloomin' Brands' same-store sales will plummet 72% in the same general period, and that Cracker Barrel's same-store sales will fall 60%.


"If you're mostly an in-dining room type restaurant, I think you're going to struggle," said BTIG analyst Peter Saleh. "That's casual dining. 80 to 90% of their business is in the dining room."

"They're going to continue to struggle," Saleh continued. "I don't think that changes over the next several weeks."

Casual dining chains are in survival mode

tgi fridays

TGI Fridays

TGI Fridays.

Casual dining chains are doing whatever they can to bring in at least some sales as restaurants are required to close seating areas and customers self-isolate.

The Cheesecake Factory is offering delivery, to-go, and curbside pickup on orders, including wine and beer. TGI Fridays is also pushing wine and beer curbside pickup. Red Robin said Wednesday it doubled its off-premise business in the last two weeks.


Companies are working to get their financials in order, trying to get more cash on their balance sheets while cutting costs.

"I don't know what the casual diners are thinking now, other than they're just trying to survive. ... Every one of them has exercised their lines of credit," Gordon said.

Casual dining chains including Darden, Bloomin' Brands, Texas Roadhouse, and Applebee's parent company Dine Brands have drawn down credit lines, joined by the majority of publicly traded restaurant companies across the industry, reports Restaurant Business.

The Cheesecake Factory furloughed 41,000 hourly workers. Ruth's Chris furloughed the majority of its employees who worked in restaurants, including managers at the chain's 23 locations where carry-out and delivery was not viable. Chuy's closed nine of its 101 locations, as well as placing roughly 40% of its corporate and administrative staff on furlough.

The coronavirus could change casual dining forever

Olive Garden

Irene Jiang / Business Insider

Olive Garden.


It is too early to predict how chains will weather months of massive declines in sales. Many casual dining chains are made up primarily of franchised locations, meaning that each individual franchisee's financials will determine whether they can keep their locations open.

However, when restaurants once again open dining rooms, it is likely the casual dining landscape will be significantly different from what it was pre-COVID-19.

Gordon predicts that at least some chains will be forced to close locations and consolidate restaurants among fewer franchisees, listing Ruby Tuesdays, Applebee's, and TGI Fridays - which was preparing to go public - as chains that are likely to struggle significantly.

Even restaurants that survive will face a new world of dining out. After months of social distancing and fears of catching the coronavirus, Gordon says, many customers may not be eager to return to a crowded bar at TGI Fridays or a packed dining room at Olive Garden.

"There's going to be a new normal in terms of our lifestyle," said Roger Lipton, a restaurant industry analyst, investor, and advisor. "I'm inclined to think that we're not going to be back to so-called normal operations for the foreseeable future."


Lipton continued: "I don't see Cheesecake Factory packing them in anytime soon. ... When is Olive Garden going to be packed again? When are they going to seat people like they used to? I don't see that happening for quite awhile. Probably years."

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