Restaurants go to great lengths to develop repeat customers. They create special deals. They commission catchy jingles. Anything to convince customers that they absolutely cannot live without their baby-back, baby-back, baby-back ribs. With barbecue sauce.
The game for mature players such as Darden's (NYSE: DRI ) Red Lobster and Olive Garden and Brinker's (NYSE: EAT ) Chili's and Maggiano's brands is to lure customers back to the same location time and time again. Same-store sales is a key metric for the industry -- possibly the most important one. If same-store sales increase, so does the love from investors.
This place never gets old
The industry standard for same-store sales in U.S. casual dining hovered around 0.1% in 2010, but ideally anything from 2% to 4% growth would be considered pretty strong. Take a look at these companies' numbers for the most recent quarter, compared with the same quarter last year.
Same-Store Sales, Q1 2011
Same-Store Sales, Q1 2010
|Cheesecake Factory (Nasdaq: CAKE )
|Panera Bread (Nasdaq: PNRA )
Source: 2011 company press releases.
Only Panera met the target range in the last quarter, while Cheesecake Factory fell a bit short. So if you're invested in one of these restaurants, you're probably wondering what kind of strategy or gimmick they'll launch in an effort to improve. What's the difference between a strategy and a gimmick, you ask? A strategy would produce results for the long term, and a gimmick only for the short term, if at all.
That's a great idea!
For example, in the first week of March, Cheesecake Factory added five "Skinny-Style" cocktails to its menu. The notion of shaving a few calories off your drink doesn't necessarily jibe with the restaurant's mammoth-sized portions, but perhaps it will persuade a few customers to make repeat visits.
Another example is DineEquity's (NYSE: DIN ) "Girls Night Out" initiative. The company used its Applebee's Facebook fan page to poll women about the frequency of their weekly get-togethers with friends. Apparently, there's a void in women's social lives, and Applebee's has stepped up to fill it. Women can send Girls Night Out Facebook invitations to their friends and can even enter a Girls Night Out photo contest to win a $50 gift card … to Applebee's.
Take a look at what fellow Fool Alyce Lomax has to say about Panera's nonprofit initiative. The company currently operates three "pay what you want" stores in the United States that help feed the needy and raise money for charitable work. The stores are so successful that Panera plans to open a new one every three months. The initiative makes a positive difference in communities and helps establish Panera as a feel-good brand that customers will keep coming back to.
But will it work?
As investors, we must evaluate each of these initiatives: Are they gimmicks or strategies? Regardless of your conclusion, these moves are easy to keep tabs on with press releases and ad campaigns. The difficulty is in determining whether the initiative will make a difference in same-store-sales growth.
Can you point to any winning gimmicks or strategies? Let us know in the comments section below.