Total revenue did move into positive territory for the period, increasing by 2.1% compared to a year ago. However, its comparable same-store sales -- a better measure of a restaurant's overall health -- were down at O'Charley's by 1.6%. Its Ninety Nine Restaurants improved comps by 2.7%.
A closer look at comps gives us a better understanding of what's going down with the restaurant group. The average check was noticeably higher, increasing by 5.8% compared to a year ago. One of the primary reasons for this is the discontinuation of the Kids Eat Free program. Forty percent of the program has been phased out, and management expects to have it fully dismantled by sometime in the middle of next year.
The flip side of removing the program is that many families have chosen to take their dining elsewhere; same-store traffic declined by 7% compared to a year ago. And so a natural question arises: is phasing out the program worth it?
In this Fool's opinion, in the long run, ending the program makes sense. Over the short term, O'Charley's is feeling the pain as some of its former customers take their business elsewhere. But, if the company can successfully link together the phasing out of Kids Eat Free with its revitalization efforts in Project RevO'lution, then at that point, O'Charley's will have a growing guest count that's paying more per transaction. A growing guest count plus higher average check will equal blockbuster comps results -- that's the target O'Charley's is aiming for.
The goal is clear, and the strategy to pull it off makes sense. It remains to be seen, however, if management has the wherewithal to make it happen. To make matters more difficult, O'Charley's is up against intense competition, including the likes of Applebee's
O'Charley's is tagged with a one-star rating by the Motley Fool's community-driven investment rating service, CAPS. The low rating is a reflection of the company's historical mediocrity. The latest results from O'Charley's do little to change this sentiment.
For related Foolishness: