Casual dining is in the throes of a midlife crisis.
A quarter-century ago, consumers feasted on fried appetizers, unlimited breadsticks and big desserts at Applebees, Olive Garden and Chilis. Today, many Americans are trading those restaurants in for cheaper, faster fare, or splurging a bit for a trendier experience.
Midpriced sit-down restaurants known as casual dining in the industry have seen on average about 2 percent fewer customer visits each year since 2008. That translates into almost 600 million annual visits, to 6.4 billion in 2012.
Theyve 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 research company NPD Group.
The worlds largest casual-dining company, Orlando, Fla.-based 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 theyve been too slow responding to major shifts in how Americans eat out.
It is clear to us that given our current business situation, we are indeed in a new era, CEO Clarence Otis told analysts.
Other companies have experienced similar turbulence. Earlier this month, Applebees and IHOP owner DineEquity reported declining traffic at both brands for its fourth quarter, while Chilis parent Brinker International toned down its profit forecast.
We know casual dining is not the bright shining star that it used to be, Brinker CEO Wyman Roberts told analysts.
Tony Romas has dwindled from 157 U.S. restaurants to 40 during the past decade, though the company says its still opening new locations.
The industry is trying to reinvent itself with lower-priced meals that are quicker and more healthful. Darden, for example, said last week it plans to speed up Olive Gardens lunch service, jump on culinary trends more quickly, attract younger diners with more technology, and lure back lower-income customers with good deals.
The economy has played a major role in slowing sales. American budgets are taking one hit after another, most recently from increased payroll taxes and rising gas prices.
Americans cut their dining-out budgets dramatically during the economic downturn, from which many in the middle class havent fully recovered.
Many consumers have had to adjust to having less and spending less, said a recent report from NPD Group, noting that nearly 75 percent now consider their spending cautious. So when they eat out, they are often finding cheaper alternatives.
Its a lot of money to dine out at Red Lobster or Romanos Macaroni Grill, said Jhonatan Arias, 26, of Altamonte Springs, Fla. If you have the money to sit down and splurge, then we go to a place like that.
Arias and his girlfriend usually eat dinner at home, and he often grabs fast food for lunch. He recently took a lunch break at Tijuana Flats, one of the fast-casual chains that have gobbled up customers at a steady pace.
Visits to those restaurants, which include brands such as Chipotle, rose by 8 percent last year compared with 2011, according to NPD Group.
Fast-casual restaurants sell fare thats a step up from fast food. But customers still order and pay at the counter, making meals quicker and cheaper than at sit-downs.
Applebees is borrowing a page from the competitions playbook, testing a lunchtime express service in its hometown of Kansas City, Mo. Customers can order and pay at kiosks, so they dont have to wait for servers to bring checks when theyre done.
If that test is successful, analyst Mark Kalinowski of Janney Capital Markets expects Darden and other companies to mimic it. Darden wouldnt say whether it is considering the idea, although company leaders say Olive Garden is trying to streamline takeout.
The more-established chains are getting squeezed by lower-end competitors, but newer, polished casual restaurants also are posing a threat. They are a tad more expensive but have more sophisticated food, décor and drinks.
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 begun looking to a stable of these newer brands to fuel growth. Its Specialty Restaurant Group includes newly acquired Yard House, an upscale bar and grill, and Seasons 52, launched in 2003.