In this Weekly Wrap, we’re looking at changes at Outback Steakhouse, attracting younger diners with spicy menu items, Sweetgreen’s ‘Ripple Fries’ flop, and more.
The Outback Turnaround
The Headline: “Outback Steakhouse to expand turnaround test from 14 to 42 restaurants”
The Source: Nation’s Restaurant News
What You Need to Know:
Bloomin’ Brands Inc. plans to expand its turnaround test at Outback Steakhouse from 14 to 42 restaurants by the end of September, executives said Wednesday.
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“We believe the expansion tests will create a meaningfully improved guest experience and will be the foundation for the Outback turnaround, starting with the service model,” Spanos said.
Reducing table stations from six to four per server seems to ensure a more consistent guest experience, he said.
“We are currently testing this revised service approach to select markets and are encouraged by what we are seeing,” Spanos said. Expansion of the test will provide the company with more learnings, he added.
Outback has also reduced its number of menu items, Spanos said.
“The Outback turnaround’s menu reductions … are now fully implemented,” he said. “We expect further reductions to the Outback menu to be implemented as we learn more in tests. We streamlined menus both on- and off-premises, removed items with low sales mix [and] low satisfaction scores for items that did not travel well. We removed seasonal LTOs from Outback, which has allowed the team to focus on everyday execution.”
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Tabletop payment devices have been rolled out to the Outback system for over three months, and more than 85% of customers are now using them to pay checks, Spanos said. That has improved table turns by five to seven minutes, he added.
Our Take:
Outback is taking a very thoughtful approach to their business. I love the intention of everything they are doing. They highlighted stress points and set up beta tests, the betas went well, and now they are expanding those changes.
Simply put, everything they are doing is smart. Decreasing section size per server, forcing the team to increase service standards; ditching underperforming menu items, as well as items that did not travel well for takeout shows that takeout and delivery are a defining force in not only menu development but the business as a whole.
I’m very interested to see the ultimate findings and data on the tabletop payment devices. I’m not sold on them at this point in time, but data and a little more personal experience in using them could sway me. They seem a little impersonal, but with the way things are trending, these devices could be a fit for certain types of outlets.
Sweetgreen’s Challenges
The Headline: “Unprofitable Sweetgreen cuts workers and fries”
The Source: Restaurant Dive
What You Need to Know:
The brand’s profitability problem worsened, with operational losses hitting $26.4 million, or a margin of negative 14.2%. Comparatively, Sweetgreen posted a negative 8.8% operations margin and a $16.2 million loss in the year-ago quarter, according to the earnings release. Reback said the support center layoffs in early Q3 we intended to constrain losses.
Losses were exacerbated by the sales decline, and Neman said many of the chain’s restaurants are underperforming expectations.
“The fundamentals like sourcing, cooking, and throughput are there, but they’re not always delivered with the consistency our guests expect or deserve,” Neman said. “About one-third of our restaurants are consistently operating at or above standard, while the remaining two-thirds represent a meaningful opportunity for improvement.”
One contributing factor to that performance difficulty is actually a successful menu item: Ripple Fries. Neman said the fries — though beloved by some consumers — were hurting Sweetgreen’s ability to prepare its core menu items.
Our Take:
Not much in this is surprising or otherwise noteworthy, except one very simple thing: the Ripple Fries.
The fact that one item can throw off the harmony of an otherwise fluid and efficient kitchen is a testament to how fragile the kitchen ecosystem can be. It seems silly that something so simple could disrupt the way it has. It shows that even when something is successful, if the efficiencies of the item don’t work cohesively with the rest of the menu and kitchen operations, it can be a recipe for disaster.
NYC’s Hot Retail/Restaurant Space Market
The Headline: “Restaurants Clamor for Retail Space in New York City’s Sizzling Market”
The Source: The Wall Street Journal
What You Need to Know:
Demand for restaurant space in New York City has rarely been greater than it is now, helping power the city’s retail real-estate recovery.
Space for quick-service, casual restaurants like Chipotle Mexican Grill and Cava, cozy pizza joints or cavernous 10,000 square-foot steakhouses are all disappearing fast, said Lee Block, president of real-estate firm RTL.
The amount of available space is so tight that more restaurant tenants are willing to splurge on the steep costs—often around $100,000—to convert other types of retail real estate into kitchens by adding vents to the properties.
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The restaurant boom is a big reason why. Americans are spending more time and money at restaurants. And millennials’ tendency to marry and have children later than previous generations has likely contributed to increased restaurant spending in recent years, analysts say.
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Frankie Solarik, co-owner of cocktail lounge BarChef in Midtown and a judge on Netflix’s “Drink Masters,” said Instagram posts showcasing elaborate presentations and homemade ingredients are receiving hundreds of thousands of views since BarChef’s opening in June.
Prices for signature cocktails range from $23 to $43, and reservations are in very high demand, with nearly full bookings for weekends two weeks out.
“Consumers are still willing to go out and spend the money, as long as there’s value and there’s a visceral element,” Solarik said. “You’re not just going out and having a vodka soda.”
Every year since 2020 has seen more spending on food away from home, per capita, according to the Agriculture Department’s Economic Research Service.
Our Take:
None of these updates are terrible news — there is opportunity in all of this. I’ve been preaching this and will continue to preach it: an enticing value proposition is king right now. Those who figure out how to offer quality and a great price are going to clean up in this economy, and that translates even to the uber-hot New York City market.
But this piece is about Manhattan and most likely focused on lower Manhattan, below 59th street. I’m constantly walking around different parts of New York City’s five boroughs and can say that I still see plenty of “Restaurant Space for Lease” signs across the city.
I also want to point out a recent article from the same publication published the day before this one, “American Consumers Are Getting Thrifty Again,” which discusses how Americans as a whole are cutting back on discretionary spending and looking for deals on everything. I can affirm that people are still spending money in NYC — I see it first hand — but if the economy continues on its current trajectory, how long will that last?
So yes, the lower Manhattan restaurant may be killing it right now, but the same can’t be said for the rest of New York City. When I speak with operators in Brooklyn and Queens, I hear about how weekends are great but weekdays are crickets. There are exceptions to this — but they are the exception, not the norm.
The Headline: “Restaurants are adding dozens of new spicy menu items in a bid for younger diners”
The Source: CNBC
What You Need to Know:
Spicy items like chicken sandwiches, seasoned sides and sauces are cropping up more often on menus at major fast-casual and quick-service chains. The idea is to introduce easy-to-execute and buzzy options that can capture the attentions of Gen Z and Gen Alpha diners, even if it’s only a flash in the pan.
One of those companies was Chipotle, which in June introduced Adobo Ranch, its first new dip in five years, as a limited-time offer.
“From an operations perspective, the sauce is a lot easier to do than bringing in another LTO or another protein. And you get a lot of the same benefit,” Chris Brandt, Chipotle’s president and chief brand officer, told CNBC.
The draw toward spice is yet another way restaurants are responding to slower consumer spending while trying to keep costs in check. A KPMG Consumer Pulse survey found that U.S. consumers plan to spend 7% less per month at restaurants this summer.
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Spicy menu items have gained traction primarily through social media. Platforms like TikTok and Instagram have become key discovery tools for Gen Z and Gen Alpha.
Restaurants are using these platforms to promote limited-time offers and influencer content, including taste tests and reaction videos. Short-form content can create urgency and encourage trial.
“Spicy food consistently performs well,” Tommy Winkler, a TikTok food influencer, told CNBC. “It is essentially the new billboard. It is a good chance that someone will end up ordering it.”
Our Take:
This all makes sense. Sometimes people just want a little spice. Give the people what they want… within reason and with thought.
I recently went to a French spot, and they had a “Spicy Chicken Sandwich” on the menu. I’m sure it’s delicious, but as it sat between the Jambon Beurre and Boeuf Bourguignon, it was out of place. It was an afterthought and off-brand.
A week later, I went to another spot, this time Italian, and they also had a spicy chicken sandwich, but the description was far different: Pollo alla Diavola sandwich with Calabrian chilis.
The difference is one is on-brand and fits thematically with the restaurant, while the other came off as a cheap ploy.
I love spicy food (my acid reflux does not). I think a spicy item can fit on most menus. It can help attract new guests, but it’s also not a “make or break” situation if you don’t have something spicy. So, if you do add a spicy item, be thoughtful, make sure it fits with the restaurant, and of course, it has to be good.