Millennials Get the Bum’s Rush

Applebee’s is about to cold-shoulder Millennials. We think that’s a poor decision.

A n email landed in our inbox this morning, dispatched by a keen observer of the restaurant trade. In part, it read:

Talk about dumb and tone deaf…

Why on god’s green earth would you say you are NOT catering to Millennials, which APPB did?

By APPB, he means Applebee’s Grill + Bar. It’s new President, John Cywinski, announced this month on an earnings call that marketing to millennials had been a mistake. The transcript of his precise wording — framed, he put it, “around the following components of the business: Restaurant operations; our guests; culinary innovation; and brand marketing” — follows:

“Over the past few years, the brand’s set out to reposition or reinvent Applebee’s as a modern bar and grill in overt pursuit of a more youthful and affluent demographic with a more independent or even sophisticated dining mindset, including a clear pendulum swing towards millennials. In my perspective, this pursuit led to decisions that created confusion among core guests, as Applebee’s intentionally drifted from its what I’ll call, its Middle America roots and it’s abundant value position. While we certainly hope to extend our reach, we can’t alienate boomers or Gen-Xers in the process. Much of what we are currently unwinding at the moment is related to this offensive repositioning.”

Yet did chasing “a more youthful and affluent demographic” really do the kinds of damage that Interim CFO Gregg Kalvin alluded to on the call? “We now expect Applebee’s comp sales to range between negative 6% and negative 8%” for 2017, Kalvin announced.

Fear factor? Nashville Hot Fried Chicken Sandwich.

Who knows? Maybe parent DineEquity’s research shows that Middle America, presumably the chain’s core guests, never latched on to the Craveable Burger menu, with its fried egg, quesadilla and Caprese salad toppings. Or perhaps the $9 Nashville Hot Fried Chicken Sandwich simply sounded too weird and spicy for middle-American palates.

Whatever the case, ignoring arguably the country’s largest age cohort seems inadvisable, to say the least. What will careful investors make of the pivot to older and vaguely defined Middle Americans? Who, by the way, seem no more eager to spend their dining dollars in Applebee’s or elsewhere than other age groups, according to research we’ve seen.

This month, for instance, Black Box Intelligence reported the Midwest (Middle America?) is the industry’s weakest region, after posting negative 3.6% same-store sales and a minus 5.2% decline in guest counts.

Moreover, Millennials represent the dining-trade’s future. Cold-shouldering the group for a relatively short-term gain risks damaging the brand for years to come. And Generation Z, just behind Millennials, may not be anymore inclined to visit restaurants they recall appealing to their grandparents. (Nostalgia could yet prove us wrong.)

So we agree with the email: Do not ignore Millennials. Cater to them and their burgeoning families with convenient and healthy menu options adapted to their tastes. (Hint: Drop the stigmatizing “Lighter Fare” moniker.) At the same time, smoothly transition the entirely franchised system to an on-trend, value-oriented restaurant with great food, including indulgent options.

Adjusting prices will also be crucial in this effort given that margins will likely shrink as the chain attempts to lure older, less sophisticated diners to their tables using value pricing. For those folks, we suggest creating a menu category featuring classic dishes (call it “Sunday Suppers Everyday”) comprised of low-food cost meals — which the kitchens make in-house. House-made Meatloaf with Fire-Roasted Sweet Potatoes, for example.

To be sure, as Black Box notes in its report, “given that grocery prices have been dropping year over year, it is no surprise that restaurants have been compelled to review their value proposition.” While it won’t be easy to rebuild the chain’s reputation as the go-to neighborhood eatery, we think management and franchisees can find a profitable balance between old and new menu items, thereby promoting a new value message that appeals to core guests and Millennials.

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A group of creative consultants who help restaurants unleash potential by growing their sales, profits, and people.

Results PDQ

We Unleash Potential

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