O’Charley’s closed 18 failing restaurants on Sunday, capping a hard recovery from the pandemic for the 91-unit casual dining brand. It stated that the closures were necessary to ensure the organization’s future success.
“We compared it to pruning vines at a winery,” CEO Craig Barber explained in an interview. “They do this every year. You get a higher-quality grape, more growth, and you must do it for the vineyard’s general health.”
It had already closed 33 restaurants in the second quarter, bringing the total to 51 this year—more than one-third of its overall unit count.
The closing stores were experiencing both long-term and acute issues. The surrounding areas altered over a period of up to five decades. Malls and other significant retailers closed or relocated, taking customers with them. This trend was accentuated by a significant shift toward online shopping during the epidemic. Meanwhile, rent was rising.
Then last year, O’Charley’s commodities costs increased by 19%. It increased menu pricing, but not enough to completely offset the skyrocketing inflation.
“For our industry in general, and for our brands, it was very challenging to understand how to best maneuver that,” Barber went on to say.
O’Charley’s is not alone, judged by the number of chain restaurant closures this year. Boston Market has lost at least two dozen stores; Applebee’s is anticipating dozens of closures; Qdoba plans to decrease by up to 1.5% per year; and Veggie Grill has closed 40% of its outlets in recent months.
However, O’Charley’s troubles precede today’s severe atmosphere. According to Technomic data, systemwide revenues fell 34% between 2017 and 2022, while unit count decreased by nearly a third.
However, Barber reported that 2021 was its greatest year since 2016. Despite a challenging 2022, the chain was optimistic at the start of the year.
Barber thought January was really excellent. However, sales began to decline in February and then even worse in March. “April, it backed up a lot,” he explained.
“It seemed like the whole industry, late March, early April, like somebody blew out the parachute at the back of the dragster and slowed things down really quick,” that’s what he stated. “And I don’t think anyone saw it coming.”
To staunch the hemorrhage, the Nashville-based chain opted to close 18 locations in one day. Some refused to renew their leases, while others collaborated with landlords on “what could be a better opportunity for both of us,” Barber said.
The restrictions were dispersed over O’Charley’s area, which is mostly east of the Mississippi River. Some were geographical outliers, like as the chain’s sole Missouri location, making them more difficult to sell and support.
Now, O’Charley’s is focusing on its remaining 91 outlets, nearly all of which are company-owned. Same-store sales are still negative year over year, but they are improving, according to Barber, and have turned positive early this week, thanks in part to several new bargain offerings.
One is a partnership between Coca-Cola and NASCAR, which provides visitors with a $5 meal bargain on Mondays if a Coke-sponsored driver finishes in the top five throughout the weekend.
O’Charley’s also reintroduced its renowned Free Pie Wednesday promotion, but with a new format to improve margins.
“We made it a little higher bar to jump over to get to the free offering,” Barber told me. “And not only are we up six straight weeks on Monday, we’re up six straight weeks on Wednesday.” The improvements affect both the top and bottom lines.
Weekends remain a confusing dilemma. This week, O’Charley’s introduced the Shrimp Lovers Weekend promotion, which provides three shrimp plates for $10.99 to $15.99 on Friday, Saturday, and Sunday. Customers can add fried shrimp to any entrée for $3.
As inflation continues, the promotions appeal to price-conscious consumers, and the purpose is straightforward: “How do we get guests to come to our restaurant versus the other alternatives?” Barber stated.
Indeed, he believes O’Charley’s has lost some clients to lower-cost, limited-service rivals. “Part of that’s just the convenience aspect and the value pricing,” he went on to say.
However, he also criticized the media for instilling economic worry and driving away clients during the difficult March and April months.
“I still laugh about all the talking heads arguing about whether we were in a recession or not in a recession,” he told reporters. Consumers experienced anxiety and concern, prompting them to reduce their exposure.
Those worries have yet to be realized. And today, Barber likes how things are going at O’Charley’s. But there is still a lot of ground to cover.
“We have 14 dayparts and have won four of them so far. And in the previous two weeks, we’ve won six,” he stated. “You get an attaboy and attagirl and thank you very much, and now we’ve got eight more dayparts.”