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Bennigan's, Steak & Ale victims of crowded market, tough economy

By Laura Reiley, Times Food Critic
In print: Wednesday, August 6, 2008

Bennigan’s and its sister, Steak & Ale, are the latest casualties. Creativity may be key to surviving the financial shakeout as restaurants try to distinguish themselves.
	[Associated Press]

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Evie and Anthony Engel and their two children aren't eating out like they used to. The economic downturn has seen to that.

No more sit-down places for them. They're frequenting restaurants like Boston Market, Panera or Moe's Southwest Grill, where they can order at the counter and don't need to leave a tip. They seldom order dessert, they drink water and sometimes mother and daughter split an entree. Plus, gas prices are keeping them closer to home.

"We also try to go to places where kids eat free. Like at Crispers, if kids wear the T-shirt they get a meal for 99 cents," Evie Engel says.

The Engels are not alone in finding new ways to save money when dining out. The sudden bankruptcy filing of Bennigan's last week may be an indication of just how big a bind restaurant chains are in. In light of rising food and labor costs, Bennigan's and sister restaurant Steak & Ale couldn't raise prices and keep their economically beleaguered customer base. And they couldn't lower prices because they were already saddled with an enormous debt load.

Could more trouble be on the way for other fast-casual restaurants in the nation's current financial crisis?

It's a crowded playing field at this segment of the restaurant market, with big names like Ruby Tuesday, T.G.I. Friday's, Chili's Grill & Bar, Red Lobster, Olive Garden, Outback Steakhouse and Carrabba's Italian Grill. There are also independent restaurants in the sit-down, family-friendly, "bar and grill" casual dining category.

There may just be too many concepts vying for the same consumer dollars, already stretched by high gas prices, the weak housing market and inflation. Keys to survival for these mega-unit chains include a menu that stands out and periodic deals to drum up excitement, says Ron Paul, president of Technomic, a Chicago-based restaurant consulting firm.

Bennigan's downfall was in part due to its increasingly muddied message. Roaming far from its original Irish bar roots, potato skins gave way to Southwest egg rolls and tempura shrimp with many other menu items indistinguishable from those at other big chains.

Bennigan's failed to stay contemporary, says Harry Balzer, vice president of the NPD Group, a consumer marketing research firm. But there are other reasons that chains are ailing, Balzer says. Restaurant visits peaked in 2000, with the average American eating 211 meals out, three out of four of those at a fast-food place. Since then, the number of meals eaten out has plateaued, with the greatest industry growth in the area of fast food and takeout.

"Food prices affect everybody. If you ask people how they are dealing with this economy, they say they're going out to restaurants less," he says. "They are not eating out less than they used to, but they are not eating out more," and with more and more sit-down concepts around the country, that's a problem.

Bennigan's was one of the original yuppie fern bars that, as those yuppies began having kids, morphed into a "family-friendly" sit-down place. That same formula continues to work successfully for other restaurant groups. How are they staying afloat?

Some are unveiling new, affordable-dining programs. One of the country's largest restaurant chains, Brinker International, which includes Chili's, Romano's Macaroni Grill and Maggiano's, is unrolling new enticements to keep customers coming in the doors. Last month, the Dallas company announced a "prix fixe" at Romano's Macaroni Grill where customers choose from six entrees and three desserts for $9.99. Additionally, the chain has created new choose-two or choose-three affordable lunch combos.

Applebee's strategy is similar, with a reintroduction of its "3-course classics" promotion starting at $9.99. Perhaps more importantly, though, Applebee's has aligned itself with popular Food Network personality Tyler Florence, who created new menu items, in an effort to stay contemporary.

Tampa company OSI Restaurant Partners (Outback Steakhouse, Carrabba's, Bonefish Grill and others) has made similar efforts to remain current. Bonefish is even moving into the TV game to keep its name in front of people. The restaurant's Notes from the Road, a music show of in-restaurant performances and interviews, debuts at 8 p.m. Thursday on Ovation TV.

Still other big restaurant groups seem to have adopted a sit-tight-and-weather-the-storm approach. Rich Jeffers, director of media relations for Darden Restaurants, says the company's enormous size and purchasing power provides a way of absorbing the double hit of increased food and labor costs. Among Darden's restaurants are Red Lobster, Olive Garden, Longhorn Steakhouse and the Capital Grille.

For independent restaurants, there are no huge economy-of-scale buffers, so the pinch stings more.

"Bennigan's closure was a bombshell, a real big deal in this business, a red flag. But comparing us is like apples and oranges," says Jim Brice, general manager at Harvey's 4th Street Grill in St. Petersburg. "The knee-jerk response (to rising food and labor costs) is to increase prices. Yes, our back-end costs have increased, but we've tried to understand where we are in the market. We have concerns like everybody else about where people are going to be spending their money."

Still, Harvey's hasn't changed its game plan, instituted prix-fixe deals or launched any TV shows — Harvey's tries to have value built into its regular menu, which has remained more or less unchanged for the past 25 years. Brice figures that in tough times familiar offerings give customers a sense of comfort.

Laura Reiley can be reached at lreiley@sptimes.com or (727) 892-2293.