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Viewing report
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T.G.I. Friday's Benckmark Analysis
Restaurant Research, LLC, June 2008, Pages: 11
Friday’s same store sales have underperformed the casual segment over the last 2 years along with Applebee’s and Chili’s – we believe this reflects that these major category players lack sufficient differentiation to attract higher-end clientele against a backdrop of increasing niche competition (such as Buffalo Wild Wings). To add insult to injury, a weakening economy and strengthening QSR and strong fast casual has driven trade-down away from these one-stop-shop casual players. Friday’s has responded by: (1) upgrading assets through a major remodeling initiative (2) improving operations (3) aggressively developing new menu items, and (4) recently introducing a successful ad campaign.
Further, we note that Friday’s has also pursued a value strategy to stem trade-down with its “Right Portion, Right Price” menu option which is designed to be margin neutral despite a lower price point. In any case, all this effort has failed to push Friday’s comps above the average – an important point to consider against the favorable backdrop of Applebee’s rather severe difficulties. This is even more concerning given favorable prospects for Applebee’s current turnaround efforts and especially as the largest casual chain sets its sites squarely on Friday’s core grill & bar space - although we note that Friday’s performance over the last 3 months have reportedly improved now that Applebee’s has started its strategic move away from value.
In conclusion, it is our opinion that even though Friday’s has done well to improve its market positioning as a “one-stop-shop” casual chain, it will continue to struggle with the overriding issue of declining demand for broad based casual chains without a clearly defensible niche.
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