Can Applebee’s $1 Long Island iced teas fix a dining hangover?
America's casual dining restaurants are dealing with a hangover.
Consumers are increasingly snubbing casual dining chains like Buffalo Wild Wings (BWLD) and Applebee's, whose parent company DineEquity (DIN) is struggling with slumping sales. After years of growth, these chains are now coping with changing tastes and demographics, with millennials preferring fresher and less expensive food.
That may partly explain Applebee's decision to roll out a $1 Long Island Ice Tea during the month of December, betting that the cheap and potent alcoholic drink will convince consumers to walk back through its doors. The offer is making waves on social media, with hundreds of consumers tagging friends on Facebook or suggesting a visit to the struggling chain.
Whether that can translate into a lasting sales bump may be another question.
Sales at Applebee's restaurants open at least a year declined 7.7 percent in the third quarter, with the company projecting full-year revenue at the chain to fall as much as 6.5 percent.
Sit-down restaurant chains have struggled since the recession, when more consumers opted to eat at home. As the economy has recovered, though, Americans have maintained some of those frugal habits, preferring to patronize quick-service chains like Panera (PNRA), where customers aren't expected to tip and prices are generally lower.
"It's simply expensive to eat out now," NPD Group restaurant analyst David Portalatin said in an interview with CBS MoneyWatch earlier this year. "Consumers want to eat at home more. We have a substantial increase in people over 55, that's those aging baby boomers" who are more likely to want to stay at home.
Millennials, meanwhile, are struggling with lower income and higher debt than their parents did at their age, putting pressure on what should be their peak years for dining out. Instead, they're opting for less expensive meals, including those offered by micro-chains that provide organic or healthy options.
Restaurant prices increased about 2 percent in 2016, while grocery costs declined, creating a headwind for restauranteurs trying to convince consumers to spend money at their establishments, he noted.
Almost half of all restaurant meals are consumed at home, since more consumers are ordering out, which they see as another way to skip tipping and keep costs lower, while also eating in the comforts of their home, Portalatin said.
These changes resulted in 292 million fewer restaurant visits last year across the country, according to NPD.
Applebee's said the $1 drink, which it calls the "Dollar L.I.T.," is available all day at participating restaurants.
"The Dollar drink is back at Applebee's just in time for the holidays, and this time, folks can enjoy a $1 Long Island Iced Tea," Patrick Kirk, vice president of beverage innovation at Applebee's, said in a statement. "The Dollar L.I.T. is kind to your pocket book and a great drink to share with old friends and new ones this holiday season."
