Are You Buying a Floundering Restaurant Brand or the Locations?

 

In the last decade, the foodservice and commercial real estate industries have increasingly overlapped, especially as restaurant chains falter under the weight of declining consumer relevance, rising operating costs, and outdated models, according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

The key question facing investors today isn't whether the struggling restaurant brand can be turned around—it often can't—but whether the value lies in the locations themselves rather than the banner on the front door. Examining food industry trends over the past ten years shows a stark truth: most struggling restaurant brands are weak and stay weak, while their prime locations remain an overlooked asset.

 

The Historical Picture: Floundering Brands Stay Floundering

The narrative of restaurant brand failure isn't new. Over the last decade, Sbarro, Friendly's, Quiznos, and Blimpie are prime examples of brands once perceived as strong yet faltered due to – among other reasons – poor management, lack of innovation, and a failure to keep up with consumer dining preferences. For brands like these, even changes in ownership failed to inspire enduring growth.

The harsh reality: Most struggling brands don't possess the relevance to rebound. According to Technomic's industry data, nearly 70% of restaurant brands that fall into steep decline fail to regain market momentum, despite reorganization efforts.

Why?

·         Consumer Migration: Customers are increasingly loyal to convenience, quality, and value-driven competitors, such as fast-casual chains, grocerants, and third-party meal delivery options.

·         Identity Loss: Brands too far removed from their original core identity (think: inconsistent menus and uninspired innovations) lose emotional appeal.

·         Market Saturation: A once-beloved concept might fail not because it's universally flawed, but because it became redundant among the dining landscape.

These brands remain locked in cycles of discounting and ‘revamped concepts’ that yield minor bumps but no sustained profitability. In short: A bad brand doesn't age well.

 

The Power Is in the Locations

The locations that these struggling restaurants occupy, however, tell a different story. While the banners above the doors fade, the physical real estate remains a highly prized asset. Prime locations in areas of strong foot traffic, suburban centers, and growing metropolitan corridors hold value far beyond a legacy brand's diminished returns.

Consider this:

·         The National Restaurant Association reported that 50% of restaurant visits over the last 5 years occur in convenience-centric spots such as mixed-use developments or neighborhoods experiencing demographic booms.

·         Well-positioned buildings with drive-thru infrastructure remain particularly lucrative in the age of delivery and off-premises dining, increasing value regardless of whether a restaurant chain fails.

Key takeaway: Investors can often derive more profit from the real estate redevelopment or repurposing of these spaces rather than sinking funds into revitalizing a stagnant brand. A floundering concept may only stand in the way of unlocking greater commercial potential.

Who Are You Competing With for

Share of Stomach

 

Investor Pitfalls: The Skill Set Problem

In many cases, groups acquiring struggling brands fail to identify their weaknesses—either by overestimating their own ability to breathe life into stale restaurant concepts or by ignoring emerging foodservice trends.

Two Major Realities:

1.       Lack of Operational Expertise: Many buyers come from real estate, finance, or outside sectors and lack the hands-on, forward-thinking expertise to rejuvenate failing restaurants. A familiar name, historical familiarity, and perceived nostalgia often trick investors into thinking a brand still holds latent consumer appeal.

o    Example: When Quiznos franchises were acquired by investment groups, owners misread the consumer's appetite for new, healthy QSR innovations, while Subway and Jimmy John's surged ahead with agile branding strategies.

2.       Failure to Create Consumer-Relevant Brands: Most struggling brands falter precisely because they aren't meeting today's consumer expectations. Acquiring firms without the vision to pivot to fresh, on-trend dining models simply accelerate the brand's demise.

o    Meanwhile, success stories like Sweetgreen, Shake Shack, and Chipotle show how forward-thinking brands capitalize on flavor innovation, pricing transparency, and frictionless delivery models.

In essence, many buyers fail to identify whether they're truly purchasing a viable concept or merely saddling themselves with an albatross.

 

Case Study Examples

·         Ruby Tuesday: Acquired several times over the last decade, Ruby Tuesday's core weaknesses persisted—uninspired casual dining, bloated menus, and neglected store upkeep. The high-value real estate that locations occupied (near major retail hubs and suburban crossroads) became more valuable than the brand itself. Buyers failed to capitalize on newer food trends, accelerating its closure rate.

·         Burger King Locations Redeveloped: In the wake of closures across declining markets, numerous Burger King franchises turned into profitable Starbucks or Chick-fil-A spots. Well-situated sites with high-volume traffic lived up to their potential, even when the Burger King banner had not.

The Future Outlook: Redevelop, Don't Rescue

As restaurant industry competition intensifies and consumer expectations evolve, underperforming restaurant brands will remain risky purchases. However, for savvy buyers, the locations present strategic advantages far exceeding their operational histories. When high-demand areas meet physical spaces built for dining convenience—drive-thru, delivery access points, and high-traffic areas—the opportunities multiply.

Consider this actionable framework for buyers:

1.       Prioritize Location Metrics: Location value lies in high consumer visibility and service capability, not in legacy nostalgia for old brands.

2.       Redevelop for Consumer Relevance: Convert failing locations into new QSR concepts, mixed-use retail, or on-trend grocery partnerships (e.g., ghost kitchens).

3.       Assess Market Conditions Aggressively: Brands with sinking operational metrics—plummeting comp sales, shrinking margins—indicate future stagnation regardless of ownership.

 

Think About This: Real Estate Triumphs Over Nostalgia

The last decade has cemented this fact: the restaurant industry rarely rewards outdated concepts trying to claw their way back to relevance. Many investors chase failed turnarounds for far too long—while smarter players recognize the enduring value of prime real estate. Floundering brands are risky ventures, but their locations can serve as fertile ground for the next big concept.

Savvy investors don't ask whether they can revive an underperforming chain. Instead, they ask: How much value can we unlock from where that restaurant stands?

Invite Foodservice Solutions® to complete a Grocerant ScoreCard, or for product positioning or placement assistance, or call our Grocerant Guru®.  Since 1991 Foodservice Solutions® of Tacoma, WA has been the global leader in the Grocerant niche.

Can Restaurant Gift Cards Save January Sales?

 

After the holiday hustle fades and credit card bills arrive, January has historically been a brutal month for restaurants. In the past seven years, restaurant operators across fast food, casual dining, and full-service sectors have felt the squeeze as consumers cut back on spending post-holiday splurges.

Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® wonders, as the foodservice industry battles economic uncertainty amid a presidential transition, many are asking: Can the holiday surge in restaurant gift cards deliver a much-needed boost to January sales?

Historical January Sales Trends: A Seven-Year View

From 2017 through 2023, the month of January has been a well-documented challenge for restaurants. According to industry data:

1.       Fast Food (Quick-Service Restaurants, QSR):

o    Post-holiday spending dips have averaged 8-10% year-over-year. The combination of indulgent December dining and tight January budgets consistently leads to fewer drive-thru visits.

o    Brands that traditionally rely on promotions, such as $1 menu items, experienced temporary volume upticks, though average ticket prices dropped.

2.       Casual Dining Chains:

o    January declines in casual dining sales averaged 12-15%, with guest traffic softening significantly. Consumers seeking to trim expenses often opt to dine at home rather than at chains with $15+ per-person check averages.

o    Notable exceptions occurred in 2019 and 2021 when promotional bundling offered consumers perceived value without compromising check size.

3.       Full-Service Restaurants (FSR):

o    Full-service dining witnessed the most pronounced pullback, with declines ranging from 15-20% post-holiday as fewer families splurge on sit-down meals.

o    These restaurants faced added challenges when labor and operational costs remained fixed, forcing thin margins in sluggish months.

The January slump reflects not only budget-conscious consumers but also broader economic anxiety. Over the years, global uncertainties like inflation, COVID-19, and economic downturns have exacerbated seasonal spending pullbacks.

Gift Cards: The 2024 Difference Maker?

Recent data from Paytronix, a leading digital guest engagement platform, indicates that holiday spending on restaurant gift cards could help restaurants regain January momentum:

·         In-Person Buying Signals Confidence: In-store gift card purchases outpaced digital sales in 2024, marking a reversal of trends and indicating renewed post-pandemic enthusiasm for in-person dining experiences. Consumers spent $7.8 million on in-store gift cards versus $7.3 million digitally.

·         Full-Service Restaurants Lead the Charge: Paytronix data shows that $12.3 million was spent on gift cards for full-service restaurants over the Thanksgiving shopping weekend, compared to $5.2 million for quick-service outlets. Consumers also loaded $66, on average, onto FSR gift cards, while QSR cards averaged $31.

·         Holiday Surge Happened Earlier: Shoppers bought 10% more gift cards during the Thanksgiving weekend compared to 2023, frontloading sales in response to enticing holiday promotions.

This increased holiday spending sets up a vital opportunity for restaurants to drive January redemptions when sales typically suffer most. Whether it's families using newly gifted cards to offset dining costs or consumers craving value-oriented offers, gift card redemptions may buffer seasonal declines.

Uncertainty and the Presidential Transition

While gift cards may provide a sales lift, looming uncertainty in 2024—largely tied to a new presidential administration—could make some consumers cautious about discretionary spending:

·         Historical precedent shows that presidential transitions often spark short-term economic hesitancy as businesses and households adapt to new policies or economic messaging.

·         When paired with inflation concerns or stagnant wages, dining out remains one of the first spending areas to shrink among cost-conscious consumers.

As January approaches, restaurants can mitigate this uncertainty by aligning their gift card strategies with consumer habits. Promotions emphasizing value, special redemptions for gift card holders, or bundled meal offers can help offset broader economic anxiety.

How Restaurants Can Turn Gift Cards into January Success

To combat the slow start of the year, operators should focus on three strategies:

1.       Incentivize Redemptions: Encourage immediate gift card use by offering perks like bonus dishes, special pricing, or loyalty program credits for gift card diners. Full-service restaurants, which already saw record gift card spending, can upsell with appetizers or drink pairings.

o    Example: Olive Garden’s "Bonus $5 Off a Meal" for January gift card use.

2.       Highlight Value Perception: Bundle meals and meal components to stretch consumer budgets. With QSR sales showing slower card growth, brands like McDonald’s or Taco Bell can offer limited-time $5 combos aimed at post-holiday frugality.

o    Example: A gift card holder special featuring a family meal bundle.

3.       Promote Through Multiple Channels: Restaurants must engage consumers online and in-store, reminding them that a gift card equates to savings. Social media, email campaigns, and push notifications can generate traffic by highlighting gift card balances and exclusive offers.

o    Example: Chili’s promoting limited-time gift card cash-back deals for loyal customers.

The Gift Card Outlook

With Paytronix data revealing higher gift card sales, particularly for full-service restaurants, the opportunity to convert that momentum into January traffic is clear. While economic and political uncertainty may prompt spending caution, diners with pre-purchased cards have more incentive to dine out.

Gift cards can—and should—be the lifeline restaurants use to weather January’s chill. If operators proactively market redemptions and position gift cards as tools of value, the post-holiday lull may turn into a period of much-needed recovery.

Are you looking for a new partnership to drive sales? Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday than tomorrow?  Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may have the clue you need to propel your continued success.

In Food Retail: Family Size Matters: Decoding Dining Decisions

 

In today’s food industry landscape, understanding family size and changing demographics is key to capturing consumer dollars. Restaurants, grocery stores, and convenience stores alike can unlock significant revenue by tailoring offerings based on family configurations and leveraging insights from the Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®, USDA, Mintel, IRI, Technomic, and the U.S. Census Bureau.

Family Dynamics Drive Dining Choices

The USDA's Food Away from Home division highlights that families with children drive 40% of dining-out occasions. These families often prioritize value, convenience, and menu customization. A Technomic report reveals that 78% of parents seek out restaurants with bundled family meals, reflecting a growing preference for cost-effectiveness and simplicity.

Conversely, households without children—a demographic now accounting for over 40% of U.S. homes according to the U.S. Census Bureau—frequently favor personalized, single-serving options. These consumers, identified by Mintel as "solo diners," exhibit a higher tendency to value premium ingredients and global flavors, often influencing the variety and sophistication of grab-and-go meal options at grocery and convenience stores.

IRI’s 2023 Consumer Shifts Study indicates that Ready-2-Eat (RTE) and Heat-n-Eat (HNE) solutions saw a 22% uptick in sales, driven by smaller households and younger consumers looking for “made for me” meal kits and portion sizes.

 

Census Bureau Insights: A Roadmap for Businesses

The U.S. Census Bureau’s 7-year trend data reveals pivotal demographic shifts:

·         Shrinking Household Sizes: Average household size fell to 2.53 in 2023, down from 2.59 in 2016. Smaller households mean fewer large grocery hauls and a preference for single-serving meal solutions.

·         Aging Population: Over 22% of U.S. households now include individuals aged 60 or older. This demographic increasingly favors meals with health-focused options like low-sodium and plant-based choices.

·         Growth in Multigenerational Households: These homes—which rose by 17% in the last decade—prefer meal solutions that cater to diverse dietary needs within one menu, such as mix-and-match entrée kits or customizable dining bundles.

·         Diverse Ethnic Composition: Asian and Hispanic populations, the fastest-growing demographics, heavily influence flavor trends. Technomic’s Flavor Consumer Trend Report indicates that 62% of consumers seek authentic ethnic offerings, an opportunity for food operators to diversify their menus.

Actionable Strategies for Food Operators

1. Restaurants:

Restaurants can cater to varied family sizes by offering tiered menu bundles—for instance, options for families of three, four, or more. Incorporating globally inspired RTE meal kits caters to smaller households, while mix-and-match family-style dining resonates with multigenerational homes. Mintel data emphasizes that visible family-focused promotions boost brand relevance by up to 28%.

2. Grocery Stores:

Grocers should lean into scalable portioned meals. Pre-portioned proteins and sides allow small households to curate their meals while offering bulk bundles for larger families. IRI data underscores the success of dynamic meal kits, showing a 35% growth in customizable offerings in 2023. Highlighting ethnic cuisines further attracts culturally diverse shoppers.

3. Convenience Stores:

Convenience stores are uniquely positioned to capitalize on grab-and-go family bundles, especially targeting late-night or sports-viewing meals. Technomic found that 45% of consumers would purchase fresh-prepped options from convenience stores if offered the same customization they expect in restaurants.

Leveraging Food Facts for Success

The USDA’s Food Expenditure Series reveals that spending on food away from home rose to 55% in 2022, compared to 44% in 2013. As the population diversifies and household configurations evolve, operators must align offerings with these changes:

1.       Flexibility is Key: From family-style meals to single-serve RTE items, adaptability will dominate the next wave of food industry success.

2.       Market to Multigenerational Needs: Highlight inclusive packaging and menus that simplify meal planning for families with varying dietary needs.

3.       Focus on Flavor Trends: Global flavor authenticity and healthier offerings appeal across demographic segments.

The Future Is Data-Driven

By combining USDA, Mintel, IRI, Technomic, and Census Bureau insights, foodservice operators can strategically align their offerings to the nuances of evolving family sizes and demographics. Understanding who is buying, why they’re buying, and how they’re dining ensures enduring success in this competitive market.

Are you looking for a new partnership to drive sales? Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday than tomorrow?  Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may have the clue you need to propel your continued success.

Now What: Kroger vs Albertsons – Who Won?

 

The merger drama between Kroger and Albertsons has dominated headlines in the food retail world, raising a critical question: who will emerge victorious? According to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®, by examining food industry trends, competitive missteps, and each chain’s strategic pivots, it becomes clear that Albertsons, albeit cautiously, is better positioned for the long haul. Here’s why:

Kroger: Lost in the World of Yesterday

Despite its reputation as a grocery titan, Kroger has struggled to adapt to a rapidly evolving retail landscape. Here are five major missteps contributing to its stagnation:

1.       Over-Reliance on Private Label Success: While Kroger’s private label brands account for over 26% of total sales, growth is stagnating as consumers pivot toward niche, locally sourced, and specialty products. Mintel data shows that shoppers under 35 are increasingly opting for artisan-style brands rather than corporate-owned private labels, undermining Kroger’s once-formidable edge.

2.       Weak Digital Transformation: Kroger’s digital sales grew by only 4% last year, according to IRI. Competitors like Walmart and Albertsons are seeing higher growth thanks to investments in seamless curbside pickup and delivery innovation. Kroger’s reliance on clunky legacy tech platforms has hampered customer adoption.

3.       Failure to Capitalize on Ready-to-Eat (RTE) Trends: Ready-to-Eat and Heat-and-Eat categories grew by 11% industry-wide, according to Technomic. Kroger’s lackluster selection in these areas puts it at a disadvantage, particularly with time-starved urban millennials driving the trend.

4.       Inflexibility with Smaller Formats: Retailer small-format stores, which emphasize convenience and curated offerings, are thriving. Kroger’s attempts to enter this market—such as Kroger Express—have floundered, failing to meet consumer expectations for localized inventory and flexibility.

5.       Inconsistent Pricing Strategy: Despite widespread inflation, consumers expect value. Albertsons’ competitive pricing in core categories makes Kroger’s disconnected pricing policies—marked by hyper-focus on certain loss leaders—a detractor. This has eroded consumer trust, according to recent data from Deloitte.

Albertsons: Driving Slowly but Surely Forward

Unlike Kroger, Albertsons has taken pragmatic steps to align with modern food retail trends. Here are five reasons why Albertsons is emerging as the better positioned player:

1.       Focused Expansion into Food Discovery: Albertsons has aggressively expanded its “Premium Fresh & Local” product lines, increasing sales in specialty food by 18%, according to Nielsen. Its partnerships with regional farmers and unique suppliers align with growing consumer demand for food discovery and authenticity.

2.       Digital Investments Bearing Fruit: Albertsons’ enhanced digital strategy—including partnerships with DoorDash and Instacart—has resulted in a 28% increase in online sales in 2024. The use of AI for personalized marketing has driven loyalty program sign-ups by 12%, showcasing better understanding of their customer base.

3.       Innovative RTE and Meal Kit Offerings: Understanding the value of convenience, Albertsons launched multiple in-store “grocerant-style” meal solutions. With Technomic projecting RTE meals to grow by 14% in 2025, Albertsons is positioning itself as a go-to destination for busy families.

Are you Serious About Building A

Larger Share of Stomach

4.       Sustainability Commitment Resonates: Albertsons has committed to reducing food waste by 50% by 2030 and expanding plant-based and organic offerings by 22% annually. These efforts resonate with Gen Z and millennial shoppers, who make up the fastest-growing segment of grocery buyers, according to Mintel.

5.       Adaptability in Store Formats: By refining its small-format banner, Market Street, Albertsons is winning in densely populated urban markets. These stores reported a 15% rise in per-store revenue last year, showcasing that flexibility pays off.

A Tale of Two Strategies

While Kroger seems to be betting heavily on traditional strategies that resonated a decade ago, Albertsons is navigating current and emerging trends with caution but precision. Albertsons understands the need to be consumer-centric, embracing personalization, convenience, and sustainability. Kroger, on the other hand, is losing touch with consumers who demand more authenticity and value.

Why Albertsons Will Outlast Kroger

As the merger saga unfolds, Albertsons appears better positioned for survival, and here’s why:

·         Consumer Migration: As 55% of consumers decide their evening meals after 4 p.m. (Grocerant Guru data), Albertsons’ RTE and Heat-and-Eat focus appeals directly to this trend.

·         Relevancy Through Innovation: With an edge in food discovery and digital sales, Albertsons continues to attract new customers, including younger generations.

·         Flexibility Amid Uncertainty: Albertsons’ small-format success and adaptive inventory management give it resilience in market disruptions—something Kroger’s unwieldy scale can’t match.

Ultimately, the food industry rewards relevance and flexibility—two attributes Kroger lacks and Albertsons is steadily mastering. As retail trends evolve, Albertsons is poised to outmaneuver Kroger by remaining consumer-centric, innovative, and operationally adaptive.

Don’t over reach. Are you ready for some fresh ideations? Do your food marketing ideations look more like yesterday than tomorrow? Interested in learning how Foodservice Solutions® can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us or visit us on our social media sites by clicking the following links: Facebook,  LinkedIn, or Twitter