Patrons of Applebee’s restaurants will soon find something new at their local venue, if they haven’t found it already. The 2,000-unit chain is replacing all of its gas grills with wood-fired grills, changing the flavor for a wide swath of its menu.
It’s a big change to be sure, and it certainly didn’t come cheap. It’s a necessary step Applebee’s parent company DineEquity (DIN) needed to take, however, as it had more than become an uninviting cliche within the world of restaurants.
However, Applebee’s is hardly the only U.S. restaurant chain that needs to change something about itself if it wants to be viable in the future.
Here’s a closer look at five other all-American brands with something to fix sooner than later.
McDonald’s
Giving credit where it’s due, relatively new McDonald’s Corporation (MCD) CEO Steve Easterbrook has given investors more reason for hope than they’ve seen in a long while.
There’s a dark cloud looming over almost everything that McDonald’s is, however, that needs to be addressed. That dark cloud is the prospect of a mandated minimum wage of $15.00 per hour.
That’s not to say McDonald’s workers don’t deserve it. It is to say, though, that everything that happens behind the counter is ultimately reliant on cheaper labor. If surging employee costs are forced on franchisees, something big will have to change, or McDonald’s will end up pricing itself out of the fast-food market.
Shake Shack
It’s tough to see Shake Shack Inc (SHAK) in any sort of gloomy light. The fast-growing chain of burger stands within the so-called “better burger” segment undeniably makes one mean hamburger.
At the end of the day, though, even a great hamburger is still just a hamburger, and it’s tough for consumers to repeatedly justify a fast-casual meal that costs as much as $13 no matter how high-quality its ingredients are … especially when the company is close to raising menu prices to accommodate higher employee wages.
In other words, Shake Shack doesn’t have a taste problem or a value problem. It has a math problem. It’s very (and surprisingly) expensive to operate a Shake Shack.
The restaurateur did well last quarter, but that’s been the exception to the recent norm.
Hooters
The once-iconic-for-all-the-wrong-reasons Hooters is finding it tougher and tougher to make a buck.
Why? For a handful of reasons.
One of them is, for better or worse, plenty of alternatives to Hooters have opened up, and apparently there’s a limited number of guys who … well, you get the idea.
Another is the fact that as much as Hooters has tried to become family-friendly, the most politically incorrect ideas that were openly cheered in the ’80s have since become considerably less acceptable to even the most open-minded of consumers.
Chipotle Mexican Grill
While beating up on Shake Shack may ruffle feathers, just since November, Chipotle Mexican Grill, Inc. (CMG) has become one of America’s easiest restaurants to not like. A not-so-small E. coli problem followed by a not-so-humble response from the company has soured consumers on Chipotle.
Interestingly, restaurants have survived worse gaffes. Even Chipotle has shrugged off similar contagions it has caused in the past. It worked past them because it apologized, fixed the problem (to the extent it could), and then moved on.
This time around, though, the somewhat-indignant handling of the outbreak has sent consumers elsewhere in a significant way.
The “fix,” so to speak, is purely an image one that’s better healed by time than gimmicks. The menu and premise is still a tasty one.
Bob Evans
Last but not least, ask 10 consumers familiar with Bob Evans Farms Inc (BOBE) restaurants if they like them, and most of them will concede they do.
Ask those same 10 consumers the last time they’ve actually been in a Bob Evans restaurant, and the timeframe is often measured in years.
It’s this partial contradiction that underscores why Bob Evans has been on the defensive for so long, closing restaurants at a fairly brisk pace of late in an effort to shore up a slow bleed.
There’s nothing inherently distasteful with the chain anyone can put a finger on. It’s just that consumers don’t want to visit, without even really knowing why.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
