Dive Brief:

• Applebee's is testing a new fast casual format, Applebee's Express, in Mobile, Alabama. The concept opened in December, according to Fast Casual. 
• Customers can place orders to go, via delivery or at the table. The 2,500-square-foot restaurant features a limited menu and seating for 72 guests.
• "It has the same neighborly feel of Applebee's with a new look and the convenience of a fast casual setting," Scott Gladstone, Applebee's VP of strategy and development, told the publication. 

Dive Insight:

Applebee's has plenty of reason to zero in on a smaller, to-go/delivery-friendly format. Its focus on off-premise business has helped the brand outperform the rest of the casual dining sector, with positive sales growth of 2.3% in 2018, versus a 0.9% decline in the sector. 

During its Q3 performance, off-premise sales were up also nearly 14% on top of last year's 37% increase. As Applebee's president John Cywinski said on the earnings call, off-premise is an important growth engine.

"We believe we're the best positioned brand ... given our youthful demographic profile, our menu variety, value orientation and the fact that we have more locations than anyone else in the category," he told investors. 

Younger consumers are no doubt driving the off-premise trajectory. While over a third of adults in the U.S. are more likely to order food for delivery compared to two years ago, half of millennials say the same, for example. According to a recent report from investment bank UBS, millennials are three times more likely to order delivery than their parents.

Another factor here is the significant growth of the fast casual space. As the Washington Post reports, there were about 17,300 fast casual restaurants in the U.S. in 2009, generating about $19 billion in sales. In 2018, there were 34,800 fast casual locations generating $47.5 billion. And though casual dining's footprint shrunk for the first time in 2017, fast casual sales are expected to continue strong growth. The segment will expand at a 7% clip throughout the next four years, according to Morningstar. 

This storyline is likely the reason why Applebee's isn’t the only casual dining brand exploring the fast casual space. Applebee's sister chain IHOP announced in December that it will also open a new fast casual brand, called Flip'd, in spring. Famous Dave's is also experimenting with a smaller format while The Cheesecake Factory debuted its fast-casual concept Social Monk Asian Kitchen in early 2019 and Buffalo Wild Wings launched B-Dubs Express in 2018, for example. Texas Roadhouse is also in the process of opening its third Jaggers in Louisville, Kentucky, after debuting the fast casual concept in Indianapolis. 

That's not to say any of these spinoffs will be an automatic homerun, however. Some casual dining chains have tried to do the same, and have failed. Cracker Barrel's Holler & Dash concept is one such example. The chain ended up buying Maple Street Biscuit Company last year and plans to convert Holler & Dash restaurants to Maple Street concepts. 

Also, just because fast casual is the golden child of restaurants, the industry itself is still very saturated and is suffering from traffic declines across the board. Shiny, new fast casual concepts that favor off-premise conveniences won’t change that, so Applebee's will need to find a way to differentiate.