Dive Brief:
- TGI Fridays plans to relaunch its bar this year, CEO Ray Blanchette said during the ICR Conference in Orlando on Monday. The company is finishing some tests toward this relaunch, according to CNBC. This development is part of the company's plan to go public after 45 years following its November sale to Allegro Merger.
- The revamp includes allowing the service of a beer and a shot at the same time, and partnering with actor Ryan Reynolds' gin company, Aviation Gin. The company also will improve music, lighting and seating to encourage socializing.
- Thirty percent of Fridays' $2.1 billion sales come from the bar.
Dive Insight:
As more consumers demand convenient off-premise food occasions, casual dining sales and traffic continue to slide. To better compete, Fridays plans to take advantage of one of the segment’s major advantages: bar sales.
Not only are alcohol sales an advantage for the segment as a whole, they're also a differentiator for Fridays specifically. A story in The New Yorker in 2015, for example, outlines how the chain helped invent the singles bar in the 1960s “at the height of cocktail culture.”
The chain could certainly use a shot in the arm. In November, year-over-year sales were down nearly 7% at company-owned locations and more than 8% at franchised locations. It also just closed a number of California restaurants.
Alcohol sales typically yield generous profit margins for restaurants. Liquor usually generates 80% to 85% profit margins, while draft beer is around 80%, bottled beer is about 75% and wine is between 60% and 70%. By comparison, full-service restaurants have average profit margins of 3% to 5%.
One major challenge Fridays may have to contend with is the overall decline in alcohol consumption in the U.S. Total cases of beer, wine and spirits consumed in America fell 0.8% to nearly 3.4 billion in 2018, the third year of declining volumes in a row, according to a report from IWSR reported by Bloomberg. Despite this trend, however, more Americans are drinking distilled spirits and sparkling wine, which is where Fridays could find a sweet spot.
The company could also find a strong tailwind if it ramps up its alcohol delivery, which it has tested in the Dallas and Houston markets. Eight in 10 consumers aged 21 to 34 years old are ordering food delivery at least once per month, and about 47% purchase alcohol every or most of the time they order food. So, while there are complex local and state laws to navigate here, the opportunity is strong.
Still, alcohol delivery doesn't support the in-house changes Fridays is making with its music, lighting and seating. The company will also have to find a way to bring customers in the door at a time when more diners are opting to order in. It has at least started that effort by tailoring experiences for consumers through artificial intelligence. So far, the technology’s ability to create one-of-a-kind drinks has enticed customers.
