O’Charley’s closes 18 restaurants in one day as sales struggle

O’Charley’s closed 18 failing restaurants on Sunday, capping up the 91-unit casual-dining chain’s hard recovery from the epidemic.

company stated that the closures were required to position company for future success.

“We likened it a little bit to pruning the vines at a winery,” CEO Craig Barber explained in an interview. “That happens every year.”

You get a better, higher-quality grape, more growth, and you have to do it for the vineyard’s general health.”

It had already closed 33 restaurants in the second quarter, bringing its total for the year to 51, accounting for more than a third of its entire unit count.

The closed stores were experiencing both long-term and short-term issues. The surroundings altered over a period of up to five decades.

Malls and other significant retailers shuttered or relocated, displacing customers. During the pandemic, there was a significant movement toward online buying, which intensified this trend. Meanwhile, the rent was rising.

The following year, O’Charley’s commodities expenses increased by 19%. It hiked menu pricing, but not enough to compensate for the skyrocketing inflation.

“For our industry in general, and for our brands, it was very challenging to understand how to best maneuver that,” Barber went on to say.

According to the number of chain restaurant closures this year, O’Charley’s is not alone.

Boston Market has lost at least two dozen stores; Applebee’s is considering dozens of closures; Qdoba plans to decrease by up to 1.5% every year; and Veggie Grill has recently closed 40% of its outlets.

However, O’Charley’s difficulties precede even today’s tough environment. According to Technomic data, systemwide revenues plummeted 34% from 2017 to 2022, while unit count fell by nearly a third.

However, 2021 was its greatest year since 2016, according to Barber. Despite a bleak outlook for 2022, the company was upbeat at the start of this year.

Barber described January as “pretty good.” However, sales began to decrease in February, and then even more so in March.

“April, it was backed up a lot,” he explained.

“It seemed like the whole industry, late March, early April, like somebody blew out the parachute at the back of the dragster and slowed things down really quick,” that’s what he stated. “And I don’t think anyone saw it coming.”

The Nashville-based chain opted to close 18 outlets in one day to stop the bleeding.

Some tenants opted to extend their leases, while others worked with landlords to determine “what could be a better opportunity for both of us,” according to Barber.

The closures were distributed throughout O’Charley’s footprint, which is mostly east of the Mississippi River.

Some were geographical outliers, such as its lone Missouri location, which made marketing and support more challenging for the network.

Now, O’Charley’s is focusing on its 91 remaining outlets, nearly all of which are company-owned.

Same-store sales are still down year over year, but they’re improving and have turned positive early this week, thanks in part to many new bargain offerings, according to Barber.

One example is a collaboration between Coca-Cola and NASCAR, which provides customers with a $5 dinner discount on Mondays if a Coke-sponsored driver finishes in the top five over the weekend.

O’Charley’s also reinstated its famed Free Pie Wednesday campaign, albeit with some changes to improve margins.

“We made it a little higher bar to jump over to get to the free offering,” Barber told me. “And not only are we up six straight weeks on Monday, we’re up six straight weeks on Wednesday.” Both the top and bottom lines have improved.

Weekends continue to be a puzzle. O’Charley’s began a Shrimp Lovers Weekend special this week, offering three shrimp platters for $10.99 to $15.99 on Friday, Saturday, and Sunday. For an additional $3, customers can add fried shrimp to any entree.

As inflation continues, the promotions appeal to price-conscious consumers, and they have a clear goal: “How do we get guests to come to our restaurant versus the other alternatives?” Barber stated.

He believes O’Charley’s has lost some clients to lower-cost limited-service companies. “Part of that’s just the convenience aspect and the value pricing,” he went on to say.

However, he also faulted the media for instilling fear about the economy and scaring away clients during the difficult March and April months.

“I still laugh about all the talking heads arguing about whether we were in a recession or not in a recession,” he told reporters.

Consumers experienced “a little bit of fear and a little bit of concern… and people just kind of dialed it back.”

Those concerns have yet to materialize. And today, Barber is pleased with how things are going at O’Charley’s. But there is still a lot of ground to cover.

“We have 14 dayparts, and we’ve won four so far.” And we’ve won six games in the last two weeks,” he continued. “You get an attaboy and attagirl and thank you very much, and now we’ve got eight more dayparts.”