A lot has been said about the decline of the family dining space in recent years. From the decline of their market share due to the advent of fast casual segment to the loss of customer traffic due to the bullishness of delivery and carry out platforms. However, the family dining segment is attempting a strong comeback, and it is the smaller chains in the sector that are reinvigorating the segment.
Smaller brands like Black Bear Diner, Huddle House and First Watch now represent an element of momentum in a segment that could otherwise appear in a state of stagnation. In recent times, First Watch showed significant sales and system growth. According to Technomic’s list of the 500 largest restaurant chains in U.S., its revenue in 2017 rose 31.8%. In fact, there are now 310 First Watch restaurants, including 256 company-owned and 54 franchised. The chain also owns 54 outlets of two other brands, The Egg & I and Sun & Fork, totaling 364 locations. Fueling the financing has been a series of private equity owners. It was first acquired by Catterton Partners about 15 years ago, then scooped up by Freeman Spogli & Co in 2011. Advent International purchased it in the fourth quarter of 2017.
The Redding, Califiornia-based Black Bear Diner has a similar story. After tapping into capital through acquisition by PWP Growth Equity, the chain is preparing for a nationwide expansion. The strategy of reusing distressed restaurant real estate is what gave this family-dining brand an edge against its competitors. It is now putting infrastructure and operations in place to support adding 21 to 22 units per year, with nearly 20% of that growth coming from conversions. The company is expected to have systemwide sales of $275 million by the end of 2018.
Meanwhile, Huddle House is doubling down on growth with an aggressive corporate development strategy set to escalate nationwide franchise momentum for the beloved family-dining brand. The Atlanta-based franchise launched plans to open 12 new corporate locations annually over the next five years with a target of adding 135 restaurants in the next five years expanding its super-regional footprint into prime areas like North Carolina, Arkansas, Texas, and Missouri.
With the overall restaurant industry projected to reach $863 billion in sales, a large proportion of the resurgence in the family dining segment is banking on millennial parents to drive foot traffic at their locations. A recent study indicated that millennials with children increased their restaurant visits by 5 percent in 2018 compared to prior year. The family dining chains that are holding their own, despite intensified competition, are offering a reason to dine out—a compelling combination of down-home service, good value, and appealing menus. Another differentiation that can lure more customers is superior service; and with 72% of casual dining operators reporting delivery growth is just the example of that aspect. FRANdata feels that if brands in the family dining segment adapt to these changes, be good at off-premises offerings and deliver on service to their core customers, they can sustain business and turn things around.