STRATEGIC BLUNDER

Applebee’s tried to be cool, failed, and now it’s moving on with its life

Some companies will never be cool, no matter how much flair they wear.

This seems to be the case for Applebee’s. The casual US sit-down restaurant chain announced this month that it will be shuttering more than 130 of its restaurants by 2018, the result of poor growth after a failed attempt to rebrand itself for a younger crowd.

America’s suburban neighborhoods helped define so many restaurant chains. For years, Applebee’s, Texas Roadhouse, O’Charley’s, Chili’s, and Buffalo Wild Wings became stalwarts of sprawl—bringing in consumers who wanted a consistent and simple menu at a relatively low price.

Then America started changing. Baby boomers had kids, and those kids moved away from the suburbs and into cities (pdf). The millennial generation (born between 1980 and 2005) developed different tastes from their parents. These demographic and cultural shifts left once-thriving restaurant chains with an identity crisis—so some of them decided to try and rebrand themselves to keep those younger consumers.

It turns out, Applebee’s perhaps isn’t cut out to be a sophisticated, modern bar with a menu that sports chicken-wonton tacos and Sriracha lime sauce shrimp. Since the beginning of the year, the company’s stock price has plummeted by nearly 50%. It’s currently sitting at its lowest point in more than five years.

In a recent conversation with investors, Applebee’s executives were blunt about what went wrong. They called out the brand’s overt attempt at attracting a younger, affluent crowd as a strategic misstep that wound up alienating boomers and Gen-X consumers. Even worse, the rebrand never succeeded in luring younger diners.

“In my perspective, this pursuit led to decisions that created confusion among core guests, as Applebee’s intentionally drifted from—what I’ll call—its Middle America roots,” president John Cywinski said.

By contrast, Texas Roadhouse made a conscious decision to avoid a rebrand and found success. It stuck to its straightforward menu, designed for those who enjoy the routine of sticking to the same dishes.

“We’re just…focusing on the basics,” said Texas Roadhouse president Steve Colosi said in a July call with investors. “When I say the basics, it is staffing, it is the food, it is the service model, pricing, [and] local store marketing.”

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