Eroding Financial Performance

Friday, 03/31/06
Restaurant plans changes to stand out from rivals and halt earnings skid
By NAOMI SNYDER Staff Writer, Tennessean.com

After years of eroding financial performance and heavy turnover in top management, ...O'Charley's Inc.'s leaders are promising a new day and a smaller restaurant.

The company's new prototype.. is a167-seat restaurant that will serve as the model for the company's future restaurants. ...will have curbside-to-go service, updated technology, more booths and fewer tables. Existing restaurants will be retrofitted over the next three years with many of the same elements on tap for the new store, although older units won't necessarily be pared down in size.

The moves come at a time of heavy competition among casual dining chains, and efforts to cut its costs by slimming down restaurant size is one way that O'Charley's is fighting back. Meanwhile, there are more restaurants competing for limited growth in food dollars, some analysts say. Popular restaurants ... are giving people more options for dining out...

Casual-dining chains including O'Charley's Inc., Applebee's International Inc., and Ruby Tuesday Inc. all saw profits drop last year amid lackluster same-store sales and higher costs for food and energy. O'Charley's Inc. saw its earnings cut nearly in half last year....O'Charley's could have a tough time distinguishing itself from other chains in the casual-dining field, including Applebee's.

O'Charley's Chief Executive Officer Gregory Burns...
"I hear too many times from a lot of folks, a lot of our guests, that (we're) all the same,"... "I don't want to be the same. I want us to be best of class." The new restaurant prototype will be part of O'Charley's attempt to remake itself. "When you look at a brand that's 35 years old, I don't think we have kept up with our guests as they've evolved," said the chain's new president, Jeff Warne...

Introducing curbside-to-go service, ... allow O'Charley's customers to pick up food without getting out of their car. Attendants will deliver food to a designated parking area at the rear of the restaurant building. Updated computers in the kitchen are designed to keep track of which food must be prepared and when. O'Charley's also is adding extra training days for employees and introducing modernized uniforms and a new plate design...

...putting a renewed emphasis on service. "It's not a program; it's not a checklist,'' he said. "We want to live and breathe this notion of hospitality.''

Some , analysts remain skeptical however, about the company's financial future in the face of tough competition for diners' dollars.... said Oppenheimer analysts... "It has been our experience that companies experiencing problems take awhile to generate the improvements that lead to higher sales and earnings."