In a surprising move, O’Charley’s, a well-known casual dining chain, closed 18 of its restaurants in a single day, a decision that significantly impacts the brand’s overall presence. This action was a part of a broader strategy by the company in response to various challenges, marking a notable shift in the casual dining sector.
The decision to close these locations was largely driven by a combination of factors. O’Charley’s has been grappling with declining sales, a trend exacerbated by the COVID-19 pandemic and its aftermath.
The chain’s systemwide sales fell 34% from 2017 to 2022, with a particularly noticeable downturn in sales performance in early 2023. This decline in business was further impacted by shifts in consumer behavior, such as the increasing preference for online shopping, which reduced foot traffic in areas where many O’Charley’s restaurants were located.
Additionally, the closure of malls and other retailers near these restaurants contributed to a decrease in potential customers.
The economic landscape also played a significant role. Increasing rent and commodity costs added to the financial strain on the chain. The challenging post-COVID inflationary environment, particularly in terms of commodities inflation, led to compressed margins, making it difficult for the company to maintain profitability in certain locations.
O’Charley’s CEO Craig Barber likened the closure of these restaurants to “pruning the vines at a winery,” a necessary step for the long-term health of the brand. The closures, which account for around 17% of the chain’s total portfolio, were seen as a way to preserve cash flow and allow the company to start anew with a more asset-light portfolio.
The company aims to improve its financial health by focusing on its remaining locations, optimizing its operational strategies, and introducing smart pricing and promotional tactics.
This strategy includes revising promotional offers to ensure they are cost-effective and appealing to customers, such as tweaking their popular “Free Pie Wednesday” promotion. The chain is also seeking to improve customer traffic on slower business days by launching new promotions and partnerships.
While this decision marks a significant reduction in O’Charley’s physical footprint, it is part of a broader strategy to stabilize and strengthen the brand. The company is focused on improving cash flow and sales margins and is open to the possibility of future growth and expansion in markets where it can maintain operational synergy.
The closure of these restaurants reflects the ongoing challenges and transformations within the casual dining sector, highlighting the need for adaptability and innovation in a rapidly changing business environment.
