TGI Fridays gambles on “endless” appetizers

July 07, 2014

CBS News

TGI Fridays clearly isn’t afraid of Americans’ reputation as big eaters.

The restaurant chain has just launched a summer-long promotion that lets customers eat their fill of any one appetizer for $10 per person. The “endless appetizers” offer, as TGI Friday is calling it, “is our way of reminding guests how Fridays delivers on our promise of great food, great service, great value and great fun,” Ricky Richardson, president and COO for TGI Fridays USA, said in a statement.

But is it likely to be a great business move for the company? Some industry analysts aren’t convinced.

“I hope for their sake they don’t run it long-term,” said David Corsun, director of the University of Denver’s Fritz Knoebel School of Hospitality Management. “It’s a loss-leader. They’re not going to make money on it. They’re trying to drive [customer] traffic — the question is whether they drive in the traffic they want.”

The promotion, which TGI Fridays is pushing in social media, comes just weeks after the Carlson Group announced it was selling the company to Sentinel Capital Partners and TriArtisan Capital Partners for undisclosed terms. In a press statement in May, Carlson’s president and CEO said the transaction would allow his group, which includes the Radisson hotel chain, to focus on its hotel and travel businesses.

Corsun notes that TGI Fridays and other restaurants in the family-oriented, casual-dining segment of the industry were hit hard by the recession.

“A lot of their clientele traded down to fast casual, to the Chipotles (CMG) of the world,” he said. “That market segment did extremely well compared to others.”

At the same time, according to Food Business News, consumers increasingly seem to favor smaller chains and restaurants, to the detriment of the the larger, full-service restaurants.

“In a weaker economy consumers respond to price, but as the economy improves quality becomes more important to restaurant customers,” Claes Fornell, chairman and founder of the American Customer Satisfaction Index told the industry web site. “This is good news for smaller chains and individual restaurants, which customers associate with higher quality food and better service.”

Corsun notes that a lot of the big, dine-in chains are trying to entice consumers through other promotions, like special appetizer and entree deals. But “this is like the next step in the death spiral, because there’s no money to be made in driving traffic that doesn’t produce profit.”

TGI Fridays may be hoping the promotion will encourage customers to order the costlier entrees or buy a couple of rounds of alcoholic drinks, which offer the best price margins for the restaurants.

“But couples with two kids, who were the pre-recession market” for Fridays and other casual dining restaurants, “they’re not going to be the ones who have three rounds of drinks,” he said.