The Restaurant Industry: Focus on Steakhouses

Overview

• Restaurant industry is notably challenging, with high failure rates and low margins.
• Pandemic, inflation, and food costs have heavily impacted the industry.
• Steakhouses are lucrative, with high margins, and dominate the highest-grossing restaurants.

Steakhouses in America

• Steakhouses are a cultural and dining experience.
• Standard menu includes New York Strip, Porterhouse, and Filet Mignon.
• Focus on quality ingredients, service, and ambiance.
• Thrive on conformity and predictability.

Economics of Steakhouses

• Steakhouses charge premium prices with high margins.
• Alcohol, especially wine, is a significant profit driver.
• High barriers to scaling due to the need for human capital.

Case Study: Ruth's Chris Steak House

• Largest upscale steakhouse chain.
• Maintains strict brand standards, slow expansion to preserve quality.
• 150 locations, with half corporate-owned.
• Average check size: $90.
• Revenue grown from $285 million (2010) to $400 million (2021).
• Focus on special occasions, business dinners, and casual visits.
• Strategies to attract millennials with Tastemaker Dinners.

Case Study: Texas Roadhouse

• Fast-casual steakhouse, focuses on affordability and value.
• 600+ locations, with most corporate-owned.
• Average check size: <$20.
• Revenue: $1 billion (2010) to $3.5 billion (2021).
• High-volume, low-margin strategy.

Case Study: Outback Steakhouse

• Largest steakhouse chain but struggling reputation.
• 1,000 locations.
• Average check size: $24.
• Sales stagnated around $2 billion/year.
• International markets, especially South Korea, show growth.

Market Trends

• Steakhouses face challenges scaling due to human capital needs.
• New competitors like Fogo de Chão are targeting mid-market.
• Traditional vs. modern steakhouse dynamics.

Conclusion

• Steakhouses are diverse, ranging from high-end, opulent experiences to budget-friendly, fast-casual options.
• Each model has different strategies for growth, profitability, and market positioning.