Casual chains pay more attention to lunch

Lunch has traditionally been the secondary meal for sit-down restaurants — if they even bothered serving it at all.

But as the competition for diners heats up, more places are focusing on midday meals.

Olive Garden, owned by Orlando-based Darden Restaurants, has added new calzones and sandwiches and unveiled a Web-based campaign aimed at the work-lunch crowd.

Darden's Red Lobster is testing a weekday pay-at-the-counter service from 11 a.m. to 2 p.m. Outback Steakhouse and Carrabba's Italian Grill, once rarely open before late afternoon, have begun rolling out lunch nationwide.

The emphasis on lunch has been joined as well by Luma on Park, which started serving it on weekends a few months ago, and Einstein Bros Bagels, which is expanding its offerings this year.

But the noontime crowd is not an easy one to capture. Midday meals don't boost sales as much because entrees are generally less expensive. And when diners eat out at lunch, they often want something quick — a problem for some sit-down chains.

Restaurants simply "get more bang for their buck at dinnertime," said Steve West, a restaurant analyst with Investment Technology Group.

Lunch makes up the highest percentage of overall restaurant traffic at 34 percent, according to research firm NPD Group. Overall, lunch visits stayed flat last year while dinnertime ones grew 1 percent. Fast food gets most of the business, and for casual-dining restaurants, analysts estimate lunch can make up as little as 15 percent of sales.

When more Americans began brown-bagging during the economic downturn, "what little lunch business they had got creamed," West said of the casual chains. "I think that's why you're seeing a lot of these guys getting more aggressive with lunch."

Olive Garden recently launched a website promoting itself as an easy choice for groups of people who can't decide where to eat. Breaklunchblock.com's features include a quirky video in which co-workers argue about whether to dine at places such as "The Troubled Pig" or "Farm to Bagel."

Olive Garden also has started lunch "flash sales," where customers can get digital coupons up to 25 percent off.

Olive Garden wouldn't say how much of its business comes from lunch or how much it hopes to boost sales. Darden Chief Operating Officer Drew Madsen told analysts earlier this year Olive Garden has much stronger lunch business than do sister chains Red Lobster and LongHorn Steakhouse.

But "we haven't put enough innovation into our lunch business over the last several years," he said — and the chain hopes to change that.

Red Lobster also plans to offer more lunch selections, Darden told analysts recently, and it has been testing a quicker, pay-at-the-counter option. Kansas City, Mo.-based Applebee's is trying a similar express lunch. The idea is to bring in diners who don't have time for a leisurely meal on their work breaks.

They include customers such as Mechelle Sein, who ate dinner at the Olive Garden inAltamonte Springs last week. Though Sein, 32, works nearby, she rarely visits for lunch.

"It just takes too long," she said. She said she prefers Moe's Southwest Grill or Tijuana Flats, which she called "quicker places."

Carrabba's, owned by Tampa-based Bloomin' Brands, began opening restaurants for Saturday lunch in 2011. Outback Steakhouse, also a Bloomin' chain, followed a year later. Now the restaurants have started opening early the rest of the week.

About a quarter of Outback Steakhouses and 9 percent of Carrabba's restaurants were open for weekday lunch at the end of last year. The company expects to eventually expand that to at least half. Bloomin' Brands would not say which Orlando restaurants might be chosen.

Lunch "is obviously a very big initiative for us," Bloomin' Brands Chief Executive Officer Liz Smith told analysts recently. The company is moving "very slowly and deliberately on a multiyear expansion into [weekday] lunch where it makes sense."

Higher sales from lunch would seemingly make Wall Street happy, but there's a potential pitfall, West said.

"The flip side of that is, will they generate enough traffic to make it profitable?" West said. "That's what some big boys like Olive Garden that are established struggle with sometimes. Can they make it profitable enough? Can they get enough traffic to make it profitable and not kill margins?"

If they succeed, smaller restaurants could suffer.

"Who gets squeezed out is probably the poor Mom and Pop," West said. "You don't think about them because you saw that $5 lunch spot for Olive Garden that's front of mind."