Dive Brief:
- Dave & Buster's is testing its first fast casual restaurant concept, according to the company's third-quarter earnings call. T&T Tacos operates in a converted special events rooms next to the arcade at the company's Dallas Flagship location, and offers street tacos and adult beverages.
- The restaurant has a food truck facade and is in a highly visible area in the arcade. Tacos range from $4 to $5.50 and offerings include traditional flavors like chicken fajita and carne asada, and plant-based tacos serving Impossible Foods-branded protein, according to Nation's Restaurant News.
- The standalone taqueria is meant to meet guest demand for quicker food options, and executives told investors during the earnings call that the fast casual concept will complement its casual dining offerings.
Dive Insight:
Despite the draw of new virtual reality games to complement its arcade, Dave & Buster's had a lackluster third quarter, which ended Nov. 4. Same-store sales decreased 1.3% even though revenues increased 12.9% to $282.1 million compared to the year-ago quarter.
Casual dining brands, especially bar and grill brands, have struggled to innovate their offerings to keep customers coming back. Several companies have been closing stores as a result, including IHOP, Ruby Tuesday and Applebee's. Even though consumer spending was up last year at restaurants, the growth has largely been in the areas of fast food, fast casual, takeout and delivery.
Burdened by pages-long menus, several casual dining brands have been trimming down their offerings to improve back-of-house operations and increase quality. Chilli's cut down its menu 40% in 2017 while Ruby Tuesday nixed 30% of its items as part of initial plans toward a revitalization, according to Nation's Restaurant News. Dave & Buster's also plans to cut down its menu further after cutting out 20% of its menu items earlier this year, according to the earnings call. The new menu will be revealed in February.
The eatertainment company is also bettering its technology and service by adding kiosk attendants, according to the recent earnings call. The brand also added front desk guest ambassadors in select stores to improve the guest experience and hosted seating at the sports lounge to help with flow during busy times.
Unlike traditional casual dining establishments, Dave & Buster's formats have the added bonus of entertainment, which makes its mediocre quarter earnings a bit of a surprise. Executives admitted to investors that not offering a popular all-you-can-eat-wings promotion early on in the football season, as it did last year, hurt the business. Late in the quarter it added a $19.99 wings promotion with unlimited video game plays to try and make up for the lost timing, but the damage was already done.
Comparable same store sales for food and beverage were down 5% even though food and beverage revenues were up 10.3% during the quarter. The share of food and beverage revenues also dipped to 42.1% compared to 43.1% in the year ago quarter.
Given the success of several fast casual brands like Panera and Sweetgreen, it makes sense that Dave & Buster's would want to test out its own fast casual concept to try to boost food and beverage sales. Its special event sales were down nearly 7% during the quarter, so it's also unlikely that the loss of the event space will have much of a negative impact on sales.
