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Is there a difference between the family segment and the family midscale segment?
The family/midscale segment is defined by those restaurants that typically focus on the breakfast and lunch dayparts and have a check average under $15. Also they usually do not offer alcohol. While there are always exceptions, we see the family/midscale segment as including chains like IHOP, Denny’s and Perkins. At a broader level, we consider the family segment to include any restaurants that cater to the American family in a full-service segment. That would include not only those restaurants in the family/midscale segment, as defined above, but also include casual dining restaurants, like Chili’s, Applebee’s and TGI Friday’s.
How have the menus evolved in the family segment?
Breakfast has historically defined the family/midscale segment, and those items still dominate on family/midscale menus. Items like Breakfast Platters, Pancakes and Omelets top the list of family/midscale menu items. However, restaurants in this segment are also eyeing other dayparts and have added lunch and dinner options, like burgers and chicken fingers, as well as some healthier items that help broaden their appeal.
Who is the typical customer for the family segment and how has that changed during the last ten years?
Although many people think that the quintessential family/midscale customer is a retired white hair, the truth is that this segment has great appeal among younger consumers, especially those aged 25-34. This age group is 12-14% more likely than average to go to a family/midscale restaurant for breakfast, lunch or dinner. The table-side service and relatively low price points make this an affordable option for new families. And if we consider some of the moves made by family/midscale restaurants recently, including Denny’s partnership with the AARP, it does appear family/midscale is looking to balance its customer portfolio.
How do family chains market to their existing customers and how do they attract new customers?
The past couple of years have been all about price promotions. These have ranged from limited time offers to “value” menus to kids eat free days/nights. But considering that this segment does well with younger consumers, restaurant chains in family/midscale are using a mix of social media tools, traditional advertising channels and movie tie-ins that are more likely to resonate to the core customer.
How has discounting figured into the family segment?
As noted above, discounting has played an important and central role in the family-midscale segment. From free Grand Slams and pancakes, restaurants in this segment were trying anything that would resonate with consumers, especially in regards to price points. But perhaps the discounting promotion that garnered the most headlines was Denny’s $2, $4, $6 and $8 value menu, which has been successful in driving greater customer traffic for the chain. These types of discounts are necessary not just to appeal to current customers but to also keep up with discounting in other full-service segments, notably casual dining.
Is the segment growing overall or retracting?
Adjusted for inflation, the family/midscale segment fell 1.3% in 2010 to $43.0 billion. Looking ahead to next year, we see family/midscale growing 0.6% to $43.3 billion.