The Downfall of Romano’s and How Casual Dining Can Be Saved

With the rise in consumer demand for fast casual concepts, some troubled casual chains, no matter how once successful, are dipping their toes into fast casual waters. But are these so-called wannabes just wasting their time? Or do these hybrids have a real chance for saving casual dining sales after all?

The downfall of Romano’s

Romano’s Macaroni Grill, an Italian-inspired casual restaurant chain that’s been running since 1988, is at a huge disadvantage in today’s marketplace. Sure, the chain’s acquisition has recently been finalized by Redrock Partners from Ignite Restaurant Group, and it generates more than $340M in U.S. sales (including its franchises). But in recent years, Romano’s has had difficulty securing loyal customers, finding its voice amongst an influx of newcomers, and understanding its audience.

While it may sound pretty good on the surface, consider this: Ignite recently sold Romano’s to Redrock for $8M. Two years ago, Ignite acquired the brand for $55M. In just two years, the valuation and perceived value of Romano’s Macaroni Grill has fallen dramatically. And while $340M in sales isn’t bad, that’s the total of its roughly 170 units, 150 of which are company-owned. (Its other locations are franchise-operated.)

But Romano’s isn’t the only casual chain that has seen a downfall in recent years.

When casual brands dip into fast casual components

As a result, some casual restaurant chains have decided to test market the idea of a shift into the fast casual segment. Some casual chains have tested extensions off of their original concept, like Red Lobster did in 2013 with Seaside Express (spoiler alert: it didn’t survive). But some take a safer approach by adopting elements of fast casual into parts of their existing operations.

Romano’s Macaroni Grill took a concept-within-a-concept approach. In October 2014, Romano’s introduced a fast casual lunch format dubbed Romano’s Kitchen Counter, which was marketed as “express lunch service,” in 131 of its company-owned locations.

Lunch options, all priced at $7, include salads, sandwiches, pasta options, “calzonettos” and dessert. An additional pull? If a guest doesn’t get their order in seven minutes, lunch is on the house. With a similar $9-in-nine-minutes model, Romano’s Kitchen Counter expanded into dinner service in February 2015 after Romano’s President John Gilbert announced the fast casual hybrid’s success.

However, customer sentiment, which we will dive into below, shows otherwise. But first, what makes fast casual so appealing?

Stripping down the ‘sexy’ of fast casual

The fast casual segment makes up $50B of the nearly $710B restaurant industry. Sandwiched in between the fast food segment and the casual dining segment, fast casual provides — in comparison to QSRs — better quality food. As the segment continues to evolve, fare has become more ingredient-focused and, for some concepts, chef-driven. Pulling from the more ideal attributes of the casual segment, fast casual also provides great service with a focus on the overall guest experience, at a lower price point than casual concepts and at a much faster speed. 

As our society shapes up to be more tech-savvy and on the go, as well as health-conscious and experience-driven, fast casual concepts are a hot option. And its sexiness will most likely continue to grow if current Millennial interest is any indication, considering this generation, the largest thus far, already drives most of today’s marketing messaging and will have the most buying power within the next decade or so.

Speaking of Millennials, they love connecting with brands and being part of a community. This is why brand storytelling has become so important. And fast casual is on top of it. But Tom Ryan, founder of Smashburger, says it best in “Fast Casual Nation: Changing the Way America Eats.” “People want two things,” Ryan says. “They want food with a story, and they want that story to make them feel good about what they’re eating.”

What customers really think

Data from the Restaurant Social Media Index (RSMI) shows there were more than 6,700 conversations on social media that mentioned Romano’s Kitchen Counter in Q1 of 2015. What we found from this data was quite revealing.

For starters, 81% of consumers found this new fast casual format to be confusing coming from a sit-down restaurant. At $7 for lunch, 67% of consumers perceived the concept to be expensive. Interestingly, 82% of consumers stated that if they wanted a lunch experience like this, they would prefer full-service. And 73% of consumers felt that this concept did not compare in quality or speed to six other recognized fast casual concepts, like Chipotle and Panera Bread. And that’s not all: The overall sentiment scoring on the food & service of Romano’s Kitchen Counter was a 41.9 out of 100, putting Romano’s Kitchen Counter at a D on an A-F scoring scale. This number is considerably underperforming in comparison to fast casual leaders like Chipotle that score in the high 80s.

What does this all mean?

This data, of course, was only measured for Romano’s. And while it certainly provides a lot of insight, there is still hope for casual dining.

“Casual dining may have a window here to compete with fast casual, but it will not come from hybrid concepts like Romano’s,” says Foodable Founder & CEO Paul Barron, author of “The Chipotle Effect.” “The emerging fast casual consumer is much more connected to craft food and beverage and high-quality ingredients. Experiences are the currency of the future of casual dining.”

While fast casual prices typically fall within the $8-$15 ballpark, $7 can seem “expensive” to guests at a place like Romano’s fast casual hybrid because, though the model has changed, the food quality has not. Remember, guests are willing to pay more for better quality ingredients (locally sourced, organic, etc.), and value comes down to customers’ perception of it. And because Romano’s was not built for a fast casual operation, it’s likely the model’s flexibility for things like speed are less easily adopted than would be the case for a full fast casual operation. Of course, speed is subjective and based on location, but that brings the risk of inconsistency into the equation.

Is casual dining doomed?

“There are some things happening in casual that could be reviewed as higher touchpoint with the pay-at-the-table concept, but the likelihood that this will be a long-term attraction to the new age consumer may be short lived,” said Barron. “Where we could see growth in the sector is with the upscaling of the experience to a new, smaller and more custom experience that would redefine what casual dining might be in the future.”