4 American Food Chains That Died And Came Back | Rise and Fall Marathon | Business Insider

[Music] you'd think that these iconic American restaurant chains are too big to fail but they almost did Chuck-E-Cheese was the destination for arcade games and kids parties but it eventually went bankrupt TGI Fridays went from one of the hottest Singles bars in town to a failing chain and even fast food giant Subway was at one point closing more stores than it was opening so what went wrong let's start with Subway with its 37,000 locations worldwide it's undoubtedly a fast food giant but in recent years Subway has been on a roller coaster ride so where did it all start and what happened the chain began as Pete's super submarines in Bridgeport Connecticut in 1965 3 years later co-founders Fred Duca and Peter Buck rebranded it to Simply Subway Subway's famous giant foot long sandwiches are made right before your eyes the way you want what was so compelling then and still is today about Subway is really an open kitchen format in many ways they really pioneered that and the ability to customize your sandwich the brand redefined fast food with fresh ingredients that customers could see compared to other fast food chains at the time it felt healthy and it worked by 1981 there were 200 locations across the US and soon after Subway went International in the late '70s and in the ' 80s and in the '90s everyone knew about Subway I mean they they were everywhere they're still everywhere that's Joel laava an expert in franchising while each store looks and smells the same they're all independently owned franchises the format is pretty simple you buy a franchise you get trained they help you secure a location they help with a grand opening and you're you're open you're open for business follow the several hundred page operating manual do the advertising and customers will come in not only were way franchises successful they were and still are one of the cheapest chains to franchise while the Max cost to open a Subway franchise is $525,000 opening a McDonald's can cost more than $2.4 million because Subways were easy to open the number of stores skyrocketed between 1990 and 1998 store locations Rose from 5,000 to over 13,000 and in that same period of time gross sales Rose by about $2.1 billion Subway success continued into the early 2000s at a time when obesity was Rising rapidly in America Subway continued to Market itself as a healthy alternative to fast food one of their biggest successes for sure was the Jared Fugal story everyone remembers Those ads where it's him in those huge pants where he's showing how he lost all of this weight and that just made them so much money and it really made people think about Subway as as a really great health brand it was one of the biggest advertising wins that any chance had in recent decades so that was a huge huge part of their brand Subway carried fogle's success story for nearly a decade but by 2008 the world was suffering from the effects of the Great Recession and for many Americans hunting for deals replaced the obsession with weight loss so Subway changed up its message in March 2008 it introduced a new promotion that would come to define the chain [Music] by August 2009 as other restaurant trains were struggling through the recession the $5 foot long had pulled in $3.8 billion in sales for Subway a 177% jump in Us sales from the year before but even the best deals run their [Music] course starting in 2014 Subway sales began steadily dropping behind the scenes many of the reasons for Subway success had turned on them Quiznos was once Subway's main competition but tons of subchains like Jimmy John's Firehouse Potbelly and Jersey miks and fast casual chains like Panera were offering seemingly fresher and healthier options and they started stealing market share they're competing against people who bring in fresh produce every day a lot of Subway locations only bring in fresh produce once or twice a week on top of that fast food chains that had been around as long as Subway were coming up with healthy alternatives of their own and getting creative with new menus more and more fast food chains really want to have that Innovation pipeline where they're bringing something out new almost every month fast food places are looking for ways to bring in new customers Drive traffic and Subway has not tried to do that in the same way other places have but other fast food chains weren't the only competition for Subway franchises with Subways franchising model making it so easy to open locations stores inevitably started opening up around the corner from each other in lucrative markets take downtown Manhattan for example within a 15-minute walk in less than half a square mile there are 10 Subway locations and these locations in close proximity began cannibalizing each other's sales the Subway franchise agreement the contract it says they can open anywhere there is no protected territory so so franchises really have no say so in where the other franchises are going to open it's a problem and Subway corporate wasn't stopping it because the company benefited from a high number of locations more locations meant more franchising fees and high royalties to Subway corporate which diminish the effect of falling sales from a single location when franchisees sales are kind of slipping as long as they're staying open it doesn't necessarily hurt Subway as much as it would some other chance if everyone's kind of like chugging along like opening new locations then they can kind of keep on keeping on and it's not going to be the end of the world for the corporate office franchise owners on the other hand took the hit in 2012 each Subway franchise generated an average of $482,000 a year 4 years later that number had slipped to $422,000 a year for comparison the average annual revenue of a McDonald's franchise in 2016 was 2.6 million and to make matters worse Subway would lose the face of its company in 2015 the man who had embodied Subway's eat fresh mission was charged with possession of child pornography and having sex with miners Subway cut ties with fogal and he was sentenced to 15 and 1 12 years in federal prison the J fogal thing kind of basically went from a huge positive to a huge liability like the worst things possible that your brand could be associated with all of these things created The Perfect Storm for Subway and soon locations started to close in 2016 Subway closed 359 stores in the US it was the first year the chain closed more locations than it opened in 2017 that number was over 800 and by the end of 2018 over 1,000 locations had closed with all these sour ingredients it's hard to imagine Subway could bounce back but the chain is certainly trying in 2017 Subway rolled out a redesign called Fresh forward the revamped restaurants featured touchscreen ordering Wi-Fi us spe plugs new furniture and music the menu also got a facelift in 2018 the chain introduced its cheesy garlic bread the most successful new item in the Last 5 Years and in 2019 a line of chabata sandwiches and Halo top milkshakes hit stores the changes seem to be working after years of store closures in the first half of 2023 Subway recorded a roughly 10% rise in global sales at its restaurants and a similar rise in online delivery sales after having grown too big too fast the sandwich giant now seems to be well on the road to recovery Chuck E Cheese Chuck cheese when you're hry Chucky Cheese Chuck-E-Cheese is another iconic American brand hoping for a change in Fortune at one point the restaurant chain was synonymous with children's birthday parties when my mom asked me where to go for my birthday I said Chucky cheesus they came for the pizza arcade games and this guy people love the rat and for decades it worked but over time the fun began to fade and Chuck-E-Cheese declared bankruptcy in June 2020 so what happened and where is it now Nolan Bushnell the co-founder of the video game company Atari came up with the idea for Chuck-E-Cheese he felt there was something lacking in restaurants he once told Fast Company I wanted to add a dimension of fun to the act of having a meal so he put video games into a restaurant and he served pizza so while customers waited for their pies they could play Arcade games he is not someone who is coming from this from a pizza angle he's like okay I know video games and I think that I can bring animatronics into the world of pizza which is kind of a crazy idea but clearly it has worked over the years originally Bushnell planned to name the restaurant coyote pizza so he ordered what he thought was a coyote costume for his lead animatronic it turned out to be a rat and Bushnell decided to run with it first he thought of changing the restaurant's name to Rick rat's pizza but his team convinced him that having rat in a restaurant's name wasn't the best idea so they agreed on calling the mascot Chuck Chuck E cheese was originally almost more geared towards adults he smoked a cigar he had a Jersey accent it was kind of like an adult night out like happy birthday to you happy birthday to you you get it but pretty quickly it became clear that kids are the ones who actually enjoy being around animatronics like animals and thus chuck-e-cheese's Pizza Time theater was born with the rat mascot front and center the first restaurant opened up in 1977 in San Jose California and the concept blew up thanks to three things Chuck-E-Cheeses could fit over 400 guests way more than any other pizzerias and the 20-minute window waiting for pizza was a gold mine for the arcade they could lure people in with a few free tokens with each meal people would stay popping in quarter after quarter into those 75 arcade games restaurants tend to be low margin businesses and those games are very profitable those games accounted for 40 to 50% of chuck-e-cheese's restaurant profits the iconic Chuck-E-Cheese tokens that's where people are spending most of their money to get the tokens to play the arcade games to kind of have this party experience not so much on pizza now before Chuck-E-Cheese even launched Bushnell sold Atari including the Chuck-E-Cheese concept to Warner Communications in 1976 so in 78 Bell bought back Chuck-E-Cheese for half a million dollar and he quickly expanded into new locations then things got a little complicated chuck-e-cheese's success caught the attention of businessman Robert Brock and he signed on to franchise more than 200 locations but that same year Brock ended up canceling the deal finding an engineer for animatronics and launching a family restaurant chain of his own he called it ShowBiz Pizza the concept was pretty much the same it was different characters but the same kind of like Pizza arcade games and while Chuck-E-Cheeses had been growing alongside the blossoming gaming industry through the early ' 80s it found itself in a bitter battle with copycat Showbiz there was definitely a rivalry between the two at the time and Showbiz had arguably better animatronics Chuck and his friends were limited to frames on the wall chiz had an entire band called Rocka fire explosion made of full body characters by 1981 sh's locations were raking in near nearly $1.5 million in Revenue outperforming Chuck-E-Cheeses by $260,000 per store but Chuck-E-Cheese still had more locations and was still outpacing Pizza Hut and McDonald's at the time so that year Bushnell took Chuck-E-Cheese as public but there were problems looming on the horizon chuck-e-cheese's was no longer the best arcade and it definitely wasn't the best pizza restaurant as the market became crowded novelty wore off and things turned sad to try and outpace Showbiz Bush now expanded faster and faster opening a new location every 5 days and driving the company into debt then came the video game industry crash of 1983 as people turned to computer games consoles and arcades were hit hard video game sales dropped 97% nationally and arcades closed across the country it wasn't a great time to have a restaurant centered on arcade games that year Chuck e- cheeses lost reportedly totaled $15 million and a year later Chuck-E-Cheeses declared bankruptcy but its rival Showbiz well that company weathered the crash a little better and in a wild twist Showbiz ended up buying Chuck-E-Cheese for $35 million the copycat had vested the original but the acquisition breathed some life back into Chuck-E-Cheese by the early '90s all the Showbiz restaurants were transformed into Chuck-E-Cheeses for some reason Chuck-E-Cheese the mascot really did have staying power people loved the rat and those better animatronics over at Showbiz got a new life too the Rocka fire explosion band was stripped of its costumes and replaced with Chuck-E-Cheese and crew the fact that chuckecheese died and then was reborn in a new company is just very bizarre fast forward to 1998 and Chuck got a little bit of a makeover the parent company dropped the name Showbiz for C entertainment by 20 there were 300 locations and the company was steadily growing I would say the '90s the early 2000s chuckecheese was really thriving that's when people my age I think like have the memories of childhood the really nostalgic Memories the best ERA for chuckecheese really this Renaissance didn't last long 12 years later even though locations continued to open up they'd hit another sales slump so again Chucky the rat was rebranded this time as a rockstar Mouse with a backstory according to the company website Charles entertainment cheese is an orphan who celebrates others birthdays to make up for his tough childhood the new mouse came alongside an option of gluten-free pizza 2 years later despite slumping sales private Equity Firm Apollo Global Management saw an opportunity Chuck-E-Cheese still had brand recognition and locations across the globe restaurants tend to have a short life cycle what's nice here is the children age out and new children come in so that gives the business or gave the business a certain degree of resilience private Equity firms they approach the owners with an idea that like Hey we're going to expand this business we're going to bring it to overseas to other countries and so that's attractive Apollo acquired Chuck-E-Cheese entertainment in a leverag buyout for about a billion dollars in a leverag buyout private Equity firms purchase a company with partly their own money and partly borrowed money that turns into debt the company is responsible for paying ultimately the saddled Chuck-E-Cheese with nearly a billion dollars in debt it was quite a bit of debt for a company like Chuck-E-Cheese Chuck-E-Cheese already had a lot of expenses monthly rent on all of its locations pricey arcade games and animatronics to maintain to try and keep up with debt payments Chuck-E-Cheese tried revamping again it retired its famous animatronics added an interactive Dance Floor redesigned the restaurant and replaced the iconic gold tokens with a play pass card but operating income had slowly been declining a 2019 planned reverse merger was going to help them with their debt load but it didn't come through things only got worse when famous YouTuber Shane Dawson posted a video circulating decades old rumors that Chuck-E-Cheese recycled Pizza Chuck-E-Cheese definitely denied that they're recycling their Pizza however the pictures make it look like they do despite the company's insistence of zero Pizza Foul Play the damage to Chucky Cheese's reputation had been done then as we all know in 2020 the coron virus pandemic hit forcing Chuck-E-Cheese to close down locations for dying in in March when you can't have kids in for parties that is kind of their bread and butter and that's always been their bread and butter by June only about half of the nearly 560 locations had reopened for dinein delivery or takeout sales declined by 94% during the last 2 weeks in March and 21% overall in the first quarter and the company was forced to Furlow 65% of its support staff and the majority of hourly employees by June 25th the parent company had filed for chapter 11 bankruptcy with nearly $2 billion in debt an announcement of 34 permanent store closures soon followed the whole purpose of a chapter 11 bankruptcy is to try to protect the Integrity of the business while getting rid of the large amount amounts of debt that put the company to bankruptcy to begin with by by the end of 2020 the company said it had successfully offloaded $75 million worth of debt it still has nearly 500 locations in the US and since the restructure Chuck-E-Cheese has looked to expand the brand globally but the restaurant's iconic cast of characters munches make believe banned won't be along for the ride in November 2023 the company announced it would be retiring the animatronic bands in all of its locations except one in a suburb of LA but even though he may may be missing some friends it seems Chuck-E-Cheese is here to stay when you hear TGI Fridays perhaps you think of family meals and colorful cocktails but the chain started out by riding the wave of the sexual revolution in the 196s as one of the first Singles bars in the US my favorite line was hi darling I own this place and it worked every time but as Fridays became a family restaurant it struggled against the competition and began shuttering restaurants after the 2008 financial crisis so how did TGI Fridays go from the hottest spot in town to a diner and decline When Alan Stillman opened his first bar in 1965 he was thinking about one thing my business plan was to meet a lot of women it's a hell of a business plan I'll tell you that back then women rarely went out drinking in public it was even banned in some places women didn't have a lot of the rights I mean you couldn't have your credit card everything had to be you know under the egis of a man you had to be connected to a male figure but things were changing fast you know out of the Vietnam War protests and out of the Civil Rights movements there was a women's Liberation movement a new movement for women's Liberation is launched cities were increasingly full of working women looking to spend time with their friends or find a date just like Stillman so he came up with a simple concept a cocktail party that anyone could attend stelman redecorated an old bar on the corner of First Avenue in 63rd Street in Manhattan with Tiffany lamps Ferns and Bentwood chairs the weight staff dressed in red and white stripes and his concept was to create a space where women could feel welcome the word singles ball was not invented and I certainly didn't think that I was inventing anything like that whatsoever still man's plan to find a date had worked not only for him but for single people all over New York in 1970 a TGI Friday has opened in Memphis this time is a franchise and four more franchises followed soon after so I saw that and I'd always bowed that after 10 years of corporate life I was going to be an entrepreneur and this looked like a good opportunity this is Dan skogan he signed a deal with Stillman to launch eight new locations starting with Dallas little did I know that this decision would have me in a Volkswagen bus with a beard and bell bottom pants and going around and buying antiques until 1971 selling anything besides beer or wine at a bar in Dallas had been illegal for more than 5 decades even after prohibition ended and prohibition is repealed but things were about to change we wanted to upscale what alen had been doing when skogen's TGI Fridays opened in 1972 it had phone booths outdoor patios and a raised Square bar you had patrons at a bar and then there was this teeny narrow passageway the bodies were all smooshed up together very deliberately and that was a huge hit and we opened at 30% profit which was over three times the best that any Friday's had ever done skokan introduced strawberry daquaries and other Frozen cocktails a new kind of drinks menu designed to appeal to women we would go every night and see what guys we could pick up at the bar we were usually very successful CU we were young and cute way back when and I actually uh met my husband there we still wanted to be the best bar in town and so all of our bartenders had to be able to free pour better than a machine could do it and they had to be the most friendly outgoing wonderful people that you could could ever buy a drink from I'd start doing the trick and then stop make some drinks so then you and the people you didn't know beside you would start talking oh what are they doing now you're making friends we were the biggest show in town people would line up outside they'd be we'd have to rope off the bar we'd have to let people out to let people in but eventually the lines began to dwindle unfortunately the singles bar thing ended it was all of a sudden and it caught me by surprise so skogan decided to pay more attention to food we expanded the menu quite a bit I mean there were a lot of products in there and that was our first step into being a restaurant not just a bar favorites like loaded potato skins were added to the menu these go in neutral territory guys TGI Fridays was making a comeback as a pioneer of Family Dining welcome to Friday come on in in 1975 skogan and his Partners sold the company to the Carlson group Stillman left the business and eventually went on to create Smith and wilinsky the famous steakhouse skogan stayed on as CEO we went to work on a strategy of becoming an Impulse by an alternative to eating at home a new category of restaurants was on the rise casual Family Dining in the 1970s and early 80s chains like Ruby Tuesday Chili's Applebees and Olive Garden entered an increasingly crowded Market TGI Fridays tried hard to stay ahead of the curve in 1983 Carlson decided to take the chain public menus changed every season tji Fridays came up with a kids menu and non-alcoholic drinks debuted in 1983 by the time Fridays turned 20 in 1985 there were more than 100 locations across the US and the focal point of every restaurant the bar had become part of popular culture flare bartending as it was called reached a whole new level TGI Fridays went on to launch its own world championship Alan Stillman even claims that Tom Cruz's character in cocktail was based on him you're got to sit in the water g county but for skogan growth came at a price because of the rapid growth we were having stores that were problematic it was all because we had it just expanded way way too rapidly skoken left in 1986 and 3 years later Carlson companies bought out all the shareholders to take the chain private again and make a major push to expand I was at the end of my contract he wanted me to stay on and do the international thing and I said now you know I've got this boat I've got to go get on and and take my family and leave by the mid 1990s almost every state had at least one TGI Fridays and the brand had gone International there was even a location at the US Air Base in Afghanistan over time TGI Fridays introduced a low carb menu and tone down the decor at TGI Fridays we let our chefs Flex their muscles and we have a whole new menu to show for it but in spite of high ad spending Friday struggled to stand out Fridays was not distinguishing itself from the competition a Fridays felt like an Applebees for an example or an Applebees felt like a Chili they were all sort of working off of the same playbook in many ways in 2008 tji Fridays had more than 600 restaurants in the US but sales started to dip as the financial crisis gripped the restaurant industry you started to see the rise of this new segment called fast casual they were now starting to offer extremely high quality meals and they were doing it cheaper they were doing it faster they were doing it where you didn't have to wait at your table you didn't have to tip between 2008 and 2019 Friday's closed more than 200 restaurants in the US sales also crashed in 20120 plans to take TGI Friday's public once again were pulled as the pandemic rocked the industry when a company is planning on going public and then does not go public that's usually not a great sign during the pandemic TGI Friday's closed more than 74 of its 386 restaurants in the US people wanted things delivered to their homes the pandemic really really super charged that but all is not lost for casual dining Chains It's very premature to write off casual dining the growth that casual dining has seen during 2021 has been nothing short of remarkable TGI Friday still has more than 700 restaurants around the world and its focus on delivery started to pay off in 2022 sales in the US increased to 8% compared to pre-pandemic levels but 2023 was a big year for Fridays with constant shakeups at the top CEO Ray Blanchett stepped down in May 2023 and his successor Brandon Coleman only lasted 2 months he was replaced by longtime board member Wen Spangler who the company says will expand the company's Global footprint returning to its roots the company's hopeful it can bring back some of that lost Friday feeling Applebee's was once the go-to destination for family nights out but in the last 6 years applebe has closed nearly 300 stores and Rising Dev vment costs prevented the company from opening new ones to turn its fortunes around Apple peas is brought back his $1 Margarita deal the dollarita but will that be enough to see people once again eating good in the neighborhood Bill and TJ Palmer opened the first Applebees in 1980 3 years later they sold the restaurant concept to WR Grayson company and it quickly blew up by 1994 there were more than 500 Applebee's locations across the US and just 4 years later in 1998 the company opened its 1,000th restaurant rivaling competitor store locations like IHOP with 800 and Denny's with more than 1,000 stores nationwide Applebees was really doing well because they were reliable they weren't too fancy they weren't too cheap but they hit a nice sweet spot in the middle for people dishes like Applebee's boneless buffalo wings became a fan favorite and promotion like half-priced appetizers made Applebee's a popular spot for customers looking for a good deal but then at the end of 2007 the recession happened and people stopped eating out as much we are in a recession the longest recession since World War II but the question now when will it [Music] end as applebe sales struggled in the post recession economy it attempted to reinvent itself as a modern Bar and Grill to draw an up and coming Millennials but it didn't work Applebee's tried to be a little bit trendy a little bit cool and it just came off as kind of corny for most people where it felt like they were trying too hard to win over Millennials new menu items like handcut $20 steaks and brisket nachos not only failed to bring in new Millennial diners they alienated the very customers who had made Applebee successful in the first place people looking for a reliable affordable meal out by 2015 Applebee sales were falling and only continued to fall year after year in 2017 the company closed 99 locations Julia Stewart the CEO of Applebee's parent company D Brands Global reportedly stepped down because of Applebee's poor performance the former waitress was one of the industry's most celebrated and longest serving Executives for a brief time it looked like Applebees was done for but instead of folding it turned things around starting in late 2017 2018 Applebee's parent company D Brands had new leadership come in and this new leadership was very very focused on being inexpensive and not trying to be too trendy basically they took Applebee's back to the basics they're not going to try and win over Millennials with these fancy new menu items they're going to find something that's inexpensive that people are proven to like the biggest thing that kind of kicked off the turnaround for Applebee's was the dollarita the $1 Margarita after the success of the dollarita Applebee's quickly launched its neighborhood drink program releasing a new dollar and $3 drink every month alcohol deals helped Applebee stay strong during the pandemic as off-site sales Rose from 133% to over 40% in 2021 apple b says it's now now achieving the same inore customer numbers it did pre pandemic and with the dollarita making a return parent company D Brands is hoping for a return to the good times for The Neighborhood [Music] Grill yeah

Channel: Business Insider

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Keywords: Business Insider, Business News, rise and fall, food chains, subway, chuck e. cheese, tgi fridays, applebee's

Id: bORfnMRY3BM

Length: 31min 30sec (1890 seconds)

Published: Sun Dec 24 2023