Theory of Evolution

By 1966, Norman Brinker was already an accomplished restauranteur. He had joined Jack in the Box in 1957, when the chain had only a handful of locations, and became president of the company only a few years later. Then in 1964, he moved to Dallas to run Brinks Coffee Shop. Steak and Ale was his next, and arguably most ambitious, project.

The brand was groundbreaking in several ways. Servers were trained to introduce themselves to guests, and customers were encouraged to serve themselves at the salad bar - two concepts of service that were mostly unfamiliar at the time but helped establish a more comfortable and informal dining environment. But what was perhaps most innovative was the brand’s positioning.

At the time, restaurants largely fell into two categories: fast food on one side and fine dining on the other. This meant that restaurants usually targeted two distinct occasions; fast-food chains went after busy consumers who needed something quick and affordable, while fine-dining establishments targeted those looking to get out and celebrate special occasions. Steak and Ale aimed to carve out a new segment of dining between these two ends of the spectrum. It was more formal than fast food but more casual than fine dining. The menu was upscale but reasonably priced. The ambiance was stylish but approachable. It was the start of casual dining.

The concept hit a niche and flourished, growing to over 100 units by the early 1970s before merging with the Pillsbury Company in 1976. Steak and Ale would continue to grow, but in the late 1980s, the brand was struggling.

It had been about two decades since Steak and Ale had pioneered the casual-dining industry, and things were changing. Consumers appeared to be shifting away from meat, and competition in the casual-dining industry was intensifying as operators quickly followed in the brand’s footsteps. Red Lobster was founded in 1968, Ruby Tuesday in 1971, Chili’s in 1975, Applebee’s in 1980, and Olive Garden in 1982, just to name a few.

And not only were these new restaurants stealing market share from Steak and Ale, they were also stealing the brand’s talent. Norman Brinker left Pillsbury’s restaurant group in the early 1980s to run Chili’s, and many at Pillsbury followed him. This included Bob Basham and Chris Sullivan, who became Chili’s franchisees before developing Outback Steakhouse.

Steak and Ale leadership realized that their category was shifting and that the brand needed to evolve. Of particular concern were changing dietary preferences as well as customer demographics; the brand’s visitors were overwhelmingly men. The company thought that it could revitalize sales and appeal more to women with not just lighter entrees such as fish but a softened décor as well. However, the changes proved unsuccessful, upsetting core guests and failing to engage new ones. Sales continued to fall, and Steak and Ale’s recovery remained elusive.

In hindsight, the mistakes are easy to see: the brand changed too much too quickly, prioritized potential customers over current ones and drifted too far from its core positioning. But bold change was needed, and inaction would likely have been just as devastating. The mistake wasn’t that the brand evolved, but that it evolved in the wrong direction.

The restaurant industry necessitates change, perhaps more so than most other industries, and operators are commonly tasked with responding to shifts in consumer preferences, the ups and downs of economic cycles, the emergence of new technologies and the opening of trend-setting competitors. Chains must also adapt to local market conditions, figuring out how to make a single brand appealing across cities, states and countries. And what results is a need to balance demands. If restaurants are too static, their brand will become stale. But if they change too quickly, their customers will become confused. If chains don’t adapt to local markets as they expand, they will have limited appeal outside of their home region. But if they are too inconsistent from location to location, they dilute their overall brand image.

In sum, brands need to evolve and adapt. And for one of the better examples of brand evolution, let’s go back to Norman Brinker.

In the early days of Chili’s, when the brand was positioned as a full-service burger joint, Brinker was known for walking around locations and engaging with guests, asking questions to understand how the brand was performing and how it could be improved.

One of his initial takeaways was that guests were visiting primarily for special occasions, which are at the crux of full-service dining. Guests look for relaxing environments where they can be served and indulge, and they’re usually willing to pay more for these visits. But these occasions are infrequent, and if guests are only visiting for special occasions, they might visit once or twice a year. Brinker wanted them to visit more regularly than that. One idea to drive incremental visits was to expand the menu beyond burgers, so the concept added new offerings such as ribs, fajitas, salads and other dishes. The new items would soon prove popular, and this Southwest-inspired positioning would be an incredibly effective brand differentiator as the casual-dining sector exploded.

While Steak and Ale was shifting away from its core customer, Chili’s was effectively implementing feedback from its own, guiding the brand to the forefront of the casual-dining space. 

For deeper insights into the stories of Steak and Ale and Chili’s, check out our podcast episode with Chuck Winship, who was an analyst at S&A Restaurant Corp, a Chili’s franchisee and the CEO of Beef 'O' Brady's. Or, check out our highlight video covering the transformation of Chili's.