Forecast: Favorable Conditions for Restaurant Chain Partnerships

June 5, 2023 Forecast: Favorable Conditions for Restaurant Chain Partnerships

Despite the last three years not being kind to restaurant owners, signs indicate many national and regional chains could benefit by partnering with sports and entertainment rights holders as they seek to attract and retain customers.

Across the spectrum of corporately owned and franchised eateries—from quick-service and fast-casual to pizza and casual-dining, restaurant operators are seeking new ways of getting people through their doors and keeping them coming back.

According to a recent report in Nation’s Restaurant News, on the heels of pandemic shutdowns and continuing workforce shortages, 2022’s rising costs for food, equipment and employees forced every dining establishment to raise prices—often by double digits—followed by attempts to attract and retain customers through coupons and other discount promotions.

But in the first half of 2023, to balance generating traffic with ensuring those customers’ checks generate sufficient revenue, “there has been an operational trend away from discounting and more toward everyday consumer value—a more complex equation that doesn’t just take price into account, but also quality of food and beverages, uniqueness of menu items, experience, and speed of service.”

With a need to increase traffic and loyalty while maintaining price points and profit margins, restaurant operators are prime candidates for sponsorship, given the medium’s proven ability to generate visits and sales for all types of brick-and-mortar retailers, both on a national and local basis.

And if Chili’s parent Brinker International is an example, the dollars to fund deals could be there thanks to the shift from discounting. “The past six months of promotional and merchandising strategy shifts have funded the start of return to national advertising,” CEO Kevin Hochman said during last quarter’s earnings call. “As a result, we’re seeing incremental improvements in traffic trends versus the industry, as well as margin improvement from the reduction of discounting and promotionally comping food.”

The industry’s troubles this decade have left plenty of opportunity for partnerships, with open restaurant categories at many properties. On the national level, the five largest North American pro sports leagues provide an example:

NBA: No restaurant sponsors

MLS: No restaurant sponsors

NFL: Subway and Little Caesars

MLB: Dairy Queen (regular season) and Taco Bell (postseason)

NHL: Chipotle (North America) and Tim Hortons (Canada)

While the NCAA has done well with Buffalo Wild Wings, Pizza Hut and Wendy’s as current corporate partners, the pro league rosters have plenty of room, especially in the fast-casual and casual-dining segments, with chains including Panera, Applebee’s, Chili’s, Olive Garden, Red Lobster, Outback, TGIFridays, Texas Roadhouse and others spending significantly on traditional advertising, but little to none on partnerships.

As with any category, sponsorship sellers will need to research individual companies and brands to determine their specific market position and appetite for partnerships. As the NRN piece points out, a few operators are sticking with discounts for the time being, including Applebee’s parent Dine Brands.

A determining factor in the path they choose, the article points out, often is the corporate structure, with companies such as Brinker and Outback parent Bloomin’ Brands operating company-owned stores, while Dine Brands’ restaurants are all franchises.

According to analyst Mark Kalinowski, “When the company owns the store, you’re going to care about your bottom line and cash flow. (Franchisors) get royalties based on sales and leave it up to the franchisees to make profits…so because that structure is different, they often will take different strategies.”