Prepared by:

1. Top Ten Chain Report 2Q 2012 DRAFT REPORT Prepared by: August 2012 Project #14332

2. For Questions, Comments or Additional Information, Contact: David J. Henkes Vice President dhenkes@technomic.com 300 South Riverside Plaza Suite 1200 Chicago, IL 60606 (312) 876 0004 Fax: (312) 876 1158 www.technomic.com

3. Introduction

4. Background of the CO-PILOT Program and the Top Ten Chain Deep Dive • In 2005, Technomic began analyzing restaurant visits by occasion-type as part of our broader evaluation of the foodservice industry. This program came to be known as ROOT (Restaurant Occasion Ongoing Tracking) and provided details on how consumer behavior, product selection, etc. varied by the type of occasion. However, the applicability for the on-premise supplier was limited, and Technomic was asked to develop an alcohol-specific program that would provide occasion-specific information for on-premise visits, and would offer detailed information on beer, wine and spirits. • The base CO-PILOT study provides on-premise suppliers with information that does not currently exist elsewhere on consumer attitudes and behavior toward away-from-home alcohol consumption. This longitudinal study provides insights into the number and type of occasions that involve alcohol, and provide in-depth insights into selection drivers for venue, type of alcohol, format, and brand. This detailed insight offers suppliers a unique opportunity to more closely monitor the on-premise consumer and adjust strategies and tactics according to current, up-to-the-minute trend information. • Based on feedback from CO-PILOT clients, it was determined that chain-specific data was necessary to provide an even more comprehensive picture of the on-premise channel. This report is the seventh report detailing specific consumer usage and feedback on the top ten on-premise (beverage alcohol serving) full service restaurant chains.

5. Top Ten Chains Included In The CO-PILOT Chain Tracker • As noted, this report asks consumers about their visits to, and usage of, the top ten on-premise full-service restaurant chains. For each chain restaurant, the research obtained a minimum of 200 consumers that had eaten at that chain in the past month (during 2Q 2012) • The chains that are included in this wave of research include the following:

6. CO-PILOT Chain Tracker Methodology – Visits/Occasions • In CO-PILOT Chain Tracker, each respondent was asked about their restaurant/on-premise visits over the past two week period. They were then asked the number of occasions that involved alcohol. Of those, consumers were asked more detail about the two most recent occasions (if more than 2). • In this 2nd quarter 2012 wave, conducted from April to June 2012, a total of 2,000 respondents (200 for each chain) were interviewed. • Once alcohol occasions were identified and isolated, the visits were broken into nine different occasions as follows:

7. CO-PILOT Chain Tracker Methodology – Chain Visit Information • Each respondent is asked to report on their visits to up to two of the top ten chains being probed. Surveys included consumers that consumed alcohol as well as those who consumed non-alcoholic beverages. Respondents are asked the same battery of questions for each occasion.

8. CO-PILOT Chain Tracker Methodology – Products Included in Scope • As in the base CO-PILOT study, consumers were asked about their consumption of every major type of alcohol. in the initial questions, consumers are asked to provide the number of drinks consumed during their last visit to each chain restaurant, and the list of drinks included the following:

9. In addition to standard demographic questions (age, gender, ethnicity, etc.) and standard daypart-oriented questions (e.g., party size, food / beverage ordered, etc.), the CO-PILOT Chain Tracker delves into other unique areas, including the primary reason for selecting each venue. For each occasion profiled, respondents were asked to identify all factors that impacted their decision to visit that particular chain and, of those, what the most important factors were. The table below lists the elements surveyed for each unique deliverable. Survey Design

10. CO-PILOT Methodology – Quotas and Respondent Base for 2Q12 • Data were collected continuously for a 3 month period beginning in mid March and continuing until the middle of June 2012 with a nationally based sample of consumers aged 21 and over. Unlike the base CO-PILOT study, this study did not set quotas by demographic group; the goal was to find “true users” of each chain. Thus, certain groups (such as Hispanics and African Americans) have slight underrepresentation in this study relative to their share of population because they do not use certain chains as frequently as other ethnic groups. Demographic Breakout

11. II. Executive Summary of FindingsSecond Quarter 2012

12. Incidence of the Top Ten Chains experienced minimal shifts compared to the fourth quarter of 2011. Applebee’s continues to have the highest incidence (16%), followed closely by Olive Garden (15%). Four other chains, including TGI Friday’s, Chili’s, Red Lobster and Outback Steakhouse, also accounted for double-digit shares Total Incidence of Top Ten Chains – Time Series % Consumers that Have Eaten at _______________in the Previous Two-Week Period

13. Top Ten Chain Incidence by Age – Time Series • The table below shows the incidence by age group. Percentages have remained relatively consistent over time, though several age groups have experienced steady shifts over time.

14. Top Ten Chain Incidence by Age – Indexed Time Series • This table indexes the visits to each chain by age group. These indices show the extent to which each chain appeals to the various age groups and how this has changed over the previous 4 “deep dives.” The red numbers indicate where each chain overindexes the greatest relative to the competitive set.

15. Top Ten Chain Incidence by Ethnicity – Time Series • This table shows the incidence for each chain included in the scope by ethnicity. Incidence of Hispanic consumers has been increasing at both Applebee’s and Chili’s over the year. % Consumers Who Have Eaten at _______________ in the Previous Two-Week Period

16. Top Ten Chain Incidence by Ethnicity – Indexed Time Series • This table indexes the ethnic breakout of the visits to each chain, indicating the appeal and strength that each chain has with the major ethnic groups. As on the previous page, the red numbers indicate where a chain overindexes relative to the full top ten. % Consumers Who Have Eaten at _______________ in the Previous Two-Week Period

17. Top Ten Chain Incidence by Income – Time Series • This table shows the incidence for each chain included in the scope by income level. % Consumers Who Have Eaten at _______________ in the Previous Two-Week Period

18. Top Ten Chain Incidence by Income – Indexed Time Series • Jerry – format To show how each chain appeals to various income levels, this table indexes consumer visits to each chain by income. The red numbers indicate the income levels that index higher at each chain. % Consumers Who Have Eaten at _______________ in the Previous Two-Week Period

19. Summary of Top Ten Chain Usage by Day of the Week – Time Series • The following summarizes the usage of each chain by day of the week, as reported by the consumers in the Chain Tracker study. Note that these are weekpart shares for all consumers, not necessarily just alcohol consumers. continued…

20. Summary of Top Ten Chain Usage by Day of the Week – Time Series (cont'd) • The following summarizes the usage of each chain by day of the week, as reported by the consumers in the Chain Tracker study. Note that these are weekpart shares for all consumers, not necessarily just alcohol consumers.

21. Summary of Top Ten Chain Usage by Daypart – Time Series • The table below and on the following page summarizes the occasions profiled in this report for each of the top chains based upon daypart. continued…

22. Summary of Top Ten Chain Usage by Daypart – Time Series (cont’d) • 2Q11

23. Summary of Top Ten Chain Usage by Type of Occasion – Time Series • As in the past several quarters, the Informal Family Meal continues to be the top occasion for most chains profiled in this report (Hooters is the lone exception and Buffalo Wild Wings is much lower). However, the share of this occasion decreased for most chains, both vs. last quarter and vs. same time last year. • The Informal/Spontaneous Get-Together (which includes Happy Hours) and Planned Get-Togethers are, for most chains, the next highest occasion in terms of incidence. continued…

24. Summary of Top Ten Chain Usage by Type of Occasion – Time Series (cont’d)

25. Index of Occasion Type to Top Ten and Overall Industry – 4Q11 • The table below provides an index of each of the nine occasions for each chain included in the scope of the study. The first column for each chain provides an index relative to the other chains included, while the second column indexes the chain’s occasions relative to the entire on-premise industry (as shown in the base CO-PILOT report.) Note that nearly every chain overindexesto the family dining occasion, which has generally been the “sweet spot” of casual dining. • The red numbers indicate where a chain overindexes relative to the competition in each occasion.

26. Summary of Top Selection Factors for Top Ten Chains • While the general selection factors are relatively similar for all chains, there are some interesting differences. The next several pages highlight the percentage of consumers that rate each factor as one of the two most important drivers in their decisions to visit each of the top ten chains, both for 2Q11 and relative to 4Q11. • There is also a chart that indexes each selection factor relative to all top ten and to the total on-premise industry to show which factors “overindex” or “underindex” in the minds of the consumer when selecting a venue. • These indices can be valuable to help understand the extent to which consumers view each chain as “unique” and how well they index against “ownable” points of difference. • Some relevant findings: • It’s clear that many of the top chains still differentiate themselves based upon convenience and price. However, “serving the food I like” and “food quality” continue to be the biggest reasons consumers name for visiting most chains. Importantly, convenience continues to rank very highly as wellalthough it fell slightly in importance among seven of the top 10 chains. • Overall, “value” remains a strong driver for chain restaurant visits along with coupon usage. While it is not a primary motivator (unlike food quality, etc.) there remain several chains that index very highly on these areas, showing their aggressiveness in driving traffic through “deals.” These numbers have not significantly declined for the past several “deep dives.” • As always, it’s important to note that most consumers are not making decisions on venue based primarily on beverage (whether it’s variety or availability of certain drinks). As Technomic has noted in the past, however, these items can provide the “resonating point of difference” to the consumer once they’ve decided to visit a venue.

27. Summary of Top Selection Factors for Top Ten Chains – 4Q11 continued…

28. Summary of Top Selection Factors for Top Ten Chains – 4Q11 (cont’d)

29. Index of Top Selection Factors vs. All Top Ten – 2Q12 Red numbers = top 3 areas in which chain overindexes its performance

30. Index of Top Selection Factors vs. Total On-Premise Industry – 2Q12

31. Summary: Where Do Consumers Try Something New? • Consumers were asked for each occasion at each venue whether the drink they chose was a new drink, a regular drink, or one that they had ordered before but only drank occasionally. The table below summarizes the percent of consumers (for beer, wine and spirits) that noted that at least one of the drinks they consumed at that venue was something they never had tried before. Note that this could be a brand, format, varietal, or type of spirit. • For the second consecutive report, Ruby Tuesday drinkers appeared to be the most adventurous. The chain had the highest propensity for beer, wine and spirits for trying something new. • Note that some of the higher percentages could also indicate that the consumers that typically go to the venue don’t normally drink that type of drink (i.e., 44% of wine drinkers at Hooters noted that they were trying something new.) Some of the bases are also slightly smaller and should be used directionally.

32. Top 10 Chain Scorecard – 2Q12 • The chart below summarizes some of the key information for each chain, as reported by consumers using each chain. More detailed information on each is contained in the profiles for each chain attached as appendices to the end of this document. *Extremely Satisfied **Extremely Likely

33. Summary: Bar vs. Dining Room Consumption – 2Q12 The table below summarizes the overall consumption (based upon total drinks ordered) of each of the ten chains included in the scope of the study. Overall, the bar accounted for 38% of all drinks consumed in the top ten chains, up two percentage points from 4Q11. All

34. Summary of Top Chain Satisfaction Among Alcohol Drinkers – 2Q12 vs. 4Q11 • Jerry – format The tables below and on the next page summarize the percent of alcohol consumers that rated each factor in the top two box on a four point scale in terms of their levels of satisfaction. The table thereafter provides an index of all satisfaction relative to the top ten accounts to provide easier comparison. continued… Note: Top Two box using a four point scale

35. Summary of Top Chain Satisfaction Among Alcohol Drinkers – 4Q11 vs. 2Q11 (cont’d)

36. Index of Satisfaction Among Chains vs. All Top Ten, 2Q12 The table below presents the satisfaction levels slightly differently and indexes them relative to the average of all ten chains included in the scope. This may help target chains by providing details about what consumers believe is there true point of difference. Red numbers = top area for each chain in which it overindexes on consumer satisfaction

37. Appendix A Profiling the On-Premise OccasionProfiles of Top Ten Chain Restaurants

39. Two-thirds of Applebee’s occasions (67%) are during the evening/dinner daypart. Afternoon (18%) and mid-day/lunch (12%) follow, while late night occasions (3%) decreased two percentage points from 4Q11. Weekends (Fridays/Saturdays) accounted for 47% of total occasions – up two percentage points from the same quarter a year ago. Daypart and Weekpart Occasion Profiles Daypart Occasion ProfilesAll On-Premise Occasions Weekpart Occasion ProfilesAll On-Premise Occasions

40. Weekpart Occasions, Drinkers vs. Non-Drinkers • Friday drinking occasions dropped in the second quarter of 2012, a trend that has been consistent over the past several deep dives. Both beer (27%) and spirits (27%) occasions declined 7 percentage points from 4Q11, falling back to percentages seen the same quarter a year ago. • Sunday occasions increased for non-drinking and drinking occasions at Applebee’s, as did on-premise occasions on Saturdays. ** Small base

41. Venue Selection Drivers • For consumers dining at Applebee’s, venue selection drivers have remained fairly consistent over the past several reports. Convenience/proximity, food quality and serves the food I like continue to be the top three venue selection drivers for consumers dining at the casual dining chain. • Despite remaining in the “top three”, the percentage of consumers indicating the most important factor is “serving the food I like” has declined over the past two reports. • Consumers do not appear to be dining at Applebee’s due to the chain’s alcoholic beverage offerings, as each alcoholic beverage factor has minimal response rates. • The table on the following page examines consumer drivers for selecting Applebee’s for one of their recent chain restaurant drinking/dining occasions.

42. Venue Selection Drivers - Overall

43. All Occasions – 2Q 2012 • Occasions at Applebee’s continue to focus on families, as 43% of on-premise occasions during 2Q12 were part of an informal family meal. This occasion type represents one more percentage point than the previous deep dive and three more than the same quarter a year ago. • Only planned get-togethers (17%) and informal get-togethers (11%) also accounted for double-digit shares. Special/romantic occasions declined two percentage points from 4Q11. On-Premise Occasions

44. Breakout of On-Premise Occasions, by Age Group • Though the occasion type declined from 4Q11, informal get-togethers continue to most prevalent among those aged 21-29. As in the past, the occasion is more common among the younger consumers, and these occasions gradually become less frequent as consumers age. • Informal family meals continue to be the top occasion type for all age groups.

45. Breakout of On-Premise Occasions, by Drinks Consumed • Informal family meals continue to represent the highest share of occasions for both non-alcohol (51%) and alcohol (37%) occasions. Nearly 3 in 10 alcohol occasions at Applebee’s include a planned occasion, whether it be a special occasion with friends or family (8%) or a get-together with friends (20%). • The share of special/romantic alcohol occasions decreased for the third consecutive deep dive, now resting at 9% of alcohol occasions. * Small base

46. Gender Make-Up of On-Premise Occasions • Two-thirds (66%) of Applebee’s occasions involve groups of both men and women. Additionally, female-only groups (22%) continue to represent nearly twice as many occasions as those consisting only of men (12%). • Alcohol occasions consisting of both men and women (66%) declined in share compared to the previous deep dive but is five percentage points higher than the same quarter a year ago. • Women-only non-alcohol occasions (21%) declined 15 points from 4Q11 as the share primarily shifted towards parties with both genders. On-Premise Occasions by Gender of Party

47. Likelihood of Ordering Something New • At Applebee’s, 29% of the consumers that ordered an alcoholic drink claimed that they tried something that they had never tried before, a four percentage point increase from the previous deep dive. Percentages of beer (21%) and spirits (39%) occasions increased during this time period. • Thirty-nine percent (39%) of spirits occasions included a drink that had never been had before, the highest percentage over the past two years.

48. Occasions by Time of Week • The following chart explores differences in weekend (Friday-Sunday) usage vs. week day (Mon-Thurs). • Most Applebee’s occasions skew towards the weekend. Only two occasion types – clubbing/letting loose and meals/drinks by self – have a higher propensity during the weekday. Occasions by Time of Week Informal Get-Together Special/ Romantic Occasion Planned Other Special Occasion Planned Get-Together w/Friends Clubbing/Letting Loose Business Meal Informal Family Meal Vacation Meal Meal/Drink by Self

49. Drink Selection Criteria • The following table examines the drivers for consumers that ordered an alcoholic drink at Applebee’s in the second quarter of 2012.

50. Drink Occasions by Major Category • The share of Applebee’s drink occasions almost mimics the share of all Top Ten chains tracked in this report. Beer (43%) and wine (14%) occasions increased compared to 4Q11, while spirits (38%) declined 8 percentage points. • The share of beer drinks consumed was similar to the last deep dive. However, the percentage of spirits drinks declined 10 percentage points (34%), giving way to wine drinks (21%). Share of Drinks Consumed (Base: Occasions with Each Drink Type) Share of Drink Occasions (Base: Occasions with Each Drink Type)