The Driving Theme in 2011 Will Be, “Perceived Value to the Guest”
This buzzword seems to have been beaten into the ground in recent years. People hear the phrase and shut it out. However, all we need to do is look at the success of several large pizza chains -Domino’s and Pizza Hut- to see how providing value to your guest increases sales and improves the bottom line. This is not limited to pizza chains; Panera Bread is doing a great job in bringing perceived value to the customer.
The term customer value is the difference between the “perceived benefits” and the “sacrifice (payment).” In essence, “what did the customer get and was it worth it.” This does not necessarily signify low pricing, but rather making sure the guests are satisfied and their expectations have not just been met, but exceeded. The guest needs to leave your restaurant thinking about their next visit. This creation of VALUE takes the form of more creative dishes, more reasonable or multiple portion sizes, and more attention to the “hospitality” aspects of service. To be successful, the operator needs to sweat the details that have been overlooked in the past: refine recipes to provide more flavors; upgrade server training; and pay attention to your facility so it is immaculate. Most importantly,
PROVIDE A QUALITY PRODUCT!
When Will the Recession End for Me?
The more important question should be, “Are you ready for the recovery?” The restaurant industry appears to be bouncing off its steepest drop in traffic in the last 28 years. Guest counts flattened in the third quarter of 2010 compared to a prior year 3% drop. Same store sales have begun to increase and customers appear to be returning. We expect this trend to continue with an overall increase in customer traffic in the 3 – 5% range during 2011. Whether or not you choose to participate in this recovery is up to you. Guests will become more finicky in their choice of dining entertainment (see VALUE above – the restaurant business IS entertainment). To capture a portion of this growth you will need to provide “Perceived Value” and market to your customer base with a personalized approach. Place special attention on marketing to the over 50 crowd. Consideration should be given to those projects to expand or add capacity that you may have been putting on the back burner for the last several years.
Profit Will Be Possible, But Not Easy
Restaurants will be squeezed from both sides. Customers will want to see lower to flat prices while vendors will begin to try to push through price increases. To counter these divergent issues and their effect on the bottom line, the you will need to push the guest to purchase items on the menu that you would like them to buy. This will require operators to take a hard look at their menu and design it to push the customers to higher gross profit items. Menus will need to be updated and revised more frequently than in years past to take advantage of guest expectations as well as specials offered by food suppliers. Pay special attention to staffing to be made to ensure labor is available only when needed. Learn to send people home quicker and not let staff linger until the top of the hour.
There Needs To Be a Continued Effort in Taking Care of the Kids
If you offer an off-the-shelf bag of macaroni and cheese and hot dogs on your kids menu, this needs to change. Since 2006 we have recommended that the quality of food items offered on children’s menus needs to improve. This will continue to be extremely important as family dining has been one of the first segments of the industry to bounce back. Per QSRweb, visits of parties with kids increased this last summer for the first time in three years. American Demographic Magazine states that married couples with children spend an average of 44% more at restaurants than those without children. Happy kids mean happy parents. Provide a fun and unique selection of foods for the kids.
The use of Social Marketing and its importance will continue to grow
Don’t have a Facebook page or a Twitter account yet? Better get one now! When was the last time you updated your web page? Is the content current or do you still have that special event from 2008 listed there?
Forty nine percent (49%) of your guest under the age of 44 have used twitter or something like it in the past year. The number of unique visitors to Twitter has increased 1,382% year over year. During the same period, Facebook usage increased 228%. Social Media Today estimates that 41% of individuals under the age of 39 will make their restaurant eating decision based on a Tweet they received that day.
Reduce the amount of resources you are spending on conventional print and TV advertising and get closer to your guests by using these highly effective social marketing tools. This needs to be complimented by a high quality web site complete with menus, daily specials, and a map showing how to get to your establishment.
Old standbys may provide a profitable new business opportunity
Last year we discussed the benefits of resurrecting food carts and food trucks. Their use exploded! It is not too late. Food trucks provide a low cost option to expand your brand and go to where the customers are. These venues provide more guest interaction while providing a valuable service. They can become part of your marketing program by taking them to special events where you can also promote your main location.
Buy Locally – It’s more important than sustainability and organic
In 2008, we accurately predicted that for independent operators and small chains, local sourcing of meats, produce, and bakery goods would provide a huge competitive advantage. This will continue into 2011 as customers perceive this as “VALUE”. Just using locally produced items is not the end; you also need to make sure you promote it. You will not be disappointed.
Ethnic Fusion is the new Gourmet Burger
Last year saw fine dining establishments and internationally-renowned chefs put a burger on their menu. This year it will be the addition of ethnic ingredients into the menu that will drive traffic. We expect to see the integration of Asian and Latin foods being combined with more European favorites. Another trend will be to grow your own spices and/or produce next to the restaurant.
The big thaw
Financing for new restaurants is still gridlocked. However, there are some signs that access to credit is thawing. Large lenders to the restaurant industry like GE Capital, Wells Fargo & Co, and Bank of America say they’re either lending more or have more money to lend than they did than during the last several years. The Small Business Administration also has recently begun to guarantee 90% of principal loan amounts, up from 75%. This will allow many small institutions to ease credit. There will still be a strong aversion to risk and access to capital will only be gained by well thought out and planned concepts backed up with a strong business plan.
Get ready for Healthcare
Unless something changes with the new Congress, major changes in healthcare rules and regulations are coming. Some will start next year with a majority of changes happening in 2014. How you calculate your full time headcount will become of major importance. This may be the one aspect of your business that will have the biggest impact on your cost structure in the years to come.
Can we help you with any of the above?
National Restaurant Consultants is a world renowned leader in providing restaurateurs with assistance in resolving some of the most challenging aspects of their businesses. This includes refining or expanding concepts to take advantage of an ever changing market place. If you believe that you are not ready for any of the above changes occurring next year or need assistance in your operations, we would love to speak with you. Please call or send us an email and we will get you on the road to expanding your revenues and increasing your profits.