For eight years now, our “Top Trends” forecast has set the industry standard for insight into what operators can expect in the coming year. We have completed our latest research and are happy to announce our “Top Trends for 2012.” Last year we forecasted a number of items accurately, and we hope to continue that trend this year.
The Driving Theme in 2012 Will Be “Local” or “Made from Scratch”
These two phrases really mean “Freshness” to our consumers and guests. It is great to support our local farmers and ranchers who provide high quality produce and meat product. However, many times this comes at a cost and may not be as reliable as other supply options.
These buzzwords seem to have been beaten into the ground in recent years. People hear the phrase and sometimes shut it out. The key for restaurateurs will be to properly promote the use of “local” sourcing and ensure they meet high quality standards. Don’t source local just for the sake of local. Make sure you receive a return for the additional time and costs associated with local.
Value to the Guest Will Remain a Top Priority
There was a shift in the market away from fine dining experiences in 2011. This trend will continue in the upcoming year as consumers will remain cost conscious. There is still no clear indication as to where the economy in general is heading. Until this changes, consumers will be focused on “Perceived Value.”
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 This Recession End?
Last year, we predicted the overall customer traffic for restaurants would increase in the 3 – 5% range. The overall increase is estimated to be around 3.6% or on the low end of our estimate. The good news is that the industry finished strong during the last several months of 2011. “The November increase in the Restaurant Performance Index was fueled by broad-based gains in both the current situation and forward-looking indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. “Restaurant operators reported their strongest net positive same-store sales results in more than four years, while customer traffic levels also grew in November.”
With a presidential political year hard upon us, we anticipate that there will be some (non-partisan) improvements in the economic outlook. This does not mean a strong recovery in employment, housing and small business performance. What it does look like for restaurateurs is a slow start and a much stronger finish in 2012.
It’s going to be a weak New Year and first quarter. You need to anticipate and plan for this. Traffic will rise less than 1% over last year in this time period. We will not see the loss of 6,000 independent restaurants this year as in 2011, but another 3,000 will close. This will occur because of their inability to adapt and offer “Value” to the consumer.
Whether or not you choose to participate in this recovery that will occur in the second half of 2012 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 continue to 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. Although several larger chains have announced price increases, they have targeted only certain items on their menus to ease the perceived impact to the guest.
To counter these divergent issues and their effect on the bottom line, 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 draw 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 (this will also allow you to offer locally supplied items more easily). Pay special attention to staffing to ensure labor is available only when needed. An hour or two here and there can offset higher costs (minimum wages are up in many states). Learn to send people home more quickly, and do not let staff linger until the top of the hour.
Do not take price increases at face value from your providers. Many commodity prices go up and down. Watch the trends. Knowledge will help you in discussions with food purveyors.
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 Continues to Grow in Importance
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 last October listed there? Social media is quickly becoming the communication of choice for many of your restaurant guests.
Forty -nine percent (49%) of your guests 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 complemented by a high quality web site including menus, daily specials, and a map showing how to get to your establishment.
Foreign Growth will Continue to Fuel Quick Serve and Full Service Growth
Yum Brands, Inc. said its leading position in China and other emerging markets would drive higher corporate earnings during 2012 while results in the US would continue to struggle.
In the next decade, American restaurant chains and independents will open multiple locations in the Middle East. Growing populations in this area of the world and increasing wealth will offer one of the best chances to expand outside the crowded US market.
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 2012 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.
An Evolving Palate
According to the research firm Techmomic, consumers are increasingly driven to try new flavors. In 2011, 42% of diners stated they were more likely to try new flavors today than they were a year ago.
You need to take advantage of this trend. Do not go overboard, however. Keep items on the menu that you are known for. Offer unique tastes through seasonal menus or daily/weekly specials. Be bold with these items. Market them often through your social media site. This will encourage your guest to not only try the item, but follow you and look for the new adventurous flavors.
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 supported by a strong business plan. Still, the best place to raise money will be through family and friends.
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.