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Customers Reduce Visits, Not Standards

by | Jul 20, 2023 | blog, Business, Industry News, National Restaurant Consultants | 0 comments

Customers Reduce Visits, Not Standards

Despite economic enthusiasm post-COVID and the quest for return to “normal”, many consumers are in periods of financial uncertainty or instability, thanks to inflation, rising grocery and gas costs, and unpredictable markets. 

AlixPartners, a global business consulting firm, made moves to study consumer behavior in light of the financial unsteadiness, and findings were surprising. “Molly Harnischfeger, a director in New York-based financial advisory and consulting firms restaurant, hospitality and leisure practice and an author of the report, ‘When the Wallet Tightens on the More Experiential Customer’,” consumers are handling their financial uncertainty differently than in recessions past. Even as recent as the recession of 2007-09, spenders might opt for lesser-valued items and experiences in an attempt to manage financial discomfort. These days, consumers aren’t willing to lower their standards, so they’ll limit their visits.

As reported to Nation’s Restaurant News (NRN), We did a compare/contrast of tactics consumers plan to use to reduce restaurant spending,” Harnischfeger noted. In 2009, trading down to less expensive restaurants far surpassed reducing visits/frequency to restaurants to manage spending. Today, we have the exact opposite spending, where reducing visits significantly exceeds trading down.”

This new behavior affects several different spending categories, firstly, retail, but followed closely by restaurant spending. “As opposed the recession of a dozen years ago, which provided fertile ground for the development of the fast-casual segment, the consumer now is ‘fundamentally different,’ Harnischfeger said. ‘This is a consumer that’s more experientially focused…’” 

A lot of this has to do with post-COVID sentiment toward life’s luxuries. Consumers grew accustomed to life without restaurants, and so rather than increase opportunities to go out, they’d rather make their visits to restaurants feel more high-value. This is a sharp contrast from a consumer base that, less than a decade ago, was primed for the fast-casual movement. 

Pandemic restrictions also heavily impacted generational groups that are more prone to experiences above product. From the get-go, Millennials and Gen Z spenders have shopped and dined-out based on more than convenience, citing food quality, presentation and aesthetics, setting, community-impact, and values as top-ranking reasons for choice-of-spending. These generations have been conditioned to a certain standard-of-living and would rather go without than sacrifice the caliber of any given spending experience.

For restaurants in the fast-casual category, this is most impacting delivery. While during the start of the pandemic, consumers were invested in new technologies, offerings, and economy boosts, as restrictions wore on, these groups became more interested in cooking at home. These spending groups are utilizing fast-casual restaurants for on-the-go meals (dining in and pick-up), but delivery has plummeted. 

Coupled with other economic factors, this shift in recession-like behaviors is greatly affecting the restaurant industry. “Restaurant operators were also facing other economic pressures, with 49% of independent restaurants unable to pay the rent in April – a 15% jump from the month prior, according to data from Alignable…And a Bank of America Survey of business owners found 72% said they were concerned about a potential recession,” states the NRN blog post.

To combat these changes and economic decline, Alix partners suggests “investing in digital infrastructure to help grow sales, engineer menus to improve margins and reduce complexity, reduce the costs of new buildings and remodels, improve the supply chain to return margins to operations and offer ‘execution excellence’.”  

Richard Weil, owner, and proprietor of National Restaurant Consultants further notes, “It’s not just about cash flow, it is about how operators can look at their business through the eyes of their customers. With guests making decisions about precious disposable dollars, operators have to challenge themselves and their staffs to make each guest visit memorable and motivate guests to return.”  

At National Restaurant Consultants, our team members have been through multiple economic shifts in our decades’ worth of experience, and our consultants’ advice to clients is rooted in this experience.

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