If you feel that nothing has been “normal” in the restaurant industry since Covid, you are not alone. Even as the pandemic subsided and restrictions were lifted, many markets in various industries could hardly maintain consistency—not with customers, profits, or demand. The macroeconomic environment has been volatile and unpredictable, and all businesses—including, and even especially, the restaurant industry—are baffled with how to keep up.
The restaurant industry is laden with trends, and wise business operators will find the right balance between considering trendy ideas and maintaining a consistency that customers can count on. In an uncertain economic environment, making adjustments is important. Our restaurant consultants have lived and worked through many periods of economic unrest, and have developed strategies for succeeding.
Recently, Nation’s Restaurant News (NRN) posted about a white paper from consulting firm AlixPartners, which offers strategies for navigating the current economy—advise which aligns with our own consultants’ tried-and-true advice. The paper, “Restaurant resilience: Turning challenges into opportunities,” was available exclusively to attendees of Prosper Forum in Florida in August. “The consulting firm unpacks what is pressuring consumers, including credit concerns and loan delinquencies,” writes NRN. “A JPMorgan survey found that over 70% of low-income consumers and 67% of middle-income households are struggling because of those factors, for instance. As such, the restaurant industry’s sales have plateaued while traffic has dissipated.”
When consumers are faced with growing financial pressure and even hardship, restaurants are immediately relegated to the “luxuries” column. While some QSR may maintain average customer levels, even the traffic may reduce as people work to lighten their expenses.
“Our customer is very hypersensitive on price right now: 82% said the price of a menu item influences their decision of whether or not to order it, 77% use deals or value offers to gain access to restaurants they couldn’t normally afford, and 69% would eat out just about every day if they could afford to,” says IHOP’s chief marketing officer Kieren Donahue. Tighter budgets coupled with higher unemployment rates and rising debt demonstrate that a decrease in dining-out is very driven by the economy, not a social trend.
To combat this, AlixPartners offers up four strategies: evolving menu offerings, enhancing the consumer experience, investing in employees, and implementing balanced pricing. While our consultants believe that these strategies are foundational to any restaurant business plan, they are also beneficial for focusing economically-driven adjustments to meet consumers’ needs—great advice for business, and menu development.
“AlixPartners’ data shows that consumers support smaller menus that may alleviate operators’ inflationary pressures. Accordingly, a sharpened focus on core offerings has become a bigger priority for many concepts, including and especially McDonald’s,” writes NRN. When it comes to crafting a financially-conscious menu for customers, our menu engineering process can save money for both customer and business. “Other menu opportunities include add-ons and select limited-time offers that can build excitement and generate traffic. These menu initiatives should be more strongly supported by digital marketing and loyalty programs, according to AlixPartners.”
These strategies are beautifully complimented by some variable pricing methods, which, “when applied reasonably…are widely accepted by consumers, with 71% of Gen Z supporting the practice. Revenue management platforms and artificial intelligence are effective in providing such a solution, while communication is also critical to avoid consumer backlash.”
Richard Weil, principal and owner of National Restaurant Consultants emphasizes, “The article and information from highly respected industry experts confirms National Restaurant Consultants belief that focusing on the core menu is most important. Bundling and promotions of these sort are often the reason that guests think about your restaurant. Key in on these core items and provide your guests with all the best reasons to patronize your businesses more often.”