Posted: Oct 09, 2017
Meal kits, delivery, grocery and c-stores threaten restaurants as traffic and growth rate decline.
This is part of Nation’s Restaurant News' special coverage of the 2017 MUFSO conference, which took place on Oct. 1-3 at the Hyatt Regency at Reunion Tower in Dallas. Follow coverage of the event on NRN.com and tweet with us using #MUFSO. Stay connected on the go by downloading the MUFSO app.
Consumers haven’t lost their appetite for restaurant food, but their taste for convenience has grown substantially.
Options like meal-subscription boxes, supermarket meal kits, c-stores with upscale grab-and-go offerings, and even hybrids of those elements, have capitalized on the need for speed — all at the expense of restaurant patronage.
Industry leaders participating in panel discussion moderated by NRN Senior Editor Ron Ruggless at the MUFSO conference in Dallas earlier this week recommended a strategy of playing up existing strengths and stealing a few of the best ideas from these emerging competitors.
Data compiled by the National Restaurant Association indicate that for the past three years, the compound annual growth rate (CAGR) of restaurant sales was down to 3 percent from a previous CAGR of 6.4 percent, which had held steady for the 47 years prior.
So how much of this slowdown can be attributed to the restaurant industry’s new competitors? According to Hudson Riehle, senior VP of the research & knowledge group at the National Restaurant Association, the $799 billion projected annual sales of delivered food is “a juggernaut.”
The shift is showing up in restaurant traffic data as well.
“We look at traffic as our best measure of customer demand,” said Bonnie Riggs, a restaurant industry analyst with the NPD Group. “And the [restaurant] industry is not growing strongly. Actually it’s declining in terms of traffic. We’ve got a whole new layer of competition coming from all over.”
Riggs cited research on why consumers use delivery services, ticking off myriad reasons: not wanting to leave home, not wanting to cook, not wanting to go out in bad weather.
Riggs doesn’t see demand for delivery faltering, forecasting a 22-percent surge in delivery services and other convenience alternative between 2016 and 2022.
Delivery now accounts for 3 percent of restaurant sales, said Riggs, adding that many in the industry are chasing delivery because it’s a growth area. “It may even double, but that space will get more crowded.”
So, should your restaurant get into delivery?
Only if it makes sense for your brand and your identity, said Tressie Lieberman, CMO of Snap Kitchen, a Dallas-based prepared food shop that offers microwaveable meals to go for busy people who want high-quality “clean” food and delivery.
“How do you disrupt before you’re disrupted?” asks Lieberman. “Do you jump on delivery? It depends on your brand. Know your authentic self and play to your strengths. Take a hard look in the mirror and say, ‘What are we great at? What’s real, passionate and innovative?’ That’s the core of who you are.”
Smile on good service
While offering delivery is one way to keep up, so is playing up to one of the restaurant industry’s innate strengths, specifically, offering great customer service.
“Service is important,” Riggs said. “One thing consumers told us would entice them to visit more was if they had better service. Poor service is one of the leading reasons customers leave a restaurant with no intention to return.”
She pointed to the success of chains like Chick-fil-A, which make a point of above-and-beyond friendly experiences at the counter. That human touch can’t be discounted. “Treat them well,” Riggs said.
Another way the panel suggested “nudging” customers back into restaurants was with loyalty offers and unique promotions that are personalized, like 10 percent off a regularly ordered menu item. “In the past, loyalty programs were at the bottom of the totem pole,” Riggs said,” but now they’re higher up. But you have to make it worth their while and easy to use.”
Riehle even suggested a subscription model similar to Netflix, where restaurant customers could pay once and then get food all month, again citing the convenience factor.
Lieberman’s key advice: “Never stop evolving,” she said. “The work will never be done. The rate things are changing is crazy and the trends are moving at an insane pace.”
By Tara Fitzpatrick
October 06, 2017
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