3 things restaurant brands better learn from Brandless. Fast.

There’s been a ton of coverage of Amazon over the past few months. First, they bought Wholefoods. Then they announced a meal delivery service almost immediately. While all that was going on, a few articles appeared about a company called Brandless. If you haven’t yet heard about it, the company is founded on several important beliefs which you need to understand if you want to compete today.

1. Everything they sell at Brandless is $3.

It’s simple because customers hate complexity. Everything – everything – on their site today is available for $3. There’s nothing to think about. Handsoap? $3. Coffee K-cups? $3. Mustard? $3.

2. Brandless turned lack of grocery distribution from a weakness into a strength.

This is classic disruption. Knowing that it’s next to impossible to get broad product lines into grocery chains, they instead focused on direct distribution. This not only allows them direct access to their customers – they don’t have to trust grocery staffers to help sell the product or protect the experience – they also realized they didn’t have to account for the retailer mark-up. Hence Point 1.

3. Brandless rendered lack of brand awareness meaningless.

By choosing the name Brandless along with a generic look and feel they’ve risen above the marketing fray. They’ve said we can’t compete against hundred year old brands on their terms, so we’ll fight by diminishing the importance of ‘brands.’

This is a coup. Brandless appeals to younger consumers that are less loyal, especially to legacy brands. It makes of its products certified organic, gluten free, non-GMO, vegan, no added sugar and certified kosher to make sure it is all inclusive. To be fair, this is a well executed gimmick, albeit a clever one. Look for a company like Amazon to purchase Brandless in the next 18 months.

OK. So how does this relate to the restaurant business?

Reduce barriers to purchase.

They are starting with products that reduce barriers to consumption. By making products that cut out sugar, GMO and non-vegan ingredients, they’re making it easier to buy them. They built it this way from scratch, intentionally. Today’s younger consumers don’t start with a baseline expectation that things don’t fit their requirements. They demand products that meet their needs. Especially food. Make it hard to meet their dietary needs and they’re not coming back.

Don’t make consumers think about prices.

Second, they made pricing super simple. In the grocery store, people hate the way stores force them to compare prices. Especially since young consumers are more likely to shop at multiple stores to achieve their regular grocery shopping. Pricing in restaurants it’s not much different. They want it to be obvious that the price is fair for what they’re getting. Can you make everything on your menu $3? Probably not. But could you stand to streamline pricing? Definitely. Make it easy to understand.

Control the experience.

How many times will you read that the experience is all-important to consumers? For most brands, one time too few. Brandless controls every part of the experience. Consumers buy and receive products directly from them. This is an advantage over brands that are at the mercy of retailers to present the brand correctly, or next to a competitor that makes them look favorable. People choose everything from taxis, to musicians and now toilet paper based on the experience. What are you doing to improve the one you offer?

Brandless is currently selling CPG space and coming after established brands. It probably has nothing to do with your business if you are in the restaurant space. One thing we have learned from the digital disruption of the past 15 years is that a successful business model is replicated in every other sector. Soon, someone will launch an unbranded restaurant concept that reduces barriers, offers simple pricing and a controlled, positive experience. Today, you have a chance to pre-empt the success of that concept. Tomorrow? Who knows.

Comparison shopping. Brands are tested against a wide array of experiences.

If you kept a dining journal you might be surprised at the varied names that appeared. People don’t have a loyalty to most restaurant brands. Never mind a single dining format. Know anyone that goes exclusively to fast casuals and never sits down at a casual dining establishment? Know anyone that truly avoids every type of QSR?
People have a wide array of options and a larger pool of comparison.

No, if you looked back at the location data stored in your phone, you would find something surprising. People choose restaurants of all shapes and sizes depending on a variety of factors. F & RM has examined this in our study. Beyond restaurants, people eat or purchase meals at convenience stores, gas stations, food courts, kiosks, family entertainment centers and theaters. How does your brand stand up to the comparison?

If you launch a restaurant brand today and hope to identify a tight group of competitors, think again. A concept like Studio Movie Grill is offering something no other casual dining place can; first run films. C-stores have upgraded their food offering. It’s on par with many QSRs and some even survive comparison to Fast Casual. Brands like Pizza Hut have softened the entry point on the pizza category through their entry in to QSR and drive-thru formats. Brands like Hunt Brothers and Quick Trip have a solid quick serve pizza offering. The middle ground is shrinking.

Each restaurant brand is used for a different range of purpose. It solves a different problem for the customer. We add more potential solutions for each situation or day part. The comparison between the solutions for each day part is natural. How does my quick morning pick up will go? Starbucks, Quick Trip, Dunkin’ Donuts, Panera Bread, the local deli. Which best meets the need?

But it doesn’t stop there. Food is sensory. Service is emotional. Both of these elements create lasting memories for customers. Those memories aren’t constrained by rationality. People do compare the pizza they got from a drive-thru to the great pizza they got at a family restaurant. They absolutely do. How do you suppose that comparison ends for Pizza Hut?

How about customers of places like Jimmy John’s or Capriotti’s? They like the brand, they understand the experience. They know how the prices of each align and how long each takes. Then they go to a convenience store and pick up a surprisingly good ready-to-eat sub on a road trip. That experience is marked in their mind the next time they go into one of those sub shops. The value and food quality are now subject to a new comparison. Is it better than the c-store sub? Is it two dollars better?

In this context, think about casual dining customers. Even a loyalist of Applebee’s will run a similar comparison to food quality when they have a good prepared meal from their grocery store. Again, they do the math on the cost and ask, “Is the service and a soda worth that?”

When we price in service on top of COGS we price against similar concepts. We look at the other brands that look just like us. So often, brands limit their competitive set to only ‘like’ concepts. It’s time to expand on that. Because that’s what customers are doing.

What restaurants can borrow from Meal Kit Delivery services

Services like Blue Apron, Chef’d, Plated have been a part of the rising tide of companies delivering the pre-set meal kit to customers since 2012. Market Research firm Packaged Facts predicted the meal kit industry would generate around $1.5 Billion in 2016. These companies have attracted the attention of investors, CPG brands, grocers and restaurants alike; each for their own obvious reasons.

Restaurants look on warily, fearing another category competitor carving away much needed traffic and revenue. We at Food and Restaurant Marketing have examined the most successful of the hundreds of meal kit brands to identify a few lessons restaurant chains could apply to their own business. It all starts with understanding why meal kits have been successful.

It is convenient

Well, sort of convenient. It’s delivered to the door of the customer, and is prepared on their schedule. But it does have to be prepared. And cleaned up. While there is convenience, it comes with a limitation that is understood by customers.

Restaurants have both of these same elements. Dining at a restaurant, getting takeout or delivery can be more convenient than grocery shopping and cooking. But waiting and other factors can diminish the value exchange of paying for the overall convenience of not cooking. Restaurants need to continue to look for ways to remove friction from their ordering experience when consumers are looking for that convenience. They don’t necessarily need to cut out all the stops for dine-in guests.

Takeaway: Focus on friction.

Restaurants can take advantage of this trend of adventurous eating by being bold.

Foodies love it

Meal kits have a tendency to feature unique or unexpected ingredients. This gives customers a chance to ‘experiment’ with a new flavor in a safe way. It also lets them explore many profiles of spice, protein and vegetable combinations than they might be able to shop for at their grocery store without guidance. The chefs at Blue Apron have already tested the flavor and assembled the kit.

Restaurants can take advantage of this trend of adventurous eating by being bold. Even if it means offering variations on successful menu items, brands can add spicier profiles and unique proteins where it makes sense. The rise in turmeric and other spices is a trend that has hit meal kits and CPG but not yet mainstream chains. This despite Technomic and others (see previous paragraph) calling for it.

Takeaway: Bring the flavor.

Balanced meals

Remember this concept? Meal kits do a great job of making sure customers get a square meal. Their meals come set with complementary fruit, vegetables and side dishes that all work together. And we’re not talking about the frozen peas and carrots that we know from TV dinners. As above, this is part of a trend of playing to foodie culture that has flourished with gourmet cooking content and celebrity chefs rising to prominence.

QSR and Fast Casual (and many, many Casual concepts) under-emphasize or else flat-out ignore meal balance. For a long time, guests looked past it and just had a meal with fries and a soda. We’re all more educated, even if the lesson is the same one taught in elementary school using the outdated food pyramid. How can your restaurant add vegetables or sides to the mix that make sense to your concept and will be embrace by your guest.

Takeaway: Side dishes can be the star.

There’s also something to be learned in where they fall short:

You can’t predict a craving.

It is great when you’ve pre-ordered that pork cutlet with green chiles, and it shows up three days later and you are still in the mood for it. Yes. However, when customers suffer multiple lapses in orders; when they pass on a meal that’s been delivered, we’ll begin to see attrition.

What most restaurants have going for them is the very thing that you cannot control. Making food that people crave. Know your guests, and continue catering to their tastes. They’ll come when they crave it.

Takeaway: Find ways to drive craving.

These along with other factors such as accurate portion size are reasons that meal kit services have blossomed in the US. But through careful study of their customers, restaurants can find keys to improving their offering, guest loyalty and new customer acquisition.