Another Challenging Year for Restaurants

If you thought 2016 was challenging you better hold on. 2017 is not poised to get better. Even with Republicans controlling both the Congress and White House and the opportunity for reduced regulatory burden on businesses, the outlook is tough for a host of competitive reasons and a continued over supply of eateries.

Chicago-based NPD expects restaurant industry traffic to remain stalled in 2017. Traffic to dine-in brands AKA casual dining, will continue to fall at a rate of 2%. They do however bode slightly better for quick serve brands with traffic projected to grow 1%, hardly a panacea in light of the expanded competition from grocery. And to further cloud the traffic picture, gas prices are projected to continue to rise again.

Innovation is critical to continued success and a way to stay competitive.

Consumers’ apetites for dining out continue to be stymied by the prepared foods industry. And the competition is not just coming from traditional grocery stores. Increased options and improved quality at C-Stores will continue to provide viable options for consumers. Take into consideration the attractive value proposition of better quality, more options, less expensive and convenience and you have a cadre of tough competitors for share of stomach.

So what’s a quick serve and any dine-in brand to do? First and foremost make sure to deliver on the basics. Create superior dining experiences. Immaculate restaurants and food quality are ways to win consumers for that next dining out occasion. Our research shows how important the customers the last visit plays into future decisions on a return visit to the same brand. Training or retraining staff to surprise and delight the customer is an inexpensive way to deliver that superior dining experience.

Innovation is critical to continued success and a way to stay competitive in a challenging environment. And I’m not talking about building an app. App downloads are down significantly as people are demanding apps that provide utility and it’s unlikely a restaurant brand can provide the kind of utility Uber provides, which is the standard by which most apps are judged. Instead, consider innovation on your menu with flavors from the season or capitalize on popular flavor profiles that consumers crave. Millennial customers are fond of bold interesting flavors you can’t find just anywhere.

Test different options in a few units before rolling out to the entire system. Our research show customers love the opportunity to weigh in on what their favorite brand is testing. Utilize a high performing store with a strong manager, this guarantees a meaningful test that can be replicated over and over. It also helps refine the preparation and presentation for a highly effective roll out.

We are also seeing technology playing a key role in innovation. Although probably the more expensive route it’s necessary to stay ahead of the curve on collecting critical data to analyze and leverage to better understand your customer’s habits and behavior. Once you know who your best customer is and what they like you can leverage that information to go get more of them.

Mobile ordering is growing exponentially and if having that feature makes sense for your brand make the investment. We are seeing many brands generating significant incremental sales and ROI on mobile ordering by leveraging intelligent upsell opportunities.

It’s not the apocalypse but these are challenging times for restaurant brands and prepared food in general. You’ve been in business a while now and you know it’s cyclical. Stay focused on the fundamentals of delivering great hospitality. Innovation is critical to staying competitive and technology will keep you ahead of the change curve.