How Restaurants Can Thrive While Consumer Confidence Softens
The industry is better positioned for a downturn than it has been in the past. The restaurant industry’s first quarter seemed almost too good to be true, with most public restaurant companies exceeding financial expectations, an improved labor environment and cooling inflation. Also, driven by a low unemployment-level tailwind, consumers have proven that their pent-up demand to dine out supersedes persistently high menu prices. But cracks are starting to appear and Q2 and Q3 may prove to be a bit more unstable. Consider new Circana data showing that more consumers are seeking restaurant deals, or Revenue Management Solutions data showing that quantity-per-transaction is down nearly 4% versus last year, while traffic is also declining. Consumers are visiting restaurants less often and they’re spending less money when they do visit. “We started to see consumers pull back on premium purchases in Q4 and Q1, both for food-at-home and away-from-home. The food industry in general has been waiting for the next shoe to drop,” Peter Cadigan, consumer products senior analyst at RSM US, said in a recent interview. This pullback trend is likely becoming more palpable for restaurants as the inflation gap for food-away-from-home (restaurants) and food-at-home (grocery/retail) widened in May for the third month in a row. Restaurant prices are now 250 basis points higher – or 190 basis points higher than the average gap between the two categories, according to Kalinowski Equity Research.
Why is Delivery Demand for Restaurants Softening?
Eighteen percent of past month delivery users report ‘it’s not worth it anymore’. Why is it that we angst over poor in-restaurant experiences, yet we continue to allow our customers to have unacceptable delivery experiences? The current delivery dilemma is perfectly predictable. Let’s face it. As restaurant delivery evolves and matures, there’s a lot of noise and confusion out there. Everyone seems to have an opinion, and it’s hard to separate fact from fiction. That’s why we delved deep into our consumer data to demystify and debunk some delivery myths. Hold on tight. Here goes. Let’s start with where, and how the delivery path to purchase really works. Myth No. 1: Customers browse third-party apps to decide what they want to order. Fact: Brace yourself for this: nine out of 10 times, delivery occasions start with a known restaurant brand. Yes, you read that correctly. Remember those daily conversations with your co-workers, friends, and family? The never-ending back-and-forth of “What do you want to eat?” and “I don’t know, what do you feel like?” Well, guess what? That’s where it all begins. The decision-making process for dine-in, carryout, or delivery starts way before customers consider which restaurant to choose. So, don’t be fooled by the notion that customers spend ages scrolling through endless options on delivery apps. The truth is, the majority of the time, delivery customers have a specific restaurant already decided when they go online or to apps to place the order. Not surprisingly, Gen Z and Millennials are more likely to scroll, but it’s only 3 out of 10 occasions, leaving the other seven out of 10 to start already knowing the restaurant.
How to Build Social Proof
For your restaurant business. The restaurant industry has generally seen an increase in online orders since the start of the pandemic. Although this is a welcome development, it also means more competition. It means more restaurant businesses now have an online presence. So, how do you attract more customers to your restaurant in the competitive market? One way to do this is by building social proof. Social proof in marketing leverages the fact that consumers trust the actions and opinions of other users to make decisions. So, when you incorporate consumer reviews and satisfied customer testimonials into your marketing collateral, you can generate more conversions. How do you build social proof for your restaurant business? Here are four strategies: (i) Encourage Customer Feedback on Review Sites. Around 94 percent of diners say they would choose a business based on online reviews, including those on review sites. Therefore, positive feedback on review websites builds a prospective customer’s trust. It can also influence their purchasing decision. However, your current customers don’t owe you a review. So, you must persuade them to give these product reviews to you. For this, you can follow these tips…
Is the Restaurant Technology Space Being Overhauled?
The foodservice tech industry is going through some growing pains. The technology sector across multiple industries is facing mass layoffs amid macroeconomic uncertainty – from the tech giants like Amazon, Google and Meta, down to unicorn startups. Now restaurant tech seems to be joining them. After several years of new foodservice tech startups popping up and nabbing big investor checks seemingly every other day, the industry is experiencing a slowdown. In just like the last couple of weeks, both Olo and Grubhub announced layoffs. The string of layoffs actually began with Nextbite in May, which was then followed by the company selling off its technology arm Ordermark, and then-former competitor SBE CEO Sam Nazarian acquiring Nextbite. Amid this flurry of activity, investors are wondering: has the food tech bubble finally burst? After all, out of the dozens and dozens of restaurant software startups out there, not all will make it in the long run. Besides the food tech shakeup, this month Uber is trying out robot delivery (again), and voice AI and ChatGPT are being used in both new and familiar ways across the industry, from voice ordering to a ChatGPT-developed pizza recipe being sold by Jet’s Pizza.
Restaurants Are Dipping Into A.I.
To streamline food prep and ordering. From drive-thru to back-of-house operations to predictive ordering for consumers, restaurant brands are starting to pilot artificial intelligence to streamline food service. The technology has yet to reach critical mass at major chains but has the potential to automate more tasks and give restaurant workers the opportunity to have a more meaningful experience with guests. Analysts say a key benefit is the potential to ease workforce challenges in an ongoing tight hiring market. The National Restaurant Association predicts the industry will add 500,000 jobs by the end of 2023, but notes there’s currently just one job seeker for every two open positions. What’s more, TD Cowen estimates voice-enabled AI can drive sales as much as 15% through suggestive selling as well as speed up service times by 10 seconds. The industry shift is reminiscent of the emergence of third-party delivery services five years ago, before it was ubiquitous at nearly every major restaurant operator, according to Andrew Charles, managing director of consumer and restaurants at TD Cowen. “Some were trying it, others we’re contemplating it, most were piloting it,” he said of third-party apps for delivery services. “I think there’s a clear analogue to today where it’s very similar and as we continue to see further adoption of this, you will see a domino effect here. But there are still hurdles to broad adoption, according to Charles. Many of these large restaurant chains need to get franchisees on board. Language barriers and menu nuances can add complexity to the ordering process that AI may not be able to navigate. Meanwhile, the wave of pilot programs has already begun.
Understanding the Politics of Cooking
Gas and or versus electric cooking? I’ve always thought of commercial kitchen cooking as anyone competing with my wife or someone’s mother to serve food and beverage. Okay I’ll keep my day job and I know it’s no joke but exactly what is going on with the politics of gas and or versus electric cooking? At Day & Nite, we service both gas and electric ovens 24/7. As I look at this with that background, I started by searching for the differences between cooking with gas and cooking with electricity. In a word efficiency, with radical differences defining efficiency. Gas stoves have proven to be far more efficient from a culinary perspective, but electric stoves are more energy efficient. Theoretically, we could cut right to the cash, because if you are asking for a dining patron to pay a premium for a great meal which in many cases requires cooking at higher heat, the choice is going to be gas. Why has the industry limited itself to building agendas that just reflect the politics of counties we serve? Smoking, trans-fats and foam have all been eliminated as the restaurant and foodservice operator listen intently to what their dining public want from them. We all listened intently as Governor Hochul made the use of gas for cooking an issue especially when it appeared earlier this year that her agenda included commercial/restaurant cooking. However, like many issues in the current political environment, really hard to tell if this is an issue in search of governance or elected officials in search of an issue. What we do know is, starting in 2026, New York will ban the use of gas stoves in new residential buildings.
Inside the Pickleball Frenzy
America’s fastest-growing sport expands operations across every daypart in a restaurant. Five minutes. That’s how long it took for the spring pickleball league to sell out at Smash Park in Des Moines, Iowa. Since opening in 2018, the eatertainment hotspot—with scratch-made food, a full bar, and six pickleball courts—has built a loyal following, including the more than 200 people and 18 leagues that signed up immediately. Once dismissed as a morning pastime for seniors at local rec centers, pickleball has emerged as one of the fastest trending sports across generations. The average age of folks signing up for the Smash Park league is 35, and some 4.8 million people play the sport in the U.S., marking a 15 percent year-over-year increase that followed a 21 percent growth rate the prior year, according to the Sports & Fitness Industry Association’s 2022 report on pickleball. And Gen Z is fully on board: The fastest-growing cohort are players under the age of 24. “Our Friday night leaguers are different from our daytime afternoon leaguers, but the courts are always full, and guests can book them two weeks out,” says Dannelle Dahlhauser, Smash Park director of marketing. Smash Park responded to the spring demand by opening additional leagues, and it is quickly emerging as one of the brands to watch in the eatertainment race to be first to market. The brand’s second store—a franchised Smash Park—opened last year in Pella, Iowa. New locations, all company-owned and -operated, are opening in suburbs of Omaha, Nebraska, and Minneapolis later this year and in 2024. Most recently, the company decided to expand beyond its Midwest base and open in Jacksonville, Florida, slated for October 2024. “All will be similar to our Des Moines store, with both indoor and outdoor courts, but new locations will include additional amenities—duckpin bowling, a private karaoke suite, and ax throwing,” Dahlhauser says.
Did You Know?
Netflix will open a restaurant that serves food from ‘Chef’s Table. Netflix is expanding beyond streaming and mobile gaming and into a completely new category–the food service industry. The company announced yesterday that it’s opening a pop-up restaurant called Netflix Bites, featuring chefs from various Netflix cooking series, such as “Chef’s Table,” “Nailed It!” and “Iron Chef: Quest for an Iron Legend.” Although the streaming giant has launched immersive experiences based on shows before, including “Stranger Things,” “Squid Game,” “Bridgerton” and “Money Heist,” this is the first time that Netflix is stepping into the restaurant business.
Employee Tip
How to approach tipping with diners who aren’t used to it. We attract a lot of international tourists, who are notorious for not tipping. I am starting to be able to profile who will tip and who won’t from their accent when they order. I asked my boss to up our wages or include an auto-grat but he’s not decided yet. Any recommendations for how similar places are handling this problem? Almost all of the problems I’ve addressed in this column come down to the same core problem: a difference between expectations and reality. You are a service employee relying on tips and expect to be tipped on every transaction. International guests who are not as familiar with U.S. tipping culture may expect to tip marginally or not at all, especially for a transaction without table service like a take-out coffee ordered at a counter or kiosk.
Bielat Santore & Company – Restaurant Industry Alert
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