Consumers Tighten Their Restaurant Budgets
But mainly on the margins. Lower-income households are visiting restaurants less often as prices rise, but wealthier people appear unbothered, and most people say their restaurant spending won’t change. Those are some takeaways from two recent surveys that asked consumers how often they’re using restaurants, how much they’re spending and why. Together, they paint a picture of a fairly resilient dining public that is nonetheless showing some sensitivity on the margins. The results come as menu prices rise and restaurant traffic falls. In September, menu prices were 6% higher than they were a year ago, according to the Bureau of Labor Statistics. And in the third quarter, many restaurants saw lower traffic, suggesting that higher prices are impacting demand. Consumers themselves say that it is. A survey by credit reporting agency TransUnion found that 19% of households expect to spend less at restaurants through the end of 2023, with 80% citing higher prices as the reason. Sixty-four percent plan to spend the same and 17% see themselves spending more. Besides eating out less frequently, consumers told TransUnion they’re also visiting less-expensive restaurants (17%) or ordering less-expensive menu items (14%). Relatively few are cutting back on alcohol: Just 2% said they’ve stopped ordering an adult beverage at restaurants to help save money. Price also tends to be the first thing consumers look for when they’re deciding where to eat, and by a fairly wide margin. Sixty-three percent said price is the most influential factor, followed by menu (54%) and location (50%).
Why Restaurants Will Have to Rethink Price Hikes in 2024
Consumers have been resilient. But they’re also paying more for food than ever before. The consumer has been surprisingly resilient despite historic inflation over the past two years. People have jobs and wages are growing. That has helped keep restaurant sales afloat despite a bevy of predictions otherwise. But that doesn’t mean operators can keep raising prices the way they have been. “2024 is going to be The Year of Management,” Carlos Herrera, chief economist for Coca-Cola North America, said at the Global Restaurant Leadership Conference on Monday. The conference is a sister company of Restaurant Business. Specifically, he said that consumers are paying more for restaurant and grocery food than ever before, to the point that they’ve started buying less food overall. That could force operators to consider other options to generate profits next year. “People have money, people have jobs, people are going out to eat,” Herrera added. “The question is how many meals are they going to afford? People are spending more to go out to eat. But the number of meals is going down. Now we’re really going to have to dot the I’s and cross the T’s.” He noted that the percentage of consumers’ income being spent at restaurants has been consistent for decades at 5%. But now it’s 5.7%. Consumers have noticed this difference. “The consumer is saying this is pretty expensive,” Herrera said.
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Restaurants are Using AI to Improve Service Logistics
A burden, it can also be a blessing in disguise. How are restaurants and food service using AI to improve service, profit margins and efficiency? A few ways are through demand forecasting software, a coffee-making machine and automated voice ordering at drive-thru locations. Thirty-six percent of 1,000 U.S. people told HungerRush in a survey in May that they believed major restaurant chains don’t have enough staff to take orders, prepare food, and handle deliveries. AI is touted by many industry experts as the solution to correct this. According to a report by the National Restaurant Association in February, around 58 percent of restaurant operators said the use of automation and tech to help address labor shortages will become more common this year. In June, Goop Kitchen, part of Los Angeles-based wellness brand Goop, reported results of its recent integration of back-of-house AI technology to enhance operational efficiency. Through the implementation of ClearCOGS demand forecasting software, Goop Kitchen successfully reduced its food costs (COGS) and profit margin by over 2 percent. By leveraging AI-powered systems, the brand optimized its back-of-house operations, enabled precise forecasting, improved inventory management, and enhanced ingredient sourcing. Goop Kitchen’s commitment to sustainability has been further strengthened by the implementation of AI. By optimizing ingredient sourcing, reducing waste, and implementing environmentally friendly packaging solutions, Goop Kitchen continues to prioritize its role as a responsible and eco-conscious brand. Major U.S. restaurant chains including Starbucks, Domino’s, and Chipotle are touting new technologies to automate production, cut labor costs and potentially boost profit margins.
The Dish on Digital Marketing Trends for Restaurant Brands
Strategy a la carte. Restaurant brands around the world are finding that their audience is craving something more than pretty pictures of delectable dishes, but rather a need for community and discussion. They want engaging content that keeps them entertained. Effective full-funnel marketing strategies are vital for the success of any business but are definitely the garnish on top for those in the food and beverage industry. The landscape of digital marketing is constantly evolving, presenting both challenges and opportunities for restaurant operators. But there are a few things to consider that can make a difference in driving impact for your business. And there are a few reasons that having a thorough, structured digital marketing strategy is imperative to the overall success of your restaurant or franchise. If it isn’t already, digital marketing needs to be the foundation in which you build your overall marketing strategy. That’s because 41 percent of people prefer to order food online rather than in-store. If you’re not marketing yourself online or devising a powerful local search engine optimization (SEO) strategy, how are they going to find you? Social media platforms provide an unparalleled opportunity to get in front of the right audience at the right time. It allows businesses to engage with current customers and help build organic brand ambassadors while also serving up content in front of new customers. By creating a strong online presence through Facebook, Instagram, TikTok, YouTube and more, restaurants can leverage entertaining content that resonates with the people they want to patron their establishments. It also allows businesses to humanize their brand, leverage creativity and create a sense of community among their supporters. All of these tactics boost brand awareness and allow restaurants to thrive in the highly competitive food and beverage industry.
Restaurant Hiring Declines in October
Eating and drinking places lost about 7,500 jobs in October. Restaurants and bars cut their payrolls by 7,500 jobs in October, snapping a climb that had brought employment in the sector nearly back to pre-pandemic levels, according to new government data. Across all non-agricultural industries, the U.S. Bureau of Labor Statistics (BLS) reported Friday morning, employers added 150,000 jobs, holding the national unemployment rate at 3.9%. The federal agency noted that the October figures signaled a slowdown in hiring overall. The economy had generated an average of 258,000 new jobs in each of the prior 12 months, BLS said. It noted that the overall hiring figure for October reflected a steep drop-off in manufacturing employment, a result of strikes against the Big Three auto makers. BLS did not provide a reason for the decline last month in hiring by eating and drinking places. Its figures were released amid a flurry of third-quarter earnings reports that showed the restaurant business was still challenged by declining traffic, with sales gains coming largely from higher menu prices. Restaurants and bars finished the month with total employment of 12,324,800 workers, or roughly 41,000 more than were on the sector’s payrolls a year ago. Hotels, in contrast to restaurants and bars, added about 6,700 jobs. The drop in hiring left restaurants about 14,000 jobs below the segment’s workforce tally for Feb. 2020, or before COVID-19 hit, according to Bruce Grindy, chief economist for the National Restaurant Association. That’s a decline of 0.1%, he reported in an analysis of the BLS data.
Restaurant Chains Paint Rosier Picture of Labor and Staffing
Turnover is low and efforts to optimize efficiency are paying off. Midway through the round of third-quarter earnings, one theme is clear: The labor picture is vastly improved for restaurants. After years of struggling to find workers, public companies are now saying their restaurants are fully staffed and optimized for efficiency. Labor inflation from higher wages remains a challenge, one that will be exacerbated by legislation in California that will bring the minimum wage for fast-food chains to $20 per hour in April. Still, many companies touted ongoing efforts to offset those wage costs with better team deployment, automation and tweaks to operations designed for efficiency. Most said they have lowered their turnover and improved retention at all levels, which is resulting in sales-boosting improvements to throughput. It took time for the restaurant industry to recover from the labor cataclysm of the pandemic, but the industry has come close to pre-pandemic employment levels—despite a slight downtick last month, when restaurants and bars lost about 7,500 jobs, according to the U.S. Bureau of Labor Statistics. But chains like Shake Shack, Chipotle, The Cheesecake Factory and others described a significantly improved staffing backdrop that is the best it has been in years. Here’s a look at how companies are talking about the labor picture during the latest third quarter.
Restaurants Are Suddenly All About Dessert
The rising popularity of the last course. A recent column in the Washington Post carried the arresting headline Why We Crave Sweets After Eating—and What to Do About It. The piece was authored by a medical doctor, who offered advice on how to handle these hankerings, and her counsel was timely, given that she dished it out on October 23, only eight days before Halloween, the gateway to an annual sugar orgy that runs right through the end-of-year holidays. While consumers may want to curb their cravings at home, they’re increasingly likely to indulge when away. Datassential reports that November is the most active month for new and returning menu items as well as for limited-time offers. And the category with the most item intros over the recent past has been dessert, a once problematic menu stepchild that has turned into a goldmine for savvy menu marketers. Dessert prospects have clearly changed for the better. There was a time when dessert was a very tough sell. Sherry Yard, pastry savant and former Executive Pastry Chef for Wolfgang Puck’s Fine Dining Division that includes operations like Spago, has spoken of the difficulty in getting waitstaff to sell her spectacular meal enders. They were more interested in turning tables, she lamented; the only way her creations would be presented to the clientele was if she worked the dining room and did it herself. Attitudes have shifted to the advantage of both dessert sellers and seekers, according to RB’s sister company Technomic’s Ignite Menu database. Dessert penetration is closing in on 75% of all operations.
4 Tech Stars from Restaurants’ Third Quarter
These investments may not be flashy, but they’re getting the job done. 2023 may be remembered as the year of artificial intelligence, but the technology having the biggest impact for restaurants right now are things that have been around for a while. A survey of recent earnings calls for publicly traded restaurant chains found that familiar products like ordering tablets and kiosks are making a real dent on the bottom line. Meanwhile, the answer to some of the industry’s traffic woes could be hiding in plain sight with loyalty programs and third-party delivery. Full-service dining chains continue to invest in handheld tablets that allow servers to send orders directly to the kitchen rather than walking them back and forth. Outback Steakhouse just finished putting tablets in all 689 of its U.S. locations and expects them to contribute to a projected $55 million in productivity savings this year. It also hopes the speedier experience will translate into better traffic. Applebee’s is also planning to equip servers with tablets when it begins installing a new POS system next year, a change that Dine Brands CEO John Peyton said will be “transformative” for employees and customers. The updates come as casual-dining chains are increasingly searching for ways to drive sales. Tech that provides a better, faster experience is one possibility. Self-service kiosks are sort of QSR’s answer to the handheld ordering tablet. Not surprisingly, they are also gaining ground. At Shake Shack, kiosks are the chain’s highest-margin ordering channel. They now make up more than 50% of total on-site sales, an increase of 140 basis points year over year. And the chain is doubling down on them, investing in better upsells and software to keep pushing those numbers upward.
Did You Know?
Lawyers guide to preventing slip and fall accidents in restaurants. According to the National Floor Safety Institute (NFSI), more than three million food service employees and one million guests are injured as a result of slip-and-fall accidents annually. The industry spends more than an established $2B for slip and fall-related injuries, and this number is rising by 10 percent each year, according to an NFSI study. Operators should set the standard of safety within their hospitality businesses by taking steps to mitigate risks within the restaurant, educating staff members about potential slip and fall hazards, and providing guidance on steps to take should a slip and fall accident occur. Slip and fall accidents can result in serious, sometimes fatal, injuries. Fractures are a serious consequence of falls, with five percent of all falls resulting in this type of injury. The most common fractures from a slip and fall are wrist, ankle and hip. Falls can also result in traumatic head injuries, which can have life-altering effects, depending on the severity.
Employee Tip
Three holiday workforce trends restaurant managers need to know. The restaurant workforce is largely back to pre-pandemic levels, signaling a much-needed reprieve amidst the larger, ongoing hospitality labor crisis. However, the typical increase in consumers wanting to dine out during the holiday season – not to mention the continued demand for take-away and delivery services – could disrupt this balance, even as businesses attempt to bolster their staff with seasonal hires. This influx of new staff is a major stressor in itself. While new workers are brought on to help shoulder the swell in demand, training more people can leave restaurant managers overwhelmed. Add in the fact that many of these seasonal hires demand schedule flexibility and don’t intend to stay on staff for more than a few months, and managers may find themselves dealing with employees who see the temporary nature of their employment as an excuse to “check out”.