Customers Are Less Satisfied With Their Restaurant Visits
Customer satisfaction has been dropping, especially with online visits. If you are experiencing declines in your customer satisfaction scores, you are not alone. Shifts in digital ordering behaviors and new customer acquisition may be to blame. But the general mood of the market is not helping matters. When you combine digital ordering behaviors with a general decline in national mood, we see satisfaction levels dipping and most often during online ordering occasions. The good news is that there are signs that a good in-person interaction can overcome that negative mood. Something is going on in the delivery market that is driving satisfaction levels down from 55% of consumers rating their experience as excellent in Q2 2020 during delivery orders to 49% today. One thing we know about consumers is that they tend not to be “wowed” by their first restaurant visit. More often their satisfaction with a restaurant goes up with experience. They come to know the brand first and then their satisfaction levels increase, as does their loyalty. The best way to build this type of ongoing, reciprocal trust between a customer and a restaurant is in a face-to-face transaction. In fact, we tend to see higher levels of satisfaction on orders that originate with an employee than other order modes. On average there is a 2 ppt advantage to an in-person order. It is very hard to build trust with a customer online.
Prices Are Rising for Diners Everywhere
At upscale restaurants, the reasons aren’t always clear. At 75 Main, a buzzy Italian-accented restaurant in Southampton, New York, a veal chop is $80, and the price of white truffle tagliatelle has gone up from $80 to $190. Most people have taken these increases—however steep—in stride, but not everyone. Take two longtime customers, a couple who dine there several times a week, who announced to owner Zach Erdem that they would no longer be patronizing the restaurant because his skirt steak had been hiked from $36 to $48. “They are in the hotel business,” Erdem says of the customers. “I didn’t want to be rude, but I wanted to ask if his hotel rates had changed [during inflation].” To keep them satisfied, he agreed that any time they came in, he’d roll back their bill to last year’s prices. “I wanted them to be happy, and since they come so often, I gave them the bulk rate,” he says. He did so at a loss to his business. Even chefs catering to wealthy diners are having to pivot to keep prices down, since the inflation rate jumped above 9% this summer. Many chefs are shifting their ingredient sourcing, finding new ways to salvage formerly discarded materials, and changing portion sizes. They’re doing what they can to keep prices from shooting up on their menus. But as chefs and owners of upscale restaurants think outside the box in order to keep customers happy, some diners are fed up with rising prices. And not all diner skepticism is unwarranted: Some upscale restaurants, capitalizing on the sense that inflation makes everything more expensive, have quietly raised prices without cause.
Want Growth? Focus on Local Restaurants
Restaurant business is so vital to the ultimate success and growth of a community. Marcus Samuelsson once said, “One of the reasons that people enjoy coming to a great restaurant is that when an extraordinary meal is placed in front of them, they feel honored, respected, and even a little bit loved.” That statement is why the restaurant business is so vital to the ultimate success and growth of a community. Communities without great places to eat are communities that will find it hard to sustain any sort of consistent growth. Over the past couple years many restaurants have closed. Those local restaurants that haven’t closed are either near their breaking point or approaching that point quickly. If there ever was a time for the community to yell, “all hands-on deck”, now is the time in the restaurant business. This column is a call to arms for the entire community. While not totally true 100% of the time, in the past it was safe to say restaurants have historically suffered due to poor management and were forced to close their doors. What is left today are restaurants that have resilient management yet have been buffeted by the economic winds of COVID, inflation, sky-rocketing wages, and recession leaving them vulnerable to joining the others already shuttered. When I say the words “all hands-on deck”, I mean the entire community. Now is the time for each of us to step-up and be a community leader in this effort. Don’t get the wrong impression, this is a two-tiered approach, one by the community and the other by the restaurants. Knowing that, let’s take a quick look at what can be done now.
The Critical Role a Commercial Food Distributor Plays for Restaurants
Commercial food distributors provide food products to restaurants. Restaurants have plenty of options when it comes to choosing their food suppliers, but they can’t overlook the importance of a commercial food distributor. A commercial food distributor can provide restaurants with a wide range of food products, from fresh produce to frozen food. This can help restaurants to stay stocked with the items they need to serve their customers, without having to worry about stocking their own shelves. In addition, a commercial food distributor can help restaurants to negotiate lower prices on food products. This can save restaurants money and help them to stay competitively priced in the market. Here’s what you need to know about the critical role that commercial food distributors play for restaurants. Restaurants can benefit from the services of a commercial food distributor in a number of ways. First, a commercial food distributor can help to keep the restaurant stocked with the items it needs to serve its customers. This can help to avoid shortages and ensure that the restaurant has the necessary food products to serve its customers. In addition, a commercial food distributor can help to negotiate lower prices on food to save the restaurant money and help to keep prices competitive in the market.
Nearly Half of Small Restaurant Businesses Couldn’t Pay Rent in October
Consumer sentiment may help sustain restaurant demand. New data from Alignable shows that rent delinquency among small businesses jumped by 7%, with restaurants at 49%. Nearly 50% of small restaurant businesses were unable to pay the rent in October, a reversal of progress made throughout the previous few months. In September, 36% of restaurants couldn’t pay their rent, while in August and July, the number was 46% and 45%, respectively. New data from Alignable shows that rent delinquency among all small businesses jumped by 7% in October, with restaurants well above the national U.S. average of 37% of small business owners who couldn’t pay. Only the automotive and education sectors fared worse than restaurants on the month. At 49%, the restaurant sector reached a new rent delinquency high in October. Alignable attributes the trend to a drop in traffic due to inflationary pressures hitting consumers. The macroenvironment is also forcing higher rent prices for commercial properties, likely pressuring smaller businesses in favor of bigger, well-capitalized chains. Rent inflation is expected to remain high into 2023, according to research from the Federal Reserve Bank of San Francisco.
Here’s How the Legal Landscape Could Change for Restaurant Employers This Year
Here is a breakdown of all the worker protection proposals. From subminimum tipped wages up for debate and a proposed rule that could one day reclassify delivery drivers as employees, to California’s new fast food worker protection laws, here’s what employers need to know. Across the United States, legal protections for employees in or around the restaurant industry continue to be debated, voted on, and put into practice: from California’s FAST Recovery Act passed in September — which could raise the statewide minimum wage to $22 an hour and be adopted by other states — to the current proposed subminimum wage abolishment on the ballot in Washington, D.C. and Portland, Maine. First, here is a breakdown of all of the worker protection proposals — many of which would directly impact the restaurant industry — that voters will be deciding on Election Day in two weeks. If the subminimum tipped wage were to be outlawed in both Washington, D.C. and Portland, then the tip credit would be banned in nine locales, including seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington).
The Next Generation of Ghost Kitchens is Stepping Out From the Shadows
At the height of the pandemic the phrase “ghost kitchen” entered the public lexicon. But as the post-pandemic dust settles, the off-premises restaurant industry is evolving beyond the rush of flash-in-the-pan celebrity-backed chicken nuggets concepts. Virtual restaurant companies are in it for the long-haul: they’re stepping out of the dark kitchen’s shadows to combine off-and-on-premises experiences, and many are avoiding the phrase “ghost kitchen” altogether. “It feels like in 2020, there was a big gold rush and now everyone is trying to recapture the viral success of MrBeast Burger,” Markus Pinyero, cofounder of upcoming virtual food hall Oomi Kitchen, said, referring to the Virtual Dining Concepts brand. “[…] We want people to order our food instead of ordering a burger that comes from some influencer that you post to your Instagram and never order from again. The return rate on some of these virtual brands is practically non-existent.” Oomi is a newcomer to the booming delivery-only restaurant space, which includes multi-brand ghost kitchen commissaries, delivery-only concepts that operate out of brick-and-mortar restaurants, and virtual food halls that house several original and licensed concepts in one spot. But Pinyero does not feel he is late to the game. In fact, he’s taking notes and learning from others’ mistakes.
Pizza Demonstrates How to Make Money in Delivery
A new era of food delivery is ahead of us. Over the last five years since becoming heavily involved in restaurant food delivery, I have heard in various forms again and again, “delivery doesn’t work.” Industry veterans say things like, “restaurants only profit on a marginal basis” (that is to say, assuming their fixed costs are already covered by their dine-in business). Restaurants with 40 percent or more of their business going out the door via delivery claim there is no way to make the business work, even on a marginal basis: the fees sink the entire P&L. Restaurants now raise their menu prices on the third-party platforms 15–30 percent above their dine-in and first-party offerings. Consumers are paying too much meanwhile, “the delivery companies aren’t even making money,” the restaurants exclaim. My response to this has consistently been, “pizza has been delivered for years, and last time I checked, Domino’s was a pretty profitable company.” It still is, as are Papa Johns and a host of other delivery-oriented pizza companies. Consumers have demonstrated that they want delivery in categories other than just pizza, and smart restaurateurs will innovate ways to meet that demand in a way that works for everyone involved—consumers, restaurants, restaurant workers, and drivers alike. The wise will look to the model that pizza developed and consider how to apply it to other categories. The evolution of the pizza industry foreshadows what’s to come for other cuisine types. Fifty years ago, most pizza places were dine-in.
Convenience Stores Taking Market Share From Quick-Service Restaurants
Food sales at c-stores have increased to over 20%. 7-Eleven is the largest convenience store brand in the U.S., with about 9,000 units. For context, the chain has more locations than Taco Bell, Wendy’s and Burger King. This is notable given that 7-Eleven has been elevating its foodservice options in the past few years, including through its Evolution Store prototype, first introduced in 2019. There are now nine Evolution Stores, and each includes a restaurant concept. 7-Eleven isn’t the only c-store chain upping its food game. BP recently opened its first Am-Pm convenience store in New York, complete with a hot deli and grocery items, for instance. Casey’s features a pizza parlor and bakery with doughnuts made from scratch. QuikTrip recently expanded its menu to include made-to-order sub sandwiches in a handful of markets, while Pilot just debuted a Tex-Mex deli called Burrito Junction. Notably, several Pilot travel centers are undergoing remodels as part of the company’s New Horizons initiative to improve food offerings. The initiative was launched in response to customer feedback, according to the company.
Did You Know?
Since the pandemic, restaurants have been cutting hours and closing early. Late-night bites are out. Dinner at 6pm is in. A new report from restaurant data platform Datassential found that US restaurants’ weekly operating hours are down by 7.5% on average, or 6.4 hours per week, compared to 2019. Overall, 58.6% of US restaurants have cut hours since 2019, compared to just 19.8% that increased them. Staffing shortages and a shift in consumer behavior (re: the pandemic) have heavily impacted restaurants. Fewer people are working in-office, decreasing lunch and after-work traffic. People are eating at home more often.
Employee Tip
How do I tell a customer they won’t like the wine they order? A couple ordered a $78 bottle of wine that they thought “looked cool” from the description on the menu. I told my server that it’s probably not going to be for them—it’s a natural/funky wine and it was just a sense from looking at them that they would not be into it. Sure enough, they said it wasn’t to their liking and asked me to substitute it. I did, with something basic and comparably priced, but am now left with a bottle to sell by the glass, not very easily, at $20 per glass. How do I tell someone that I don’t think they’ll like what they ordered?
Bielat Santore & Company – Restaurant Industry Alert
HOW HIGHER INTEREST RATES WILL IMPACT RESTAURANTS
Currently, inflation is at 8.2 percent, the highest it has been since 1981. All indicators point to the Federal Reserve raising the prime interest rate to 7.00 -7.50% by year-end 2022. As rates continue to go up, it will make operating a business more expensive and potentially increase unemployment, which could put additional strain on labor resources.
Higher supply chain costs, more financial pressure on small and medium-size businesses, frequency of cash deposits increasing, the cost of credit going up. It is predicted that higher rates will be here to stay, and restaurants will need to adjust accordingly to minimize any potential impact.
DO YOU KNOW WHAT YOUR BUSINESS IS WORTH?
65% of all business owners do not know the value of their business…
75% of all business owners’ personal net worth is tied to their business…
85% of all business owners have no EXIT STRATEGY!
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