Are Consumers Getting Used to Higher Prices?
Consumers are showing few signs of cutting back on eating out. Picture it. Chicago in 2018, a stranger sits next to me on the L and says, “Imagine yourself five years from now. What news will most anticipate reading every month?” Without hesitation, I reply, “Cheap Trick tour dates announcements.” “Wrong!” says the stranger, “It’s the U.S. Bureau of Labor Statistics’ Consumer Price Index report. Well, there will also be a couple of years where you’re obsessed with COVID-19 rates and the Jobs Report, but in 2022 you’ll be adding a monthly calendar reminder to check inflation numbers.” And with that bit of morning crazy-talk, I would switch L cars. That stranger that I just invented was right. I do religiously comb through the inflation report every month, looking for a sign that inflation is easing in a meaningful way, especially when it comes to food-away-from-home prices. While overall inflation is easing, albeit slowly, menu prices increased again in January, up +0.6% after a +0.5% increase in December (i.e., they’re trending the wrong way). What will this mean for restaurant traffic going into 2023? Are we likely to see a decline again as we saw in the fall when inflation was at its peak? Even though average wages haven’t caught up to inflation, it’s unlikely that consumers will continue to reduce visits, and instead are likely to increase visits and basket size by purchasing add-ons that they may have cut out since inflation soared. In fact, the U.S. Census Bureau reported a jump in eating and drinking places’ sales volumes from $89 billion in November and December to $95.5 billion in January 2023.
Why 2023 Isn’t the Best Time for Restaurants to Go Public
Analysts are worried about chains’ compressed margins and profitability struggles. When Cava submitted its intent to file an IPO in early February, it left analysts surprised. “It is not the normal point in the cycle where you start to see restaurant companies go public,” said Nick Cole, managing director and head of restaurant and hospitality finance at Mitsubishi UFJ Financial Group. The industry is at a 20-plus-year low in restaurant supply relative to population, Cole said, which is unusual given the current stage of the economic cycle. Usually, restaurant supply is at its peak after a period of economic expansion softens toward a recession. “That’s the unique condition that I think the IPO market will get worked up about once they have a little bit clearer picture of the economic cycle,” Cole said. “But it’s not normal that we would have this supply-demand imbalance at this stage of the cycle.” Cole said restaurants tend to go public in the first few years of economic recovery following a market downturn because that’s the period when institutional investors rotate funds into early-stage, cyclical industries. That investment support encourages better revenue and restaurant unit growth, which often leads to increases in company valuations. These kinds of financial conditions, Cole said, often lead to IPO activity.
Avoid Costly Employment-Related Lawsuits
For your hospitality business. Understanding your employees’ rights is paramount to protecting your business. According to the Equal Employment Opportunity Commission’s (EEOC) 2022 reporting, retaliation continues to be the most frequently filed claim included in charges with the EEOC with nearly 56% of all charges involving a retaliation claim1. After retaliation, the EEOC reports a high number of disability, race, sex, and age claims. From discrimination to wrongful termination, employment practice claims can carry a heavy price tag when businesses fail to have the right risk management procedures and insurance coverage in place. It’s impossible to prevent all lawsuits. However, you can take mitigating steps to reduce your business’ risk and high cost associated with employment-related lawsuits through the following best practices. The first step and most important step is to create and implement concrete policies and procedures. Make sure that there are specific ways and means to address common on-the-job issues that could lead to a lawsuit.
Five Ways to Capture Frequent Users
In a tightening economy. We’re all aware of the value of an existing customer. Restaurant operators have scrambled to launch loyalty programs and subscription services in recent years – capitalizing on new technology to keep that “old” customer, often 16x more valuable than a new one. Recent data from our team at Revenue Management Solutions confirms the importance of loyal-to-the-brand customers. It also reveals the importance of loyal-to-dining customers, or as we call them, “frequent users.” When we asked nearly 800 US consumers about past and future restaurant usage, consumers who frequented restaurants ten or more times per week (frequent users) are twice as likely to increase their future use. Going into 2023, 45-50 percent of frequent users said they plan to use restaurant channels “more or much more” compared to just 20-23 percent of the whole respondent population. This isn’t just “talk,” either. When Revenue Management Solutions asked respondents about their past behavior, frequent users reported increased usage across all restaurant categories in Q4 2022, particularly quick-service. By restaurant category.
Bad Social Media Review?
Do you regularly look at your reviews on Yelp and Google? The ones that gush positivity (“awesome place!” “great food!”) will make you feel good and energize you for the long day ahead. But then there are reviews like this one, delivered via Yelp to a restaurant with an entertainment area this past summer. “Good location but freaking expensive. Also, if you order food or drinks away from your table, please look at your receipt. Most likely they have added a tip into your tab. Perhaps more than you would have tipped these under-par servers in the first place. They don’t deserve 20 percent. Slow, inattentive, unfriendly, borderline rude.” That’s not going to make any manager feel good about the service they’re providing. OK, so maybe it was an off-night. That’s happening more and more in the hospitality industry because, let’s face it, recruiting, hiring and retaining staff is a huge challenge in the current employment environment. But your customers don’t care about your hiring problems. Rather than ask to see a manager and express their concerns, customers are increasingly turning to social media review sites (which is admittedly easier than complaining in person). And the next day there’s a scathing Yelp review criticizing customer service, the quality of food or both. What should be your reaction – fight or flight? When it comes to bad reviews, neither is the right response.
How Restaurants Are Building a Loyal Customer Base
Listening to consumer feedback. As restaurants develop innovative strategies to build a loyal fan following, it can present a challenge to pinpoint which approaches work best to entice customers to keep coming back. For some restaurants, connecting with consumers is the key to a thriving brand—making it more than a business to consumer dynamic, but instead, a relationship built on a mutual adoration for an authentic concept. One of the main strategies to building a loyal fanbase involves making sure that brand messaging and promotions are relatable and transparent with guests. Slim Chickens, a beloved southern hospitality chicken concept, known for its cooked-to-order, hand-breaded tenders, has built an impressive fan following over the past two decades. Chris Allison, Chief Marketing Officer for Slim Chickens, shared that the brand actively responds to consumer feedback rather than attempting to decide what consumers want for them. In addition to responding to customer feedback, restaurants will often aim to connect with fans in a way that allows for a sincere relationship between the restaurant and the consumer.
Why Recommending Restaurants to Friends is a Futile…
And frustrating gesture. As someone who has made a career out of writing about restaurants, you might think I welcome people’s trusting me to recommend a restaurant here and abroad. Unlike doctors, lawyers and stockbrokers who spurn such requests by saying, “Call my office,” I always respond but first ask some specific questions: What kind of restaurant? Neighborhood? New? Trendy? Classic? Budget? Unless they are going to Thailand or France, invariably the answer is: Upscale Italian. I almost never get a request to recommend a three-star French restaurant. Bistros, trattorias, tabernas are preferred. Second most popular preference—by a wide margin—is a steakhouse. You would think by now I’d narrow down my responses to half a dozen places, which is what concierges in good hotels always do because they will only recommend places that repeated guests will come back and say were just what they’d hoped for. (I’ve tested this out in Paris and Rome and always get the same recommendations from concierges for places the well-heeled Americans seem to love, like L’Amis Louis in Paris and La Carbonara in Rome).
Did You Know?
Here’s where to find new restaurants, great pizza and delicious desserts at the Shore. Love food? You’ve come to the right place. Each week on app.com, writers Gabriela L. Laracca and Sarah Griesemer share the latest dining news in Monmouth and Ocean counties. They profile new restaurants, tell us what places are closing, and share roundups of places to go for everything from pizza to bagels to sushi. The best way to access all our content? Subscribe now. Click here to check out the latest offers. Here are just some of the stories we’ve covered in the last few months.
Employee Tip
Should a restaurant worker get overtime for assisting in an emergency situation? I am a tipped employee at a restaurant making minimum wage. My restaurant suffered a burst pipe, and it forced the restaurant to close for the day. I was made to work a seven hour day of doing kitchen prep, cleaning up water and throwing away damaged goods. Is my boss required to pay me overtime for this day? Or more? Answer…
Bielat Santore & Company – Restaurant Industry Alert
LOYALTY HAS TO BE EARNED!
Anyone looking to buy or sell a restaurant in New Jersey should only consider Bielat, Santore & Company. After 40 years in the restaurant business, I consider choosing Bielat, Santore & Company one of the best business decisions of my entire career. I cannot recommend them highly enough and now consider myself fortunate to call Richard a friend and confidante. In 2020 when I sold Rod’s I was quoted as saying: “I still have another restaurant to run, Frankie’s in Point Pleasant Beach.” Who knows in a year or two down the road, I may give Bielat Santore & Company another crack at selling this one for me? Well, that proclamation came to fruition in 2021. I handed over the keys to Frankie’s and have officially retired, after Bielat Santore & Company sold Frankie’s in Point Pleasant Beach.”.” Frank Kineavy – Rod’s Tavern, Sea Girt, NJ/ Frankie’s, Point Pleasant, NJ
Since 1978, the principals of Bielat Santore & Company, Barry Bielat and Richard Santore, have sold more restaurants and similar type properties in New Jersey than any other real estate company. Furthermore, the firm has secured in excess of $500,000,000 in financing to facilitate these transactions.
YES, WE WILL SELL YOUR RESTAURANT TOO!
Take a look at our most recent “CLOSED TRANSACTION LIST” by clicking here
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