Beef’s to Ride On Fast Casual Train

April 23, 2014

AR-140419726Perhaps it’s a sign of how much Tampa loves Beef ‘O’ Brady’s that everyone just calls it “Beef’s.”“Hey, let’s go to Beef’s to watch the game.” Personally, I’ve stumbled over the full name a few times, but that’s another matter. I stumbled over the Au Bon Pain restaurant name for years. There’s just no way to pronounce it without sounding like a rrreal ‘mmmerican or a Francophile snob.

Be that as it may, Beef’s will soon give people another reason to check it out. The company is joining the growing ranks of restaurants launching “fast casual” restaurants, following right in line behind Panera, Chipotle and Five Guys. This one will be called “Beef’s Express,” and Beef’s CEO Chris Elliott says he doesn’t mind if people think of this as a Beef ‘O’ Brady’s version of Chipotle. One could do worse in the restaurant world. Have you seen the lines at Chipotle recently? It’s like a money printing press.

I sat down with Elliott this week to hear a rundown, and he very much cautioned that this is an experiment, and that they’re starting with a single prototype in Lakeland — a test bed to try out everything from the menu and portion sizes to the furniture and traffic flow. He also explained what happened to the St. Petersburg YWCA location of The Brass Tap, since he runs that brand too, but more on that below.

“It took a little while to get our heads around the idea, but once we got into it, we became very excited,” Elliott said. “In the beginning we weren’t sure we could convert the Beef ‘O’ Brady menu to a fast casual menu.”

All this brings up the question: Why the heck are all the restaurant companies trying to be Chipotle all of a sudden.

My time as a business reporter has taught me that one of the biggest dangers in explaining a corporate project is to reduce everything down to one factor. Life is far too chaotic and contradictory, and I won’t fall into that intellectual pothole today.

So, let me count the ways the fast casual concept is taking off like a frenzy in the market — or rather, let’s let Darren Tristano count the ways. He’s a frequent source of mine, and he travels the country checking out restaurants and giving advice to owners for the consulting firm Technomic Inc.

♦   Compared to a full-service restaurant like Olive Garden or Red Lobster or Ruby Tuesday, fast casual restaurants like Chipotle or Five Guys average a 50/50 ratio of dine-in versus take-out traffic,
so they require a smaller footprint;
hence, lower real estate costs. Plus, Elliott says full-service Beef’s restaurants do 40 percent lunch, 60 percent dinner, while a fast casual joint has the opposite
ratio. So, launching Beef’s Express helps even out the revenue per hour.

   ♦   A smaller footprint means a restaurant doesn’t require an expensive stand-alone building, which opens it up to new sites such as malls, airports, strip centers and even travel centers.

   ♦   The catering opportunities are very strong for “off-premises sales” at a fast casual place. The kitchen can still produce the food, but there’s no need for dining room space. PDQ, for instance, does a
thriving business catering events
around town, something I’ve seen pretty much zero fast-food chains do well. Typical fast-food items don’t handle the transportation well. French fries have about a
three-minute shelf life before they turn pasty and cold.

   ♦   Fast casual joints can charge higher prices, which means better annual sales, which means higher return on investment for a franchisee who can open a store “with less cost/capital than brands
like McDonalds or Applebee’s but with
greater upside vs. Subway,” Tristano said. The labor cost per employee may be higher at fast casual places, but there’s no need for a host, waiters, bussers or
other floor staff. Just cooks, a cashier and a cleanup person. I’m not saying
that’s good for America’s job prospects; just observing the thinking of restaurant execs.

   ♦   Typically, fast casual food is a peg or two above typical fast food, and even KFC is getting in on the fast casual action. It built a test site in Louisville, Ky., called “KFC Eleven” with more upscale items.

Put that all together and Tristano says the average fast casual “unit volume” can top $1.1 million per store, versus “fast food that is much lower.”

But let’s focus a bit closer on Beef’s.

Elliott says the Express sites will only take some design cues from a regular Beef’s, but there will be no TVs (sacre bleu!). This is not the place to park all afternoon to watch a football game; that’s for the regular Beef’s.

The Lakeland mock-up is a 2,000-square-foot prototype with 64 seats, the size of a small Chipotle. People walk up to a counter, order their food and pay at a cashier. A server brings out the food. But here, Beef’s is pushing the envelope. Unlike Chipotle or Five Guys, which basically have one food item (burritos or burgers), Beef’s will have more than a half dozen: Chicken wings, burgers, chicken tenders, fish and chips, Cuban sandwiches, Philly cheese steaks, sandwich wraps and flatbreads.

Beef’s wants the average check to hover around $10, drink included. “The trick will be to have a more diverse menu and still deliver on what people want from fast casual,” Elliott said. “Quality, speed and value.”

Elliott is targeting an opening within 12 months, maybe by the end of this year. The Beef’s fleet of restaurants are virtually all franchisee operated, so Elliott can’t just build a slew of sites like McDonald’s or others can. “It depends,” Elliott said. “If the test goes well, we might get a lot of interest.”

Meanwhile, here’s other retail, restaurant and trend news around town:

So, about that YWCA Brass Tap location in St. Petersburg that closed last week. Elliott said it was a valiant effort, particularly because it was part of an adaptive re-use of a notable location, but the site just wasn’t seeing enough traffic. But it’s not going away forever. Likely, Elliott said, the Brass Tap brand will be relocated to a spot around the restaurant hub — Central Avenue, maybe close to the stadium.

Last week, we wrote a huge story about the launch of the Lyft ride-sharing service in the Tampa region. There’s a fight afoot, obviously, because taxi and limo companies don’t necessarily welcome the competition from plucky and less-expensive upstarts. Now Lyft just gave the taxi guys another reason to grumble. After raising $250 million in new venture capital, Lyft is cutting prices by 20 percent. Rival/compatriot ride-sharing service Uber made a similar move recently. As the TechCrunch blog phrased it, the move “won’t affect the amount of money that drivers take home. Instead, the company is temporarily suspending its 20 percent commission while testing out the new rates.”

The Channel District will soon have a couple of more bar/restaurants to boast of. Maloney’s Local Irish Pub will open soon along Meridian Avenue in the Grand Central complex, taking the place of the former Rajin Sports Bar & Grill, with a likely opening of late May. There’s already a Maloney’s in Westchase if you want to see the look and feel. Soon after, a partner restaurant will open directly next door called The Hideaway, more of an upscale lounge. There’s one in Clearwater if you want to check that out. Both are owned by Todd Wingard and Brian Pfeiffer, who say it’s a “leap of faith” to go into that area, but with hundreds of new apartment units going up, the Riverwalk complete soon and Jeff Vinik’s projects nearby, they figure this is the sweet spot for young professionals.

Fear not, Apple devotees, your International Plaza store is only temporarily closed. The site is undergoing another renovation and should re-open May 23. Unfortunately, if you don’t like crowds, there may be some frustrating news. Despite cries from the populace to triple or quadruple the size of the store, the site will retain its current footprint.

Good news for Oxford Exchange fans. The oh-so-classic styled bookstore/tea shop/retail store/business club/restaurant now has a full liquor license, which means beer, wine and cocktails. Another change: The restaurant is normally only open for breakfast and lunch, (private events at night) but the owners have decided to experiment with dinner open to the public at large on Thursday and Sunday nights. Call early for reservations, because the menu looks hot: Macadamia Mahi Mahi ($24), Steak Frites ($32), Shrimp N’ Grits ($24) and Vegetable Lasagna ($18).

After a devastating fire, A Modern Line furniture has found a new home in Seminole Heights at 4632 N. Florida Ave., adjacent to several other funky art galleries and creative projects. “Granted, we will be a bit lighter on merchandise to start, but the place is looking great and we still have a pretty swell collection to choose from,” co-owner David Call said in an email to fans. “Many thanks to our awesome neighbors, family, friends, customers and our local businesses for helping make this happen as fast as it has. You all rock! Love you all!”


Luxury Dining at the Mall

April 22, 2014

bildeWhen the new Saks Fifth Avenue department store opens at the Mall at University Town Center, shoppers can expect more than just expanded departments and two floors of merchandise. The 80,000- square-foot Saks space — one of the key anchors for the $315 million mall in Sarasota County — also will boast its own restaurant, and be one of the first in the chain to do so.

When Saks opens, so will “Sophie’s,” a new restaurant concept by Fifth Dining LLC, a new restaurant effort within the Saks brand. The elegant, gourmet restaurant will complement the department store’s look and feel but will offer a completely separate lunch and dinner dining experience for Saks shoppers.

“We wanted to tie together the legacy of Saks with a concept that had a lot of appeal for the people who happen to shop here,” said Michael Kaufman, president of Fifth Dining. “The restaurant is designed to be a high-end experience through a unique look and feel and our freshly prepared food. It’s not stuffy, but resonates appropriately with the traditional Saks Fifth Avenue shopper.”

The 2,600-square-foot restaurant’s design is simple, with sleek tables and chairs and black-and-white finishes.

Its name pays homage to one of Saks Fifth Avenue’s legendary fashion designers, Sophie Gimbel, who designed women’s apparel for Saks for 40 years and married a Saks executive. Among her many simple and elegant designs was a red coat and dress she created for Lady Bird Johnson.

“We’re not creating a museum to honor Sophie, but a restaurant brand, if you will, keeping in mind what she stood for — like the simplicity in the way she designed — as we go along,” Kaufman said.

IT STARTED IN CHICAGO

Saks opened its first Sophie’s concept in Chicago earlier this year. Sarasota will be the second. More restaurants are planned in larger markets.

“These kind of restaurants primarily target women. It’s very much a place for ladies to lunch and meet their friends, then continue shopping,” said Jeff Green, a retail analyst with Phoenix-based Jeff Green Partners. “The demographic in Nordstrom cafes is traditionally older. I imagine the restaurant in Saks will do very well in Sarasota.”

Saks Fifth Avenue will close its existing 40,000-square-foot store at the Westfield Southgate Mall in October, when the mall being jointly developed by Taubman Centers and Benderson Development debuts.

Saks Fifth Avenue has further invested in the importance of the Southwest Florida market by closing its Tampa store at Westshore Mall.

When the 880,000-square-foot Mall at University Town Center opens in October, Sarasota will have the only Saks department store on the Gulf Coast north of Fort Myers.

Saks joins Macy’s and Dillard’s as anchors for the new mall, the only enclosed mall scheduled to open this year in the United States.

A slew of other national, high-end retailers have committed to opening stores there, including Apple, Anthropologie, lululemon, Tiffany’s & Co. and Brooks Brothers, to name a few.

Sophie’s will compete with other national restaurant chains — Brio Tuscan Grille, Capital Grill, Seasons 52, Cheesecake Factory and Zinburger — as dining options at the new mall.

“There are so many great restaurants in Sarasota. We hope Sophie’s will fit right in,” Kaufman said.

The restaurant will not stay open later than the department store does. Each Sophie’s will have a menu unique to its market. For example, Sarasota’s menu will have more fresh seafood than others, Kaufman said.

While the Sarasota Sophie’s menu has yet to be created, and the Chicago restaurant is open only for breakfast and lunch, its menu gives a taste of what Sarasota can expect. It includes a $12 cocktail menu with a rhubarb basil gimlet of distillery gin, basil, bitters and lime juice. Entrees include a North Atlantic salmon for $25 and an “Amish chicken breast” for $21.

A RETAILING TREND

Saks Fifth Avenue is the latest upscale retailer to venture into the dining sector in recent years.

Nordstrom’s department stores, including the one in Tampa’s International Plaza, have their own line of in-store cafes, which serve lighter fare, coffee and cocktails.

The concept has helped make Nordstrom more of a destination for shoppers, said Darren Tristano, executive vice president with Chicago-based Technomic, a food consulting firm.

“Combining a high-end restaurant with the Saks or Nordstrom clientele is a service to the customer that goes beyond just the typical shopping experience,” he said. “The idea of restaurants in department stores is coming back, and we’re seeing a lot of it internationally. It has great strength and is moving forward.”

Macy’s, too, has dabbled with restaurant concepts in larger markets — such as its Stella 34 Trattoria, an Italian restaurant tucked onto the sixth floor of the Macy’s in New York.

Brooks Brothers announced that it plans to open its first restaurant, “Makers and Merchants,” a steakhouse, around the corner from its flagship store in New York this year. The restaurant is taking over vacant space once used for a Brooks Brothers women’s line.

“Price is not the issue here, considering the type of store shoppers are in,” said Green, the Phoenix-based consultant. “We really only see these kind of restaurants inside upscale department stores, even though they used to be in more traditional stores.

“Full-service restaurants won’t ever be in traditional stores anymore.”


Expect New Dishes at Your Favorite Casual-Dining Spots

April 21, 2014

getimage.aspx“The food, it is kind of incidental to everything else,” said Myers, dining recently in the cafe at Universal CityWalk.

Hard Rock is seeking to change that attitude with a major menu makeover, one of many that casual-dining chains are doing to keep up in a competitive industry. Olive Garden, Smokey Bones and Tony Roma’s are among those trying to offer a better bill of fare to woo diners with increasingly sophisticated palates.

“People are more food savvy because of social networking,” Hard Rock’s executive chef Russell Booth said. “They’re expecting great food with flavor, with punch.”

A musical museum of sorts, Hard Rock is themed to the extreme. But the company said it wants to make what diners taste as much a reason to visit as what they see and hear. So it conducted a soup-to-nuts analysis that spanned 15 months and solicited opinions from more than 3,000 customers.

Thirty dishes and drinks are new. Almost as many other items have different ingredients and preparation methods.

Results range from a new chicken arugula salad to adult beverages with trendy additions such as bacon and salted caramel. Hard Rock replaced queso on its nachos with two layers of mixed cheeses and added toppings such as smoked beef brisket. Other changes are more subtle, such as new brioche burger buns to replace potato ones.

Still, Hard Rock hasn’t strayed too far from its roots: heaping portions of typical casual-dining chow.

Tony Roma’s took a more radical approach with a rebranding experiment in Orlando. It essentially gutted its old menu, keeping its signature ribs but switching out almost everything else for trendier fare such as pulled pork tacos and fish with couscous.

That’s risky, however, and unusual, experts say.

“It’s about balancing what is familiar — old favorites, signature items, with items that are new,” said Darren Tristano, executive vice president of restaurant-research firm Technomic.

Experts say casual-dining restaurants are reinventing menus to fight a trend of declining traffic and sales. But other types of restaurants are making changes, too. Atlanta-based Chick-fil-A recently introduced grilled-chicken dishes marinated in sea salt, lemon, garlic and herbs and cooked on a new kind of grill meant to create the flavor of a backyard barbecue.

Such changes aren’t always a recipe for success.

In late 2012, Red Lobster added more-affordable meals and many others that didn’t feature fish. Sales at the seafood chain owned by Orlando-based Darden Restaurants have declined sharply since, diving 8.7 percent in its most recent quarter.

At Olive Garden, also owned by Darden, one lesson learned from Red Lobster is that “you can’t forget that there’s something for everyone on this menu,” said Jay Spenchian, the Italian chain’s executive vice president of marketing. “You have to have those messages to different audiences going simultaneously.”

Olive Garden recently debuted more than 20 new tapas-style dishes meant to attract younger consumers. Grilled chicken with broth and vegetables appears on the lighter-fare section aimed at health-conscious diners. Several $9.99 pasta and sauce combinations are meant to appeal to customers on a budget.

To lure people with more adventurous tastes, Olive Garden added dishes with pesto and spicy diavolo sauces, which the chain had previously shied away from for fear of alienating core customers.

“We can’t be afraid when we put something on the menu [that] some people aren’t going to like it,” Spenchian said. “Before, we were a little enamored with trying to get everyone to like something a little bit.”

One of Olive Garden’s competitors, Tampa-based Carrabba’s Italian Grill, also recently added 15 new dishes for less than $15.

At Orlando-based Smokey Bones, Chief Executive Officer Chris Artinian said the goal of recent menu changes is to emphasize freshness. More sides and sauces are homemade. The restaurants are buying brisket with more fat and smoking it longer — 14 hours — for more tender meat and richer flavor. New items, meanwhile, include fried pickles, additional chicken-wing sauces and a margarita with Pop Rocks on the rim.

At the restaurants, some foods have disappeared — and not just to make room for new ones.

The overall number of items at Tony Roma’s dropped from 62 to 51 after the chain already dropped about 30 others a year and a half ago. Smokey Bones and Hard Rock both ended up with slightly fewer items than before.

Spenchian said Olive Garden’s menu is about the same size but a few things could be deleted in the near future to make operations less complex.

That, too, is a common theme in the industry now.

At Smokey Bones, Artinian said, part of the revamp was “ensuring our menu has enough variety but also small enough that we do everything great.”


Taco Bell Runs Naughty TV Ad For ‘Happier Hour’

March 27, 2014

taco-bell-campaign-188_2To drive awareness of its “Happier Hour,” which runs from 2 to 5 pm each day, Taco Bell is running new TV creative that’s slightly naughty, in a playful way.

The spot (in 30- and 15-second versions), from Deutsch LA, shows three different scenarios in which male/female pairs — office colleagues, college students and seniors — exchange suggestive looks and then appear to be heading out together for a tryst, as the song “Afternoon Delight” plays in the background.

But it turns out that they’re all actually headed to a Taco Bell, where they can get any “Loaded Griller” for $1, and any medium beverage for the same price, during those three afternoon hours.

The “Afternoon Delight” version is a Little Hurricane cover of the 1976 Starland Vocal Band song.

The keen-eyed viewer may notice a cameo by “America’s Next Top Model” winner Laura Ellen James, playing a college student who clearly makes the day of her much-shorter classmate when she lures him out of an in-progress lecture.

The spot started airing this week on networks and cable, and will continue running through the end of June, with additional media support through the end of August. Happier Hour is being promoted on Taco Bell’s social assets, including Facebook (10 million “likes”) and Twitter (1.1 million followers), as well as featured on YouTube.

Happier Hour is described in consumer promotions as a “limited time offer,” but it’s been running at participating locations since last year (an “always on” promotion), according to Deutsch. The current marketing push is the second campaign for Happier Hour; Taco Bell also ran a campaign last year.

The reasons behind a special afternoon event/offer aren’t hard to grasp. QSRs obviously benefit from driving more traffic during the quieter hours between and following regular meals. And offering snackable items at attractive prices has become a key strategy for driving such business.

According to a new “Snacking Occasion Consumer Trend Report” from foodservice research firm Technomic, 51% of Americans now report that they eat snacks at least twice a day — up from 48% two years ago. Nearly half (49%) report that they eat snacks between meals, and 45% replace one meal a day with a snack.

Among those who buy snacks at restaurants, 45% order from the value or dollar menu.

“There’s plenty of room for restaurants to expand their snack programs and grab share,” even as packaged food makers and retailers also push harder to grab those snacking dollars, noted Technomic EVP Darren Tristano.

And while candy is still the dominant snack (purchased at least occasionally by 71% of surveyed consumers), half of consumers say that “healthfulness” is very important to them when choosing a snack. As a result, many restaurants, like their CPG counterparts, are including healthier options within their snack offerings.


Burger King to Add Mobile-Phone Payment at U.S. Locations

March 26, 2014

AR-140329974.jpg&maxw=248&maxh=191&updated=Burger King Worldwide Inc. is introducing an application that will allow customers to pay for Whoppers with their smartphones as it races rivals to woo younger diners.

The program will be introduced next month and should be in all of Burger King’s more than 7,000 U.S. locations in “a few months,” Bryson Thornton, a spokesman for the company, said in an e-mailed statement. The option to order food and drinks ahead of time for later in-store pickup may be added, he said.

Fast-food chains including McDonald’s Corp. and Dunkin’ Brands Group Inc. are competing to quickly introduce the best loyalty programs and smartphone apps to try to attract millennials and teens. McDonald’s last year said it was testing coupon and mobile-payment apps at some of its U.S. locations. Dunkin’ Donuts rolled out a rewards programs to all of its domestic shops in January.

“I don’t think there is a clear leader,” Darren Tristano, executive vice president at Chicago-based Technomic Inc., said in a phone interview.

Burger King’s app, developed by Tillster Inc., will give customers coupons for deals, such as $1 any-size drinks and free fries, as well as nutrition facts. To pay with mobile phones, users can load value onto a virtual card within the app.

Mobile ordering and payment apps appeal to millennial diners — those 18 to 35 years old, Tristano said.

“What younger consumers are looking for is the ability to use their phones to do everything,” he said. “The cell phone has replaced the wallet.”

About 19 percent of American consumers had recently used a mobile device to make a restaurant pickup or delivery order, according to a 2012 study from Technomic. That will probably increase as younger generations age, the researcher said.

McDonald’s, the largest U.S. burger chain, said in December that it was testing a smartphone app, called McD, at 1,000 U.S. stores. The trial app, created by Palo Alto, California-based Mowingo Inc., sent customers deals and discounts to redeem with their phones at participating stores.


Making Sense of Value and Pricing Expectations

March 25, 2014

The prevalence of value-based promotions spiked in recent years as U.S. restaurant operators aimed to drive incremental traffic and sales among consumers affected by the recession. The use of these deals is becoming ingrained in consumer behaviour, even as the economy slowly improves. During the economic recession, consumers were more likely to cut back spending altogether, deals or no deals. Now that the economy is on the mend, consumers are accustomed to these deals being available and likely expect that they will be in the future.

While price continues to be a major component of the value proposition, it is by no means the only factor. Value is multidimensional, including the quality of food and beverage, and the quality of service and convenience. These different facets of value allow flexibility in formulating value propositions and pricing strategies.

This article explores U.S. consumers’ value equation; the appeal of restaurant deals and promotions; consumer price thresholds and how low prices drive traffic. U.K. operators will find many of these themes suitable for their own customers, whether they are deal-seekers or not.

The Value Equation

The restaurant value equation is comprised of a host of factors. It’s not straightforward—and it’s evolving. Primary drivers of value are price, quality, service and atmosphere. Secondary drivers vary but may include the meal or occasion as well as the diner’s mood and needstates. Consumers asked to describe what constitutes good value in a restaurant mention food quality, appropriate portion sizes, fair prices, service and cleanliness.

Food and beverage trump price in creating good value. Highlighting specific qualities of food and beverages—such as quality, convenience or healthfulness—can help marketers create a message of good value. Even at limited-service restaurants, the quality and taste of the food are most important: 86% of consumers say food and beverage are key to the LSR value equation, vs. 74% who name price. At full-service restaurants, of course, service and ambiance are also central: 87% name food and beverage as a component of value, 60% mention price, 28% ambiance, and 24% the service and amenities.

Customisation can enhance the value proposition. Half of diners—and a larger proportion of those under 35—say customisation is important in creating a good value proposition. They want to know that the meal will match their personal preferences and that they will get (and pay for) only the ingredients they like. Restaurants can incorporate customisation by offering menu items in multiple portion sizes (thus making them appropriate for both meals and snacks); allowing ingredient substitutions; and varying the heat level of foods from mild to super-spicy. Even a simple bottle of hot sauce left on the table allows patrons to customize their dish to their liking.

Deal-seeking in restaurants has become ingrained behaviour for consumers. Dealing was essential during the recession, but since then operators have been hoping to scale back on deals as the economy improves. However, consumers expect to continue employing deals; more than half say they’re using more deals now than two years ago. Interestingly, deal-seeking is not tied to income constraints; eight out of 10 diners at almost all income levels say they order from dollar menus at fast-food restaurants at least once a month, and among those with annual incomes over $150,000, seven out of 10 do the same. In addition, four out of 10 consumers use “daily deal” websites, and two out of 10 use them more than once a month. (These sites encourage restaurant patronage, but not loyalty; 55% of subscribers to daily-deal sites say they turn to these deals so they can try new restaurants more often.)

Traditional buy-one-get-one and half-off specials resonate strongly with consumers. More restaurant traffic is being driven by specials rather than the quality of the food, atmosphere or experience, with consumers asking: “What can I get for the price?” Deals that provide immediate half-off savings represent the most attractive value: eight out of 10 consumers say buy-one-get-one deals and half-off promotions add strong value, compared to seven out of 10 who name set-price specials, coupons or value menus. Buy-one-get-one specials, coupons and half-off deals are effective in driving traffic, with almost two-thirds of consumers saying they’d be likely or extremely likely to visit restaurants that offered these.

Base: Approximately 800 consumers aged 18+; base varies as promotions were randomly rotated Sum of percentages may not equal cumulative percentage due to rounding Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Base: Approximately 800 consumers aged 18+; base varies as promotions were randomly rotated
Sum of percentages may not equal cumulative percentage due to rounding
Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Pricing Expectations

Consumer price thresholds increase as the day progresses.Operators should make sure that their price thresholds are in line with what consumers are willing to pay (keeping in mind that consumers may report lower thresholds than they would actually accept). Research for Technomic’s Value and Pricing Consumer Trend Report found a “sweet spot” between what consumers consider optimal and what they’ll pay without complaint for each meal in each restaurant segment.

3-2014_exhibit_23-2014_exhibit_3

3-2014_exhibit_4

Base: 1,800 consumers aged 18+ Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Snacks provide a unique pricing opportunity because women are willing to pay more for snacks than men are. For example, while the average consumer would pay $5 for a snack, women aged 25‒34 would pay $6.50. A number of chains, from coffee-café Starbucks to quick-service burger chain SONIC, have experimented with “happy hours,” during which they sell snacks at a special price. And while some fast-casual bakery cafés are seen by consumers as offering only unhealthy pastries for snack time, Au Bon Pain has built afternoon traffic with female-pleasing small plates like hummus with cucumber and Thai peanut chicken with snow peas.

“Fresh” and “premium” descriptors can increase consumer price thresholds.Nearly half of consumers say they would be likely to purchase—and to pay more for—food or beverage that is fresh; 37% say the same about premium options. Operators may be able to justify higher price points on food and beverage billed as fresh, homemade, premium, authentic, local, natural, organic, seasonal or sustainable. They should carefully consider both what such terms could mean when applied to their offerings and how to adjust their price threshold.

Value and Low Prices Help Justify Restaurant Visits

The good news for restaurant operators is that good value makes consumers feel better about eating out: 57% say they can eat out more often if meals are low in cost, and 52% say low prices help them justify the money they spend eating out.

Base: 1,500 consumers aged 18+ Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Base: 1,500 consumers aged 18+
Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Key Takeaways

The value equation involves multiple inputs, but price and quality both play strong roles in all segments. Deal-seeking in restaurants has become ingrained behaviour, and consumers don’t expect to change. Operators must find ways to adjust prices, deals and portions so they can still make money. Price and value promotions can effectively drive traffic. But be careful what you’re driving traffic to; you probably don’t need more business on Friday night. Freshness, quality and customisation can help justify higher prices.

There is pent-up demand for restaurant meals. Consumers who are looking for low prices are doing so to eat out more often. Older consumers seek value and “worth,” while younger diners have a more straightforward desire for deals; operators should consider strategies that don’t alienate any part of their customer base.

Darren Tristano is Senior Managing Director of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.


Reaching the Socially Conscious Consumer

March 18, 2014

In the United States, as in the United Kingdom, more and more consumers—especially younger ones—are weighing a company’s efforts in social responsibility when they determine which businesses to patronize. During a presentation at our recent Consumer Trends & Directions conference, Technomic set out to define social responsibility when it comes to the restaurant industry; show how perceptions of social responsibility influence consumers; and look at the impact of social responsibility on business.

Social Responsibility in Restaurants

Social responsibility in restaurants is a complex idea, but has three key aspects:

The environment: This includes recycling programs; packaging (such as disposables made of recycled materials); energy-saving and water-saving practices; and waste disposal and composting. One company doing well in this area is Starbucks. In a growing number of units, the coffee-café chain gives customers the chance to toss paper hot cups into a separate receptacle for recycling or composting.

Community-building: Engagement with the community can involve fundraising; food donation; support of community groups, from providing free meeting space for groups of seniors to sponsoring sports teams; and, particularly in fast-food settings, emphasizing local hiring and offering wages, benefits and advancement opportunities that are better than the industry average. Darden Restaurants, a multiconcept operator whose stable includes The Olive Garden and Red Lobster, among others, brags that its high-profile nonprofit Darden Foundation has awarded more than $71 million in grants to charities since 1995.

Sourcing: Sourcing is simply where the ingredients come from; among other things, socially responsible efforts encompass organic, natural and local items as well as animal welfare (such as free-range poultry and grass-fed beef) and avoidance of hormones and steroids in meat and milk. One chain that has made sourcing key to its brand identity is fast-casual concept Chipotle Mexican Grill, whose “Food With Integrity” promise involves “finding the very best ingredients raised with respect for the animals, the environment and the farmers.” Both suppliers and restaurants must respond to increasing consumer preoccupations with sourcing.

How Social Responsibility Influences Attitudes and Purchases

According to Technomic research, nearly six out of 10 consumers say that when they’re weighing what restaurant to visit, it’s important to them that the establishment be socially responsible.

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Source: Technomic Consumer Brand Metrics 2013

Technomic’s Consumer Brand Metrics program, which tracks how consumers rate 123 leading restaurant chains on a host of experience and reputation attributes, shows that some chains score much higher on social responsibility issues than others. It’s important to consumers that they perceive a restaurant’s values as aligning with their own, so not everyone rates the same chains highest. Nevertheless, there are clear leaders.

When asked to rate chains on the attribute “is socially responsible,” consumers gave ice cream chain Ben & Jerry’s, quick-service chicken concept Chick-fil-A, and coffee giant Starbucks the highest scores. For the attribute “has values that are similar to my own,” Darden’s polished-casual Seasons 52 concept, Ben & Jerry’s, and family-dining chain Cracker Barrel Old Country Stores came out on top. Consumers rated burger QSR McDonald’s, Chick-fil-A, and Ben & Jerry’s highly on the attribute “supports local community activities.” And for “has an excellent reputation,” consumers ranked fast-casual Panera Bread, high-end steakhouse The Capital Grille, and quick-service In-N-Out Burger as the leading chains.

Social responsibility is more important to certain consumers, including ethnic minorities; younger consumers, including Millennials and Generation Z; and, most importantly, heavy restaurant users, who are visiting restaurants more frequently and having a greater impact on total sales. Younger consumers, especially, perceive social responsibility as part of the value equation in a restaurant experience; they see it as worth something because it makes them feel they are spending their money in a way that lets them feel good about themselves.

Base: 1,500 consumers aged 18+ Consumers responded on a 1–6 scale where 1 = not important at all and 6 = extremely important  Source: 2013 Value and Pricing Consumer Trend Report, Technomic

Base: 1,500 consumers aged 18+
Consumers responded on a 1–6 scale where 1 = not important at all and 6 = extremely important
Source: 2013 Value and Pricing Consumer Trend Report, Technomic

Looking at specific efforts, around six out of 10 diners say they’re more likely to visit a restaurant that makes charitable donations of leftover food. Almost as many say they would also be willing to pay more for menu items at restaurants that make food donations. Consumers don’t mind the idea of restaurants promoting their food charity programs. In unaided recall, they were most likely to remember Panera Bread, McDonald’s, Applebee’s, Chili’s, Starbucks and local independent restaurants as donating food.

Waste disposal is another key issue. More than six out of 10 consumers believe that composting of organic waste is so important that it should be mandated by legislation. Recycling programs for non-food waste are also important to many and can be a strong traffic driver; 47% said they’d be more likely to visit a fast-casual restaurant if it offered recycling, and 43% said the same about fast-food restaurants and coffee cafés. Most of those consumers also said they’d be willing to pay more at restaurants that offered such programs, particularly coffee cafés.

Social responsibility initiatives can deepen a brand’s alignment with its customers and thus build sales, as leading restaurant marketers have attested. In a recent letter to shareholders, Panera Bread wrote “[The Live Consciously, Eat Deliciously initiative] is intended to drive a deeper affiliation between Panera and our customers, and we believe such an effort has the potential to deliver a greater, long-term return on investment from advertising than more promotional messaging.” And Starbucks CEO Howard Schultz said, “I think that the rules of engagement for a public company are changing…I believe strongly that there’s a new movement to recognize that we have to serve the communities, that’s about keeping the balance between profitability and social consciousness.”

Case Study: Roti Mediterranean Grill

As part of the Socially Conscious Consumer session at Technomic’s Consumer Trends & Directions conference, Peter Nolan, chief brand officer of Roti Mediterranean Grill, an emerging fast-casual chain based in Chicago, spoke about how Roti makes social responsibility part of its brand positioning.

In the old days, Nolan said, healthy eating and socially responsible practices “didn’t work,” but now consumers—particularly younger generations—want to live in sync with their values. He argued that “real” trumps “wow.” Authenticity, transparency and trust are important, Nolan said. Initiatives must be true to the brand’s identity and the values of its executives and employees; socially responsible practices based on marketing research will come off as false. Roti—whose motto is “Food that loves you back”—chooses initiatives that are relevant to its healthy menu, such as in-restaurant cooking classes for low-income kids. Burger restaurant Meatheads, in contrast, supports high school football.

Nolan suggested that packaging is a great way to start. Roti replaced its disposable plates with compostable plates made from sugarcane fiber. Roti composts food waste and lets customers know it donates food to a food bank.

Today’s consumers associate fresh, organic, local and sustainable foods with quality. Nolan noted that smaller companies may believe their distributor wouldn’t supply these ingredients, but if a number of customers ask, the distributor may find a way to accommodate requests.

Finally, he suggested that companies make it a mission and get the word out. Patrons want to get personally involved in charitable activities. For example, if a restaurant is raising money for literacy, it can promote the initiative as giving customers a chance to teach people to read. Restaurants can promote their initiatives via integration with customer loyalty programs, email messages, social media, and even simple in-store signage.

Key Takeaways

Social responsibility can be multifaceted. Environmentally friendly sourcing, a community presence and other aspects may be important to different consumers when they are deciding which restaurant to visit. Consumers respond to and perceive value in social responsibility. A restaurant that’s seen as socially responsible has the opportunity to increase price thresholds as well as traffic.

Marketing opportunities are expanding. Restaurants should leverage the positive vocabulary of social responsibility, communicate their values and programs to their customers, and pursue long-term consumer engagement with social issues, rather than seeing them as mere promotional opportunities.


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