Restaurant industry analysts monitor economic data to measure the overall strength of the industry so companies can alter their strategy if needed. The 2018 reviews are mixed, as consumer confidence was determined to be shaky due to United States retail missing its mark in September.
Most consumers tightened purse strings, causing a decline in restaurant guest counts and traffic. Conversely, overall same store sales increased, resulting in higher average checks. Some analysts are concerned the positive sales data is short-term and reflects two additional factors: a.) Major restaurant companies have raised their prices to offset increases in minimum wages and rent costs; and b.) Americans were spending the extra money they received from Trump tax cuts. Future short-term reviews will continue to be mixed, but long-term, what transformations will the restaurant industry implement to offset the shifts in consumer eating behavior?
Below are four macro trends affecting the overall performance of the restaurant industry.
New Food Venues – Internal competition between restaurant industry segments has always been intense as consumers swap out one dining experience for another. This can often result in low monthly repeat visits. Over the years external competition has adversely impacted restaurant guest counts as more consumers use retail supermarkets, C-stores and mass merchandisers for prepared, restaurant-quality meals. Additionally, a new wave of nontraditional food venues is surfacing. Examples include movie theaters now serving complete meals and hand-crafted cocktails; food halls offering a variety of artisanal food experiences; and brick and mortar retailers creating an over-the-top shopping experience (e.g., AT&T Lounge, Crate & Barrel) where food is also being offered onsite. Long-term, the new innovative food venues could become a competitive force adding to consumer food choices.
Food Delivery – Why leave home for dinner? Last year over 80% of meals were prepared and eaten at home. NPD Group’s “Future of Dinner” study revealed this trend will continue to grow over the next five years. Technology is one of the leading factors driving the change. Examples include online ordering and delivery, grocery delivery, and meal kits. Additionally, the popularity of video games and streaming among the younger generations (e.g. Netflix and takeout – Gen Z) is also having an effect on eating habits. Restaurants are already adapting to the trend of in-home dining by jumping on the delivery bandwagon (this accounts for 3% of restaurant traffic according to the National Restaurant Association). In addition, some restaurant chains are implementing innovative solutions, such as Chick-fil-A’s “Mealtime Kits” (a line of chicken entrees), or Newk’s Eatery’s Express Market that offers take-home meal options.
Social Media Use – Millennials and Gen Z rely heavily on using technology driven social media platforms to engage with restaurant brands. “Instagrammable” food is their mantra. Consequently, to help drive sales, food marketers are crafting influence marketing movements targeting teenagers. In the future, given the amount of time consumers spend in their cars (101 minutes per day according to the Harvard Health Watch), dashboard voice-enabled technology will have a major impact on the food-away-from-home consumer decision making process.
Psychographic Profiling – At the moment, demographic categorization by population group is the primary targeting process in the restaurant industry. Because of the growth of data gathered via technology touch points (e.g., transactional purchasing behavior, apps, geo-location, etc.), psychographic profiling will become the norm when targeting future consumers. Potential psychographic buckets include lifestyles (e.g., “on-the-go”); situational behavioral patterns (location and time of day an individual purchases food); health perceptions; and social values (is the restaurant making the world a better place through sustainability, responsible sourcing, etc.).
Due to the changes detailed above, foodservice operators must better understand their guests’ behavior and implement innovative solutions in order to improve financial performance.