Four solutions for a struggling restaurant industry

According to a new report from the American Customer Satisfaction Index (ACSI), for the first time ever, fast food (limited service) restaurants do better than full-service restaurants.

As an additional sign of full-service restaurant woes, just a year ago that category was rated among the top four industries tracked by the ACSI, but they now register below many other industries, including banks, life insurance, and fast food.

Food quality continues to rise within the fast food category and that bodes poorly for the full service restaurants. Without food quality as their competitive edge, full service has much less with which to attract customers. Compounding the problem, new labor rules and higher food prices force higher restaurant prices to the point where the average consumer is looking at their other options for tonight’s family meal. According to Wendy’s CEO Todd Penegor, the continued gap between the cost of eating at home and the cost of dining out is now at its widest point since the recession.

The fast food category however, is not without it’s own challenges. A recent survey by the consulting firm Alix Partners LLP found that American visits to fast-food establishments for any type of meal will fall 13 percent over the next 12 months.

What can these establishments do to operate a healthy thriving business? After all, according to the National Restaurant Association, the restaurant industry is an $800 billion dollar industry, so obviously people have not stopped eating out. They’re just making different decisions about where and how often.

Embrace Technology

Restaurants are constantly having to meet customers’ increasing demands for technology that improves their dining experience. Customers can reserve a table via mobile phone or pay their bill with an iPad. In fact, 39 percent of smartphone users said they would pay restaurant and bar tabs via a smartphone app if it’s offered, according to the National Restaurant Association. A Zagat survey found that 52 percent of avid diners said they make restaurant reservations online. Meet your customer’s needs by making it easier for them to eat at your establishment.

Provide a More Engaging Customer Experience

A leader in the above mentioned American Customer Satisfaction Index, Cracker Barrel provides an engaging, kitschy retail store along with games on its tables and a menu that pushes value. Pizza Hut is rolling out tabletop interactive screens allowing customers to not only choose the pizza they want but to see a digital version right on their table. Categorize this innovation in the above technology section as well.

Healthier Food and Beverage Choices

While large portions from restaurants like Olive Garden and Cheesecake Factory do satisfy a number of consumers, studies have shown that lower calorie offerings often out perform. A study conducted by The Hudson Institute on 21 national restaurant chains found that lower-calorie foods and beverages outperformed other choices in 17 of these chains. Lower-calorie items were the key growth engine for foods and beverages. The chains that did not increase their lower-calorie choices recorded declines.

Lower Costs

This is certainly easier said than done in these days of rising commodity prices and more onerous regulations, but one thing that can be improved is the return on unused assets like dark stores, obsolete equipment, and ingredients and products from discontinued menu items. As underperforming locations are closed, rents and other holding costs can place undue strain on your balance sheet.

The prospect of replacing in-store equipment with new technology may seem prohibitive if the old equipment no longer carries any real value. These items, along with raw materials, can be bought by a company like Evergreen Trading, at above market prices, consolidated and quickly moved to approved buyers or recycled.  Evergreen Trading can also purchase closed store real estate or pay for the termination of unwanted leases.

As an example, an Evergreen Trading client not only had dark store locations but also a large collection of artwork that had been hanging in stores and sitting in warehouses for a long time–art they no longer wanted. We bought and took title to both the dark locations and the art, freeing up space and reducing carrying costs for the chain.

 

About Mike Lake

Mike is the Senior Vice President of Marketing for Evergreen Trading. When not playing jazz trombone he is probably obsessing about writing content that will capture the attention and interest of business people and fellow learning junkies everywhere.

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