The foodservice industry spent 2009 slogging through the worst economy in living memory, facing customers whose most frugal moods in previous years seemed downright extravagant compared with their attitude over the past 12 months. Consequently, the year found several chains filing for bankruptcy and independent landmarks closing their doors for good.
But it wasn’t all bad news. Restaurants trimmed down, renegotiated leases, took advantage of lower food costs, and tried new strategies to cut costs and attract customers—and sometimes it worked.
Not for Ruby Tuesday, though. The year started out with the nation’s third-largest casual-dining chain announcing plans to close 10 percent of its domestic units in an attempt to reverse more than two years of bad operating results. In March it debuted a two-for-one entrée promotion, and later in the year it began experimenting with brunch. But in August chain officials nevertheless were predicting samestore sales would be down by between 2.5 percent and 3.5 percent in fiscal 2010.
Frozen-yogurt and coffee chains also were hard-hit, as $4 coffees and $6 afternoon snacks—affordable luxuries a year earlier—were now deemed too expensive.
In February Starbucks announced that it would eliminate nearly 2,000 jobs while it rolled out a less-expensive instant, soluble coffee.
Analysts were not impressed, saying the new item, which Starbucks claimed had been in the works for 20 years, didn’t address the chain’s central issue of falling retail store traffic.
The company devised different marketing efforts. It reminded customers of less expensive items available in its units. It also launched a line of desserts that were free of one of the year’s nutritional bogeymen, high-fructose corn syrup. So did Jamba Juice.
As Starbucks tried to convince customers of its value, so did frozen-yogurt chain Red Mango. It pushed its products’ health attributes and launched a loyalty program. It also lowered its initial fee to franchisees by $10,000 to $25,000 and offered to buy back stores from dissatisfied franchisees.
Eventually, Red Mango and rival Pinkberry, sensing a saturated market in Los Angeles, their first port of call in the United States, started to move into the interior. In June Sodexo signed a deal with Red Mango to open 10 units in college, corporate-dining, government and health care venues.
Although high-fructose corn syrup was one hot-button health issue—first lady Michelle Obama said she wouldn’t serve products containing the flavoring to her children—the big one this year was sodium.
Burger King had started the move to reduce sodium in its food late in 2008, but Denny’s, Yum! Brands and Au Bon Pain also introduced initiatives to lower salt content.
But that didn’t stop the health advocacy group Center for Science in the Public Interest from helping file a class-action lawsuit against Denny’s for not disclosing the sodium content of its food. The case eventually was dismissed, but the presiding judge pointed out that the plaintiff had a right to appeal.
While Starbucks ramped up its retail product offerings, so did Tony Roma’s, Steak n Shake and Jamba Juice.
In June, Starbucks also opened a bar and live-entertainment venue in its hometown of Seattle called 15th Avenue Coffee & Tea Inspired by Starbucks.
The company said the new restaurant—one of three it was planning—was an attempt to get back to its roots. Espresso drinks were prepared using manual machines instead of the automatic ones used in the chain. Coffee beans were roasted at a nearby plant. Baked goods were provided by a local company.
Other chains tried new concepts, too.
Friendly’s tested a fast-casual prototype with smaller menu and announced plans for an ice-cream-only model for noncommercial venues. Baskin-Robbins rolled out a smaller prototype, called BR Express, for on-site venues, featuring soft serve with six to eight flavor ribbons rotating in and out, plus an array of mix-ins. Krispy Kreme launched smaller units serving donuts that were made off-site. Burger King debuted its first Whopper Bar at Universal CityWalk in Orlando, Fla., which had a smaller footprint and limited protein options, but 22 burger toppings. It later opened a second one in Munich and divulged plans for venues in Miami Beach and the International Airport in Malaga, Spain.
In addition, BK reformatted more than 60 units with its new 20/20 design, featuring metallic-and-black industrial design and LCD menus, including its highest-grossing store, in Amsterdam’s airport.
Pizza Hut tested new signage that simply said: “The Hut.”
Like Friendly’s, IHOP and Denny’s experimented with fast-casual formats for their customers on-the-go.
Even fine-dining restaurants reinvented themselves. Three white-tablecloth stalwarts in New York—Oceana, San Domenico and Aureole—relocated in bigger, more casual locations with bigger bars, lower check averages and more event space.
Fine-dining chefs from Emeril Lagasse to Michael Symon to Daniel Boulud opened “better” burger joints.
Starbucks made other efforts to drive retail traffic. To help its customers manage their loyalty card accounts better, it introduced two new iPhone applications.
Pizza Hut also launched an iPhone application, for ordering pizza—something customers already could do from any phone, at any time, without any computer software. Still, the Yum! Brands subsidiary said the “app” boosted sales for the chain by more than $1 million in its first three months.
iPhone apps were one bit of telecommunications technology that the restaurant industry was all atwitter about. Another one was Twitter.
Restaurants found the microblogging tool could help them stay in touch with their customers—alerting them of special promotions and new menu items and, as Domino’s learned, doing damage control when some employees posted a video on YouTube of themselves doing disgusting things with food in a Domino’s location.
The now infamous video from a Charlotte, N.C., location of the pizza brand resulted in a short-lived but sharp drop in sales for Domino’s. However, the chain quickly set up a Twitter account of its own and encouraged its employees to use their accounts to point customers to a video that Domino’s made and uploaded to YouTube, attempting to ease customers’ fears and becoming overnight an oft-cited example of the importance of social networking.
The Domino’s employees who made the video were fired and prosecuted, but the unit where the video was made never recovered, and eventually closed.
Twitter also helped spur the growth of food trucks. Many restaurants on wheels—serving such fare as Korean-influenced tacos in Los Angeles, Asian-fusion dumplings in New York and frozen yogurt in Washington, D.C.—alerted their Twitter followers about their regularly changing locations.
Brick-and-mortar restaurants found most success with discounts and giveaways—if they handled them correctly.
Denny’s advertised during the Super Bowl its plans to give away Grand Slam Breakfasts on Feb. 3. Some 49 million people visited its website, and 84 percent of those who had the free breakfast said they were very satisfied with their experience. It was so successful, in fact, competitor IHOP even reported a bump in sales for the day.
Quiznos was less successful with the coupons advertised at its website,
Not all units participated, irritating customers and creating an outcry in cyberspace.
KFC had similar difficulties as it marketed the year’s biggest new-product rollout: grilled chicken. After it was promoted on the “Oprah Winfrey Show,” a surge of customers caused operational headaches and the need to offer rain checks to those aggravated individuals who didn’t get their chicken.
Prognosticators are now predicting a recovery—a slow one with little job creation or other factors to motivate a loosening of customers’ purse strings. But operators face 2010 with hard-earned experience gained from 2009.— [email protected]
