NEW YORK —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
The study, called “Please Sir, We Want Some More for Less,” found that consumers are unlikely to shed their desire for discounts even as the recession fades, making it more difficult for operators to grow their top lines even as the economy turns. The study found that while respondents said they expected to eat out in 2010 as much as they did in 2009, they planned to spend about 20 percent less—and they wanted the food to be of high quality. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“Initially, our perception was that the restaurant industry, which usually is the first business sector to get hit by a recession, would also be the first to come out,” said Adam Werner, a director in the foodservice division of business consultant AlixPartners LLP, which conducted the survey. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“While it was the first to get hit during this recession, we don’t think it’s going to be the first to recover,” he continued. “Customers are going out to restaurants—slightly more frequently to fast casual and quick serve, but they’re not returning to casual or fine dining—and when they do they use coupons or make use of the latest promotions.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Werner oversaw the survey of about 1,000 consumers with Adam Fleiss, another director in the firm’s foodservice division. The duo completed a similar survey in the first quarter of 2009. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
In the most recent study, whose results were released Nov. 9, 63 percent of respondents—up 11 percent from first-quarter figures—said they would continue to dine out, but would not look for luxury. The survey also found that the number of visits to fine-dining establishments plummeted 36 percent in the time between the two studies. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
The average price per meal that respondents indicated they would be willing to pay also dropped, from $13.25 in the first quarter to $11.49 in November. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“That in itself is interesting, one of our most compelling findings,” Werner said. “That’s a 20-percent reduction in just nine months. When you translate that to 950,000 restaurants across the country, it’s a significant drop.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Frank Guidara, president and chief executive of Uno Chicago Grill, the 200-unit casual dinnerhouse chain based near Boston, suggested that pervasive discounts had more to do with the drop than consumer frugality. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“I think I’m stating the obvious here, that there is a lot more discounting going on, a lot more meal deals,” he said. “I’m not even sure that a reduction in [spending] would be intentional on the part of the consumer, but more by virtue of the couponing that just about everyone is offering.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Consumers, inundated with deals, have come to expect them, forcing operators to find other ways to stand out from their competition, said Fleiss of AlixPartners. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“For restaurant operators, to have [a value promotion] is not a point of differentiation now—it’s your ante to get into the game,” he said. “And because everyone has one, the differentiation has to be quality. With all the promotions out there, operators are having to get back to the fundamentals of who’s delivering the best food.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Many restaurateurs are trying to do just that. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Mike Woodhouse, president and chief executive of Cracker Barrel Old Country Store, the 588-unit casual-dining restaurant company based in Lebanon, Tenn., told Nation’s Restaurant News earlier this year that he is committed to delivering a value proposition that has nothing to do with discounting. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“What happens in a recession is that the customer has less money to spend, so he or she is more careful when they do spend it, more careful at getting the best deal,” he said. “Now that’s not necessarily the cheapest or a buy-one-get-one, but it’s the best deal in terms of great food, great quality and great service. They know we’re not going to change things on them. We haven’t downgraded anything we serve on the plate. In 40 years we’ve never had to discount [our prices]. And during this recession, we’re running better guest traffic than most of the rest of the industry.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
But while operators with lower check averages are finding ways to navigate the new consumer psyche, the casual and fine dining segments are likely to struggle into next year, said Fleiss and Werner. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“That’s the other piece in all of this,” Werner said. “Fine dining still hasn’t figured out the equation. Business dining is still way down and promotions are not working as effectively as people thought they would. It won’t disappear; there’ll always be a time and place for fine dining, especially during special occasions, but I’m still wondering whether there’ll continue to be a shakeout across the segment at large.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Uno’s Guidara agreed, saying: “It’s really tough to be in the fine-dining business now. It’s not what people [want]. Look at Danny Meyer. He’s known for his upscale restaurants, but see which one he’s chosen to grow? Shake Shack, a quick-serve concept.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
Renowned restaurateur Christopher Myers, who operates Radius Restaurant Group in Boston with his partner, celebrity chef Michael Schlöw, recognizes the sea changes overtaking upscale dining; one of his restaurants, Great Bay, at the Hotel Commonwealth in Kenmore Square, closed last summer. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
At the time, Myers acknowledged the recession had hastened the closing, but said he would continue working in the segment. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“It’s funny; I was reading this article…that said fine dining was going to go the way of the dinosaurs, but I don’t believe that’s true or has to be true,” he said. “You may see more generic dining for a while, but by no means do I think fine dining will disappear.” —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
The AlixPartners study found that of all the dining segments, fast casual has performed best and appears on track to repeat that performance again next year. Werner noted that among 18-to-24-year-olds, fast-casual fare is deemed the most healthful and, therefore, worth spending money on. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“That demographic actually is dining out less because they’re looking for healthier options,” he said. “This, we think, is fairly compelling, because this group is the one that, over time and as they age, the restaurant industry will have to [please]. They’ll have to figure out how to recalibrate their menus to attract this group. —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
“We think in the next 15 years there will be a massive switch in eating habits. The industry is going to have to go along to get along.”— [email protected] —Usually, the restaurant industry is first in when the economy slumps and first out when it improves, but a new study suggests that may not be the case this time around.
