No, you’re not imagining things and there is no need to adjust your TV. There really are more ads and marketing campaigns from restaurant companies on air, on your phones, on your streaming services, on your social media feeds.
An increase in advertising/marketing spend was one of the major themes from this latest round of earnings calls, in fact, and it’s a strategy shared by brands from Brinker to BJs, and from Shake Shack to Dutch Bros. There’s a reason for this (or several). Firstly, we’ve returned to a far more normalized environment after three years of anything but. Second, several brands are growing and therefore cultivating top-of-mind awareness as they enter new markets. Third, consumers are becoming more discerning and pulling back on traffic, and it’s important to keep their attention.
“For us, it’s always been a critical element. But we have seen other brands who pulled back a lot during Covid start to build their marketing budgets back up again,” Applebee’s CMO Joel Yashinsky said during a recent interview. “I think it falls to what we’re hearing from the guests that they’re facing pressures, especially the lower-to-middle income households. And everyone needs to respond to what’s going on that is making people feel a little uneasy.”
In other words, as companies ramp up their marketing and advertising budgets again, most of them are focused on promoting their value proposition. It’s what Brinker has done for the past several quarters by featuring its 3 for Me platform, for instance. CEO Kevin Hochman recently told analysts that returning to TV ads last year has driven “more sustained business lifts,” including positive traffic.
Brinker executives said the company will spend the bulk of its advertising budget in March and May to drive more traffic and sales, and Mika Ware, VP of finance and investor relations, expects about a $20 million increase year-over-year in advertising spend. Brinker has doubled its advertising as a percentage of sales, with last year around 1.5% and this year around 3%, which is close to pre-Covid levels.
“We are making a pretty big bet on the increase in advertising,” Ware said. “I feel like we have been moving very fast to reset demand creation in this business.”
There are several such examples of such increases with that demand creation in mind. Potbelly is also stepping up its marketing budget this year by about 20%, fed by a full year of 3% contributions and ongoing systemwide sales growth. CEO Bob Wright said this “full-court press” on marketing will help drive traffic, value “and excitement” for our customers.
Shake Shack’s outgoing CEO Randy Garutti said his company is ramping up its spending in digital channels, where the company has “seen strong returns.” G&A expenses are expected to increase by 11-to-14% this year, driven largely by an increase in advertising activity.
“We’re not big enough yet to capture the kind of scale that we’d love to have a Super Bowl commercial someday. We’re just not there yet,” Garutti said in February. “But there will be a day where that can happen.”
In the meantime, Shake Shack is focused on its one-to-one marketing, brand partnerships, third-party delivery promotions, and its own channels.
“We’ll keep testing and learning new strategies in all kinds of markets to see where it hits best,” Garutti said. “We’ve got a lot of opportunity ahead and the marketing team is set up to fire a lot this year.”
Dutch Bros added nearly 160 new stores last year and is expected to maintain that pace in the near-term with a long-term goal of reaching 4,000 outlets. As it enters new markets, the company is intensely focused on driving awareness and during its earnings call in February, CEO Christine Barone said advertising presents that opportunity.
One of the priorities at BJ’s is also to raise brand awareness. During its investor day presentation in November, the company disclosed that it has about 12% unaided awareness versus 20-40% from its peers. CEO Greg Levin said the company, which recently returned to TV for the first time in several years, will increase its linear and connected TV spending in some markets.
“We’re going to have two flights – one in Q2 and one in the second half. Our flights will start more in April, and we’ve added in another market as well that will be more on … streaming services versus linear TV,” Levin said.
Domino’s is certainly no lightweight or newcomer when it comes to advertising, but the company has been pushing its new loyalty program on TV and also recently advertised its Pan Pizza for the first time since 2014.
“We call our Pan Pizza our best kept secret. It’s time to change that,” CEO Russel Weiner said during the company’s earnings call in February.
Meanwhile, Bloomin’ Brands CEO David Deno said his company spent more on marketing and advertising in 2023 to improve its share of voice in a competitive category and plans to increase spending yet again this year by about $20 million.
“This investment will improve our share of voice and build traffic, utilizing a blend of television and high return digital tactics,” Deno said.
Cracker Barrel also plans to increase its advertising spend this year after pulling back last year. New CEO Julie Masino told analysts that pullback likely hurt the company’s topline.
“We’re really focused on driving relevancy, driving the business. We started evaluating advertising spending, tactics, messaging, channels, all those things,” she said. Cracker Barrel will “surround national buys with local buys” to drive traffic and relevancy, she added.
Speaking of national buys, Papa Johns is moving into a 20% increase in media spend, including a new national advertising campaign the company believes will generate strong sales momentum. Outgoing CEO Rob Lynch recently told analysts there is more consistency on returns for national advertising versus local advertising, which is why the company has shifted its approach as part of its Back to Better 2.0 strategy. That strategy includes an increase in franchisees’ national marketing fund contribution from 5% to 6% while they will no longer have to spend 3% of revenues on local marketing.
“When we look at the return on advertising spend, we’re seeing over a 25% improvement at the national level versus the local level,” he said. “If we were comparing apples-to-apples, we’re reducing the total advertising investment by about 25% and you’re getting a 25% pickup on that.”
Red Robin intentionally kept its marketing powder dry last year while it focused on improving its products and operations as part of CEO G.J. Hart’s five-point “North Star” plan. Now that many of those pieces have fallen into place, however, it’s full speed ahead. The company will test TV in six of its core markets, targeting specific channels and times of day.
“We think going on TV does get the word out broadly,” CFO Todd Wilson told analysts last month. “So, part of our approach is to go to those six markets, measure performance, and that will then inform how we approach the second half of the year. But it’s really pushing to get the word out and get people to come back in.”
Finally, Portillo’s CEO Michael Osanloo said his company’s marketing strategy has been traffic driving and has worked really well in specific markets like Chicago. That ad campaign contributed to a $3.8 million year-over-year increase in G&A expenses. Despite a proven return, however, he also painted a bit of a cautious picture with this increased spend toward the end of this year, which makes us wonder if we’ll see any major strategy or budgeting shifts again.
“Trying to advertise during an election cycle is a really tough spend,” Osanloo said. “So, we’re probably not advertising the back half of this year anywhere in the country; we would get shouted out by local politicians.”
Contact Alicia Kelso at [email protected]
