The consensus from last year’s ICR Conference in Orlando, Fla., was that 2024 was going to be much more normal than everything the industry had gone through the previous three years. Optimism was relatively easy to come by, driven by a belief that we were largely through most COVID-induced challenges, like supply chain issues, labor shortages, and generationally high inflation.
As we now know, however, 2024 turned out to be tougher than many expected thanks in large part to sustained traffic declines across the board. Consumers had reached their discretionary spending limit, and much of the restaurant industry fell victim.
Perhaps because of that, this year’s ICR Conference, which concluded on Wednesday in Orlando, was a bit more muted. There was optimism, to be sure, but it was more of a conservative, or cautious, optimism.
“Companies are being pretty quiet. To me that indicates there is still a lot of uncertainty about some things and they’re not ready to commit to full guidance,” said Placer.ai head of analytical research RJ Hottovy.
John Gordon, founding principal of Pacific Management Consulting Group, added that while there were signs of better trends, including improving sales, nothing was too “expressive.”
“We did have brands that pre-released positive trends, which is good. But none were huge numbers,” he said. “But during some ICR Conferences we’ve had no positives. I’m hoping the uplift from November and December will get most brands into OK shape and hopefully the industry traffic is flat, so that small pricing and mix will cover inflation.”
William Blair analyst Sharon Zackfia noted that one positive from the conference was that companies seemed less nervous.
“It feels more stable for them. Last year, there were still thoughts and worries about a recession. I haven’t heard the ‘r’ word at this conference,” she said.
“Stability” – barring any more black swan events, of course – could indeed vie for the “most used word of the conference” title based on restaurant companies’ presentations and interviews. Amid that stability are glimpses of momentum. As Gordon noted, several chains reported preliminary positive – and above expectations – fourth quarter sales results at the conference, and investors responded favorably to progress and plans put into place from chains like Portillo’s, Shake Shack, Denny’s, Red Robin, Potbelly, Cracker Barrel, El Pollo Loco, and others.
Here are some of the biggest themes driving that progress.
Tech investments
Brands continue to prioritize investments in technology that maximize efficiency. Portillo’s, for example, is testing camera vision at the drive-thru with the goal of reducing wait times. The company is also bullish on kiosks, as is El Pollo Loco.
Several brands are leaning heavily into labor deployment tools to maximize staffing during peak times, while others discussed their successful introduction of kitchen display systems and pay-at-the-table solutions to help with table turns.
“Technology continues to be a bigger part of the conversation and we’re seeing more willingness to implement things like kiosks or back of house (solutions) or labor. Not everyone can afford this technology but it’s an advantage and it’s become magnified because of inflation and labor costs,” Zackfia said.
Efficiency and simplicity
There was also plenty of discussion about simplicity, or more specifically, “getting back to the basics.” Portillo’s is testing a new menu with 15% less SKUs to keep things simple and bolster throughput, for instance. Papa Johns CEO Todd Penegor said that the company is now focusing on its core menu items, as well as little things like improving the cheese and dough sourcing and recipes. Dave & Buster’s is slowing down the rollout of games to make sure they are tested and perfected before increasing operational complexities.
For Dutch Bros, which has outperformed much of the industry in the past year-plus, simplicity is a core tenet and will remain so.
“I think for us … staying super focused on just a couple of things is what we're focused on,” said CEO Christine Barone.
Value adjustments
The current value environment isn’t expected to wane anytime soon, and plenty of companies have made adjustments to their strategies to try and stand out from the growing crowd. Denny’s CEO Kelli Valade said her company got smarter with its $2, $4, $6, $8 Value Menu, which was launched in August and has helped the chain generate positive sales.
“It resonates with guests, and we were able to re-engineer it so it was profitable for franchisees,” she said. “We brought it back in a smart way.”
Potbelly found success with its $7.99 sandwich combo, introduced in August and helping the company generate positive sales. Red Robin gained a significant amount of sales traction from its Monster Monday and $10 Cheeseburger Tuesday promotions, as well as its 30 bottomless sides promotion.
Meanwhile, both Papa Johns and Shake Shack admitted the need for improvement with their value propositions.
“We will mitigate inflation to maintain our margins, but we want to continue to improve our values, reception in the marketplace, and the things that are going to help our operations and speed, like combo meals,” Shake Shack CEO Rob Lynch said. “All of these things have intentionality around improving the value perception while continuing to enhance our margins.”
Shrinking the box
Another key driver for several restaurant brands is the work to shrink the size of their restaurants, effectively cutting their build-out costs and supporting a new normal in which the off-premises business remains material. Papa Johns reduced its build cost to $500,000 from $630,000 per unit last year, for example. El Pollo Loco and Portillo’s are also doing work to shrink their boxes.
Portillo’s chief financial officer Michelle Hook said the company’s new prototype cuts at least $1 million from buildout costs, while the next iteration, expected to launch in 2026, is expected to cut another $300,000 to $500,000.
“And it creates more opportunities to get into more developments,” she added.
A deeper connection with the consumer
Finally, as restaurant consumers continue to be bombarded by an awful lot of value-related noise right now, more investment dollars are being earmarked to create more personalized connections with them. Portillo’s will launch its new loyalty program by the end of the first quarter, which will exist in mobile wallets versus as an app. During the company’s presentation, chief information officer Keith Correia said the company can send messages through the program and that messaging will become more personalized as it ramps up.
“We will use data over time to drive the timing and relevance of these offers so they become more material to our guests and incentivize them to visit. That’s where we get the incremental transactions and the value of the program,” Correia said.
Red Robin and Potbelly have also found success reaching customers in a more personalized way with their new loyalty programs, leading to increased frequency and higher check sizes.
Denny’s launched a loyalty program in 2023 and is now enhancing it to create more one-on-one relationships with guests, Valade said.
“We have a decent loyalty program today with 5 million customers in our database who are more frequent diners. When we launch the new program, we will get into more personalized journeys with them,” she said. “We are ready to pull that lever and see impact in 2025.”
In addition to getting personal, brands are also honing their marketing messages to convey authenticity. Several brands are doing this by creating social media moments. PF Chang’s executives spoke about infusing “moments of fun” into the dining experience, for example, to create authentic opportunities for social media-worthy snapshots.
Part of Cracker Barrel’s comeback story (which is still in early days) is about authenticity as well, and staying true to its down-home, country-centric branding. For example, recently Gen Z began making Cracker Barrel men’s sweatshirts trend on social media, calling them “grandma sweatshirts,” and the company was all too happy to lean in.
“All of those social mentions, those were all organic, and those were all within the last couple of months,” Cracker Barrel chief marketing officer Sarah Moore told Nation’s Restaurant News. “If there is one thing that I find so beautiful about this brand, is how we show up in culture organically. I think what we're doing different now as compared to before, is we're just paying attention, we’re seeing that, and we’re fueling it.”
Contact Alicia Kelso at [email protected]
Contact Joanna Fantozzi at [email protected]
