State of the Restaurant Industry Discussed at Restaurant CFO Roundtable
Darren Tristano, Executive Vice President at Technomic, Inc.
, discussed the state of the industry at SS&G’s Chicago-area Restaurant CFO Roundtable last month. Topics included the socially conscious consumer, today’s value equation, and the outlook for 2014.
According to Tristano, the phrase “socially responsible” hits a nerve with consumers in deciding which restaurants to visit. Younger consumers in particular perceive value in corporate social responsibility. Brands that scored that highest as being socially responsible include Ben & Jerry’s, Chick-fil-A, and Starbucks to name a few. Although restaurants understand that social responsibility is certainly more important to certain consumers (such as ethnic minorities, Millenials, and Generation Z), some like Panera and Starbucks are focusing on brand building and social responsibility first, with the idea that profitability will subsequently follow. “Being socially responsible is a philosophy, not a marketing pitch, and brands that invest and communicate will build a platform for emotional engagement,” noted Tristano.
In determining today’ value equation, certain factors like price, quality, service, and atmosphere are considered primary drivers, while secondary drivers (such as meal, occasion, consumer mood, or need state) may vary. Above all, food and beverage quality and taste override price in creating good value, even at limited service restaurants. At full-service restaurants, however, service and ambiance are also an important part of the value equation. In addition, deal-seeking has become an important aspect of consumer behavior, as more than half of diners are using more deals now as compared to two years ago. Consumers especially find value with deals that provide immediate half off savings or are “buy one get one” (BOGO) free offers. Descriptors such as fresh and premium can also impact consumer spending, providing potential justification for increased price thresholds. Value has become engrained in today’s consumer expectation and behavior is best defined through quality food first, followed by price and discounting.
In looking toward 2014, “the economy continues to improve, but restaurant growth remains modest with the most operators fighting for a share of the stomach. The industry will continue to yield a mixed bag of winners and losers,” concluded Tristano. “The industry is slowly gaining back lost volume, and restaurants will grow about 3.5 percent nominally in 2014.”