The Roaring Twenties has a lot of similarities to what has been going on in recent times. In the early 1920's, it was a time of hope and prosperity. With WWI over, the economy was booming, jazz was all the rage, women's rights was a critical topic, and people were out spending lots of money.
On The Rise
Discounting in restaurants is on the rise, as measured by Mirus Index, and is about 30% higher than a year ago. Examining this trend, it looks like discounting started climbing in 2015 but was up and down until mid-2016. Since then the trend has been a steady increase in discounting, except for the traditional holiday spike in November and December.
The strategy of discounting is often debated among industry experts with some saying it is always a bad idea while others taking a more nuanced position that says discounting can be useful to achieve goals in specific situations.
We had noticed that Average Check has been increasing as well as Discounts. If you overlay the trend for Average Check against the Discount trend, you see that while discounts have gone up about 50% since the start of 2017, so has the Average Check, about 25%. Could the increase in discounts be related to the strategy of increasing prices?
The start of a new year means many people are focusing on getting in better shape. You may even be offering some healthier choices on your menu to meet the consumer mindset. Why do so many people vow to eat better in the new year? No doubt losing weight gives you more energy and confidence. As a restaurant executive getting your restaurant data into better shape can have the same effects on your business. Learn why you should resolve to whip your data into shape and how to successfully do it.
What do you think will be the most popular restaurant business trends for 2019? I recently had the privilege to sit down with FSR Magazine to briefly discuss this topic.
We discuss four prevailing predictions:
According to a recent article, the top 10 oldest restaurants in America are:
- McGillin's OldeLouis' Lunch (1895) New Haven, Conn.
- Buckhorn Exchange (1893) Denver
- McGillin’s Olde Ale House (1860) Philadelphia
- Breitbach’s Country Dining (1852) Balltown, Iowa
- Tadich Grill (1849) San Francisco
- Antione’s Restaurant (1840) New Orleans
- Union Oyster House (1826) Boston
- Griswold Inn (1776) Essex, Conn.
- Fraunces Tavern (1762) New York City
- White Horse Tavern (1673) Newport, R.I.
To me, it is fascinating that these establishments are still going!
Most likely, today's restaurants evolved out of the Tavern where travelers could get a bed and a meal on their journey. I am sure that in the 18th and early 19th centuries most people would not think of paying someone to cook a meal for them. It required discretionary income and the 'middle class' would not evolve until later during the industrial revolution.
Is Food Delievery Right For Your Restaurant Business?
No topic is hotter in the restaurant space than delivery today. An amazing shift is taking place where customers want their favorite food, and not just pizza, delivered wherever and whenever. For me, delivery became a new reality and not just a fad when I saw McDonald's advertising during the recent World Cup matches that they would now be delivering food. This was no longer a test in a few US markets but now ready for prime time by a heavy hitter in the QSR realm.
There are people projecting that delivery will do to restaurants what Amazon did to retail. I think it is too early to tell for sure, and caution is wise. Nonetheless, I am seeing many restaurant companies testing delivery in select markets and many more are discussing it. However, before you make the decision to plunge into this new channel, there are a few questions you should ask yourself.
Whose Customer Is It?
How are your customers going to request a delivery? Will you hire your own drivers and create your own e-commerce website, or will you use a third-party delivery service? The first option will take more time and money before you can start comparing to a 3rd party option. But, which alternative do your customers prefer?
Examples of restaurants who have built their own platforms include Panera and Domino's, and both efforts are considered successful, albeit expensive. It's simple, the customer goes to the brand website and orders. An upside to this approach is your customer sees only what you want them to see and their experience is directly connected to your brand. Another plus for this option is the ability to add other programs and services beyond ordering, such as loyalty and payment.
The ordering experience at a fast-casual restaurant can be overwhelming for some guests. Take a second and imagine this scenario with me: You walk into a fast-casual restaurant with a friend. Let's say this is one of those new pizza concepts where you go through the line picking toppings, making your pizza similar to a Subway line.
It's lunchtime, the place is fairly busy. You have a handful of customers behind you as you stare at the menu board above. But it's ok, they are also staring, trying to decide how they should begin their journey. For some, the ordering experience can even cause anxiety. To make the process go smoothly and put guests at ease there are two things fast-casual operators can do. Focusing on these two areas will help fast casual operations increase profits.
Much has been written over the past two years about the dismal pattern of same store sales and traffic for restaurants. Traffic has been negative throughout this period, and sales have rarely been positive, and then only when restaurants increase prices.
The official numbers for July are now out and it was a bad month for restaurants sales, down by -4.7% according to TD2NK. I thought it would be good to take a mid-month check on the Mirus Index to see if August could be the month to turn things around. Based on the first 14 days of the month, the sales slump continues in August.
Same Store Sales in Mirus Index were positive in both Q1 and Q2 of 2017, and you can see the trail end of that in the chart above. The positive gains were declining in June, and July 4th was a great weekend, but by the middle of July the month to date numbers were negative and they haven't budged much.
All of this is focused on sales, but what about traffic? Q3 will be the seventh quarter in a row of negative customer traffic into restaurants. TD2NK measures that traffic fell -8.7% from July 2015 to July 2017. The Mirus Index has traffic down -2.7% at the mid-way point of Q3 2017. You can manipulate same store sales, but you can't manipulate customer traffic.
We will keep an eye on things, and keep you informed. If you would like to learn more about how you can get the Mirus Index every day, click on the button below.
Restaurant sales and customer traffic have been in decline for months, and July didn't help. While the results were not the worst in recent history, July extends several streaks that started at the start of 2016. Same store sales for July fell (1.2%) on (2.6%) less traffic. July was the first month this year that recorded negative growth in both numbers.