Canada’s Competitive Market Is Making It Harder for Restaurants to Thrive

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It’s never been easy to thrive in the restaurant business, but today’s über-competitive business-operating environment in Canada makes it incredibly challenging.

The Challenges

“Today’s foodservice market is more competitive than it ever has been,” confirms Geoff Wilson, president at Toronto-based FsStrategy Inc. and a foodservice industry consultant since the 1980s. “There are a number of factors causing this. Increased consolidation is one of them,” says Wilson, citing recent headline-grabbing acquisitions, such as Vaughan, Ont.-based Cara Operations’ acquisition of former Mississauga, Ont.-based Prime Restaurants, and Toronto-based Fairfax Financial Holdings Ltd.’s acquisitions of Cara and the Richmond, B.C.-based Keg Steakhouse and Bar. “We’re getting organizations with better competitive strength in terms of buying power and influence with landlords.”

Another factor is consumer traffic. NPD Group statistics show customer traffic only increased by approximately one per cent in 2014. Furthermore, NPD stats last year show 45 per cent of the Canadian population visited a restaurant every day, down from 46.3 per cent one year earlier. “The restaurants are trying to grab as much market share as they can, but [since] the traffic levels aren’t coming back, things [are getting] more competitive,” says Wilson. Toronto-based Restaurants Canada data shows that there were 41,757 full-service restaurants in 2014, up from 40,223 in 2013; and there were 35,915 quick-service units in 2014, up just slightly from 35,329 in 2013. With all those restaurants looking to improve revenues, but no significant increase in traffic, it’s become a truly intense battle for foodservice dollars.

Wilson says this is especially true in casual-dining. Players in the family casual segment are facing heavy competition, not only from other family casual restaurants but from QSRs and fast-casual chains as well. “Many quick-service brands have really improved their food quality and experience, and there are countless new brands entering the marketplace targeting the same guests,” confirms Alan Howie, EVP of Operations and Development with Mississauga, Ont.-based Boston Pizza International.
The same goes for the upscale/premium end of the casual market. “Is it getting more competitive? The answer is yes,” says Bruce Fox, COO and VP, Development for Vancouver-based Browns Socialhouse. The West Coast in particular is buzzing with upscale-casual action, says Fox, with Vancouver players such as Browns, Moxie’s Grill Bar,  Cactus Club and the like showing up on every corner.

West Coast dwellers clearly love upscale-casual chains, but real estate is becoming scarce. “There’s big demand for locations, but there isn’t a lot of good dirt left,” explains Wilson. “So the rents are going up, and operators are questioning whether their businesses can survive. Meanwhile, the competition for space is intensifying because the better the space, the more likely you’re going to achieve the revenue you need to grow.”

Competition is a factor across the industry. When asked about competition in his market segment, Jay Gould, president and CEO of New York Fries and South St. Burger Co., simply laughs. “You mean there are other people in the premium burger-and-fry business?” he asks facetiously. It’s no secret premium burgers have exploded in the past few years. Still, as competition increases, is there hope for the hard-working foodservice operator? Absolutely, says Gould: “There’s room at the top. You just have to make yourself stand out.”

The Opportunities
Increased competition means restaurateurs need to step up their game. According to FsStrategy’s Wilson, successful operators use many of the following strategies: introducing buzz-worthy dishes to attract diners; organizing special events to keep them coming back (“This Sunday we’ll have face-painting for the kids!”); constantly using social media as a marketing and advertising tool; being sticklers for consistent quality; and introducing value pricing and limited-time offers to foster excitement.

“You’ve got to create excitement and buzz,” says Wilson. “Nobody wants to sit in an empty restaurant. They want a place that feels like a great gathering place.” To that end, Browns Socialhouse’s small footprint seems to hit the mark. A typical Browns’ location might have 125 to 135 seats, says Fox. Many of its competitors, he says, often have up to 300 seats — so even when there are 150 people in a restaurant that size, it’s only half full. “People want to go to a place that looks full and busy,” says Fox, explaining that a lively, bustling atmosphere is part of the Browns’ character essence, and a smaller footprint helps foster that vibe.

The smaller footprint also offers an advantage for growth. At 3,000 to 4,000 sq. ft. per unit, Browns can find real estate in smaller towns where their larger-sized competitors often can’t or won’t go. This is a deliberate strategy for Browns, which has grown from about a dozen stores three years ago to 36 units (and growing) in five provinces today, with great success in smaller markets such as Dawson Creek, B.C., Nanaimo, B.C. and Moose Jaw, Sask. “There’s pent-up demand for sophisticated upscale-casual in those smaller markets,” says Fox. By targeting these types of markets, Browns is creating the opportunity to really stand out to local residents. “They can get a quality glass of wine or a nice draft beer with interesting food, and it’s not same old, same old,” says Fox. “In downtown Toronto or Vancouver, that may be no big deal, but in Dawson Creek, that’s huge.”

In the family/casual market, Boston Pizza employs numerous strategies to stay on top of the competition. “Going out to a restaurant should provide guests with an experience they can’t get at home,” says the chain’s Howie. “We offer a lively sports bar where the biggest games and sporting events are always on the big HD TVs. We have a best-in-class kids’ program that includes an interactive kids’ pack and smartphone app to keep kids entertained and engaged with the brand. And, finally, we’ve introduced amazing menu items like the Pizzaburger, Pizza Taco and flat-bread Pizzatizers to keep guests coming back.”

According to Gould, of New York Fries and South St. Burger, many of today’s selective consumers also look for restaurants that foster social advocacy. “Our customers are well-informed about the issues, and they want to see us trying to be environmentally responsible,” says Gould. To that end, South St. Burger opened its first LEED-certified (Leadership in Energy and Environmental Design) shop in Toronto a couple of years ago. While Gould says the process was extremely expensive, customers were impressed, and the chain is taking what was learned from the LEED process to eventually make all its stores more environmentally friendly, potentially helping its bottom line.

Finally, consistency is more important than ever. You have to deliver every single time. “I’ve been in this business for a long time, and consistency is still a hallmark. People now want better service, they want better quality food, and they will pay an extra dollar or two for it,” says Gould. “But if they’re paying an extra dollar or two and we don’t deliver, that’s a lost customer.”

Issue 48, Number 1

Written By: Carol Neshevich

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