Leaders of the Pack

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This year’sTop 100 restaurants appealed to customers’ thirst for quality and convenience at a reasonable price

It’s tempting to look at the top restaurant companies to point to which sectors are hot and which are not. However, such conclusions are not so black and white, as there are winners and losers in each segment and price point.

What success boils down to is pleasing the consumer on their own terms. There are many trends driving growth and success at the largest restaurant companies, but these days most centre around an enhanced value consciousness, greater demands on time, a desire for flavour and a growing demand for healthful options.

Such trends were optimized by the companies who make up this year’s Top 100 report, which represents $31.2 billion in sales, a 3.9percent increase over last year, and 51 per cent of the $61billion industry. Tim Hortons ($5.6 billion), McDonald’s Restaurants of Canada ($3.3 billion) and Compass Group Canada ($1.4 billion) received top billing on the report, which shows a slow recovery following the recession.

Looking for a Bargain

Even though the recession is officially over, consumer confidence recovery has stalled. Employment is still a major challenge, and disposable personal income is impacting foodservice spending.

According to a consumer study, fielded in December for the Technomic Canadian Foodservice Planning Program, 61 per cent of consumers said the recession impacted their household. And, regardless of income level, a high percentage of respondents are “getting by” or “struggling.” The majority don’t feel they have money available for “extras” such as foodservice.

Consumers are spending less at restaurants by eating out less, skipping extras, using coupons, dining at less expensive restaurants and ordering less expensive items. The good news is, research indicates that once confidence in the economy improves, restaurants will be among the first to benefit from increased spending. In the meantime, operators continue to drive traffic by offering deals and discounts.

And, they’re doing it with promotions that include combo meals at both quick-service concepts and fullservice eateries such as Wendy’s two for $6.49 deal, which invites customers to pair any premium halfsize salad with one of six menu items; and Boston Pizza’s Pasta Tuesday promotion, where dine-in customers create their own pasta dish for $6.95 or select gourmet pasta for $9.95. The latter is an instance of another smart trend: targeting specials to certain days of the week to drive business at slower times.

Operators are offering smaller portions, which come with lower prices but also suit consumer demands regarding health. And mini appetizers and desserts, such as Dairy Queen’s launch of mini Blizzards last summer, give customers the full-meal experience at a reasonable price point.

Use of loyalty clubs and social media marketing efforts succeed in offering the perception of value while building a relationship with the consumer beyond price. Of course, some of those efforts speak directly to price: witness the growth of electronic coupon services such as Groupon and brands that trade free food for Facebook “likes.” Savvy companies use those methods to attract new customers but have a plan to keep them coming back after their first visit.

It’s worth noting cost-consciousness is one reason for the fast-casual segment’s growth. Customers are responding well to quality ingredients in an upscale atmosphere that offers quick service and affordability. Although fast-casual chains account for a small share of the Top 100 companies, as a group, fast-casual outpaces the industry’s growth in sales and units.

Similarly, there’s been a casualization of more upscale concepts. Steakhouses, for instance, offer bar menus with smaller portions and price tags. Even some fine-dining restaurants are offering more casual versions of their high-end fare at lunch and via prix-fixe menus.

Consumers are Timecrunched

Consumers are busy. They want the quality and service they are used to getting at restaurants, but they want it fast, and they want it on their own timeline.

For example, consumers are less likely to eat according to a three-square-meals schedule. They nosh, skip meals, eat breakfast for dinner and vice versa. This has driven Wendy’s, McDonald’s and others to keep drive-thrus open all night and Subway to open for breakfast, when it sells just as many subs as breakfast sandwiches. The same consumer trend is the reason chains, from Burger King to Alice Fazooli’s, feature snacks, appetizer samplers and small plates. Offering menus beyond traditional dayparts has the added benefit of creating revenue at off-peak times.

The need for speed is another driver of fast-casual chains’ growth. The ability to enjoy a casual-dining-quality meal without having to wait for a server and then wait for the check — at a reasonable price point — is appealing to time-hungry diners. Most of these concepts have the flexibility to offer takeout as well.

The demand for takeout is being met by operators of all stripes, from quick-serves making drive-thru systems faster (such as McDonald’s double lanes) to casual-dining restaurants dedicating more space for togo meals and using runners so customers don’t have to get out of their cars.

Some operators are adjusting service so they can capture the on-the-go customer by providing a dine-in option. For example, Montana’s Cookhouse introduced a 15Minute Express Lunch menu, where food is served within 15 minutes or it’s free.

The growing need for convenience ties in with the use of technology to make ordering/payment faster and easier. Tim Hortons recently introduced a system that accepts debit-card payments at most Canadian locations. Text-message ordering and online-ordering systems come into play as well. Pizza Pizza, for instance, launched an app for iPhone, iPod touch and iPad users that allows them to view full menu and special offers; place and pay for delivery and pickup orders; and create a profile to save their favourite orders and locations.

Chains’ expansion strategies also tie in to consumers’ need for convenience and flexibility. The trend toward smaller restaurant footprints, such as A&W’s new Urban Concept prototype, enables operators to be closer to customers in tight downtown and other high-traffic areas. Opening in non-traditional locations such as airports, arenas and grocery stores puts brands where consumers are already gathered — Prime’s Fionn MacCool’s, for example, opened at Toronto’s Pearson International Airport last winter, and Subway launched a site atop the construction site of 1 World Trade Center last summer. And, to some extent, colocating brands — like at one MTY Thai Express and Country Style combo site in Toronto — saves customers from making two stops.

Flavour Innovations

Whenever consumers are polled about the qualities they demand in a foodservice experience, taste and flavour always top the list. With the rise of the celebrity chef, an ever-more-diverse population and broader food sophistication, people are eager to try new flavours. In addition, great flavour innovation drives craveability of items, leading to repeat customer traffic without having to offer a lower price.

Technomic research has found consumers across all age groups report they like trying new flavours but don’t necessarily seek them out. Those more likely to seek them out are consumers aged 18 to 24 and those aged 35 to 44. Successful restaurant owners integrate new flavour and cuisine trends into their menus, creating a comfortable place for customers to try new tastes.

Many chains are finding success by offering comfort food with a twist. Witness the better-burger trend, which features the standard sandwich with premium, unique and/or atypical proteins, cheeses, toppings and sides. Creative macaroni-and-cheese dishes, poutine with new sauces, alcohol-spiked milkshakes and new iterations of oatmeal are other examples of this trend.

Limited-time offers, such as KFC’s controversial Double Down sandwich, give operators the chance to provide new flavours as well as test the waters for potential core menu items. Small plates, snacks and appetizers serve a similar purpose. Consumers don’t have to risk much — say the cost and enjoyment of their entrée — to try something new or prepared in an unusual way.

And, of course, the desire to try new things has driven growth in ethnic dishes and concepts. Sushi is established in Canada, but now many consumers are curious about what other Asian cuisines have to offer. This increased consumer attention will lead to new authentic Asian concepts and new Asian-inspired dishes at existing restaurants. The Mexican segment, presently underrepresented in Canada, is also forecast to proliferate.

What “Betther for You” Means

Technomic has found nearly half of today’s restaurant-goers want healthier menu items, and about a quarter actively consider nutrition when dining out. For operators, this means one in two potential customers would at least like a healthier meal as an option, even if they’re not always going to order it (or ever order it, for that matter).

Most consumers no longer think they need to sacrifice taste to make healthy choices at restaurants. However, a current trend at restaurant chains is balancing “healthy” with “indulgent,” sometimes within the same product (such as “skinny” versions of classic cocktails or low-fat tart frozen yogurt smothered with fresh seasonal fruit) or more often side by side on the menu, such as the new Fresh Ontario Turkey Burger, which sits alongside the half-pound, 100-per-cent Angus beef hamburger at Hero Certified Burgers.

Consumers employ a wide variety of strategies for eating healthy at restaurants such as skipping extras like desserts and appetizers. That’s when savvy operators should offer smaller portions for smaller appetites and budgets.

Today’s diners look for healthy menu options to feel good, as opposed to adhering to a strict diet. They are more attracted to descriptors such as “natural” and “fresh” than phrases such as “low in fat” or “diet.”

Operators are responding by touting such language. As well, they’re sneaking healthier fare onto the menu by cooking with trans-fat-free oils or using seasoning blends rather than sodium. Boston Pizza, for example, reduced sodium in 75 per cent of its menu items last year.

Health-conscious consumers want operators to make it easy for them to distinguish healthy options. Whether they post nutrition information on their menu or not, savvy operators have better-for-you-options available and have detailed nutrition and ingredient information readily available for customers. Casey’s, for example, introduced a QR code on its menu so diners would have direct access to nutritional and allergen information.

It’s worth noting a large percentage of consumers believe “organic,” “seasonal,” “local” and even “gluten-free” are better for you. Several operators — even large chains — use local ingredients on their menus and are able to respond to consumer demand for local items, while providing fresh, high-quality fare and supporting their local economies. They also use the heritage or pedigree of the food in marketing. Denver-based Chipotle Mexican Grill, which is growing its presence in Canada, has long promoted its use of naturally raised pork and chicken.

Consumer Connection

Consumers are increasingly concerned about how the companies they do business with are involved in their community, respectful of their employees and active in protecting the environment. Restaurant operators are responding by purchasing locally where they can, demanding sustainable ingredients, using greener products and practices and getting more involved in the markets in which they operate.

Many successful and forward-thinking chains examine ways to enhance the emotional connection with their guests, an increasingly important strategy to build and maintain loyalty and frequency of visits. Give the customers what they want, and they’ll be back.

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