As we ended the fourth quarter of 2019, restaurant growth was slowing. Unemployment had risen, consumer sentiment had fallen and household debt was at a record high. January and February continued with the slow traffic-growth trend of just one per cent — the lowest in five years. When there is economic uncertainly, one of the first things people cut back on is restaurant meals and, with many economists suggesting Canada will face a recession coming out of this isolation period, restaurants will have to work harder than ever to win back their customers.
Here are some areas for restaurant operators to focus on based on market trends from before the COVID-19 crisis.
Let’s Make a Deal
With a high likelihood of an economic recession as we come out of the isolation period, expect consumers to be looking for deals. It will be important for the industry to avoid the pitfalls of deep discounting and instead come up with ‘deals’ that present the consumer with good value and not necessarily just a good price.
Dealing is typically higher among consumers aged 18 to 34 and those with lower incomes. The overall deal rate has risen by five points over the last five years to just under 27 per cent of commercial visits, with research showing combos and coupons are the most popular forms of dealing.
Digital orders (placed online or via mobile devices) generate the highest dealing rates, approaching 50 per cent of all orders that include a deal. Curiously, family visits include fewer deals than adult-only visits so, moving forward, more ‘family-meal deal’ types of offers could be an area where operators can provide something unique.
The average check on deal visits is higher than on non-deal visits and is rising at a similar rate. This supports the earlier statement that a deal does not necessarily mean a low price, just good value. In other words, it’s possible to get people to spend more to get a good deal — for example, offering something for free (delivery, dessert, appetizer) if a minimum threshold is met.
Delivering the Goods
The obvious behaviour that comes to the forefront during this time is increased delivery use. The question on everybody’s mind is how much of this behaviour will carry over post-COVID-19. Will the operators who are new to delivery realize its value and continue to support it? Will consumers who are new to delivery continue to order or will they go back to their previous ways?
Delivery has been one of the fastest-growing segments of the market for several years and represents 300-million visits, or four per cent of total visits. Over the past year, delivery was up 19 per cent and represented about half of all market-visit growth.
According to research company CivicScience, the biggest growth in delivery in the U.S. market at this time is displaced office workers working from home. CivicScience also reports that while people are ordering more delivery, they’re also tipping their drivers more, which is good news for frontline workers.
Technology is the engine that drives all of the above trends — from the delivery boom to the rise in dealing. But technology also facilitates additional trends, such as touchless payment, which currently accounts for less than two per cent of all transactions. This form of payment is expected to climb as consumers continue to exercise caution around touching surfaces in public places or handling money.
Pre-ordering has also risen in popularity, even before the COVID-19 crisis began. In fact, digital orders currently account for six per cent of all restaurant dollars and have been climbing faster than any other segment of the market for about three years.
Customer interaction through social media allows restaurants to communicate with their customers, even if they are closed or on reduced service through this crisis.
Location, location, location
According to the NPD Group ReCount census of restaurant locations, there are approximately 65,000 commercial restaurants in Canada. And, while independent restaurant counts peaked in 2008 — followed by declines every year since — chains continue to grow, although the overall number of restaurants is down about 7,000, or just under 10 per cent in about 10 years. Restaurants Canada suggests another 10 per cent closed at the start of this crisis and many more are on the verge of shuttering.
Amid these closures, independents have actually grown share of visits in recent years and those remaining open are stronger than ever as consumers gravitate towards the unique and authentic dining experiences offered by independent operators. In fact, a recent study completed in the U.S. by CivicScience indicates consumers are looking for ways to support their local businesses during, and after, this crisis. While this is a difficult time for independent restaurants, those able to survive the hardship should come out stronger on the other side.
A New Outlook
Now, more than ever, restaurateurs need to realize going out to a restaurant is not just about the food. If it were, restaurants wouldn’t be suffering as much as they are right now because we still need to eat. Instead, eating out is about the experience. It’s all about spending time with friends and family, enjoying a night out and soaking in the ambiance. The functional side of eating out — the food — is further down on the list. In fact, a recent study completed by The NPD Group in the EU confirms going to a restaurant is one of the first things that many plan to do as soon as they’re able.
During this crisis, it’s important for operators to focus on their core. Understand your customer, why they visit and how your restaurant is different and unique. Continue to do what you do — only better than ever. But don’t be afraid to try new things to stay relevant and current, as long as they remain aligned with your core offerings.
Written by Vince Sgabellone