Read More About
Recommended For You
Meanwhile, as table-service restaurants were reeling, quick-serve and fast-casual restaurants gained some competitive ground, partly because low price is a reasonable part of their value.
The barbell menu strategy took hold at quick serves as they doted on their $1 menus while introducing premium-priced products on the other end. “The $1 menu is a way to make sure people are coming in, and the premium product is there to attract those trading down [from table service] but don’t want to lose too much in quality,” Giandelone says. Burger King, McDonald’s, and Wendy’s have each worked both ends of this equation.
That strategy, as a way to protect check averages, is here to stay and is likely to grow, Giandelone says.
In fact, while casual dining was focused on keeping up guest traffic, quick serves and fast casuals were quietly improving quality. Think of how McDonald’s is testing chicken wraps with aioli sauce, Giandelone says. “How many casual-dining restaurants have aioli sauce? It started in fine dining, and now McDonald’s is taking the lead, not casual dining. Casual needs to look more at what’s happening in fine dining and see what they can do to raise the value proposition to quality.”
Fast-casual restaurants are finding their place in the spotlight in the area of fresh, healthful options, Morris says, citing Chipotle and Panera Bread.
Menu refreshment was part of what helped Panera Bread through the recession, says executive chairman Ron Shaich.
The company went into the recession deciding not to deploy any different strategy than what it had done for the past two decades, which is to invest in the quality of the food, marketing, and its employees, he says.
Shaich owes the freedom to not reduce prices to the sound financial condition the company went into the recession with. “Many of our competitors didn’t have that, and they had pressure from banks and their boards to pull costs out of their P&Ls,” he says. “The only way to do that was to rip labor out of the P&L, and who pays for that? The guests, with longer wait lines, people serving who are more frazzled, and the table next to you is dirty. It taxes guests.”
During the recession, Panera Bread, which had only one fiscal quarter with slightly negative sales results during the past few years, rolled out a range of new salads, sandwiches, and soups.
Dinner Sales Growth from 2006-2011
With a reduction in discretionary spending throughout the recession, full-service restaurants suffered the heaviest sales declines as consumers traded down to limited-service restaurants.
Source: Packaged Facts, Dinner Trends in U.S. Foodservice, November 2010 Report
Schlotzsky’s, another fast-casual concept, took a daring approach during the recession. “When everyone else zigged, we zagged,” says company president Kelly Roddy. He saw how other operators cut costs by cutting portion sizes and lowering food quality. Knowing that customers trading down from casual dining were still discriminating about where to go, the chain decided to spend some money to rebrand itself.
“Our goal was not to cut prices, but add value. So we worked on how we could give a better experience. We added table service in the restaurants,” he says.
In doing so, the units are starting to look a little more like casual dining. The new prototype has new packaging, an updated color scheme, cushioned seating, and shares cobranded space with sister company Cinnabon. Existing stores started the makeover in mid-2010 with expected completion by the end of 2011. The company has managed to maintain positive comparable/same-store sales throughout the recession.
“Our average restaurant that has been doing this full-blown has seen a 28 percent sales increase, on average,” Roddy says.
The stores also offer free Internet access. “Customers are coming in in the afternoon for the snack daypart to spend time and have a Cinnabon and coffee and work on their laptop. That’s part of our reimage,” Roddy says.
But quick-serve and fast-casual restaurants shouldn’t get too confident in their problem-solving successes, because consumers are fickle, as the recession has taught. They may be just as happy eating somewhere previously unthought of. Look at food trucks, and don’t forget about the expanding prepared food sections of grocery stores—with seating areas.
The dark horse galloping in to compete is convenience stores that are hungry for profits to replace declining fuel and cigarette sales.
With the expected rise in electric cars, vehicles with better gas mileage, and individuals who got used to cutting back on travel at the peak of the fuel-price crisis of 2008, gas is not the business it once was at c-stores. Plus, “motor fuel has a low margin,” says Jeff Lenard, vice president of communications for the National Association of Convenience Stores (nacs) in Alexandria, Virginia. “You try to find ways to encourage customers to come into the store. Food is the perfect way to do that. Foodservice done well has a robust margin.”
In-store sales at c-stores increased 4.9 percent in 2009 when overall retail sales dropped 7 percent, according to NACS data. Lenard attributes the growth to the increase in fresh-prepared food many stores are offering.
Some c-stores are even beginning to add seating areas. Others are running television commercials, encouraging consumers short on time to stop in and pick up a meal.
But c-stores aren’t top of mind when consumers think of getting something to eat. “No marketing campaign will change that perception. What will change the perception is customer experience,” Lenard says.