Restaurant operators have spent 2010 in wait-and-see mode. The economy seems to have survived the financial collapse of 2008—survived being used quite literally here, as in, not died—and is even slowly growing. But consumers are still pinching pennies, and staying afloat in the restaurant industry remains about as difficult as ever.
Still, there are reasons for restaurant operators to look forward to the next year. Many expect the economy to continue to slowly improve, and there are a lot of exciting trends that promise to move the industry forward. With the New Year here, we look ahead at some of the trends that will shape the industry in 2011.
1. Mobile Tech
The one rapidly growing technology seemingly everyone in the industry has an eye (or an ear) on is the mobile phone, as it increasingly becomes the portal through which consumers interact with the digital world.
“It is the wallet of tomorrow, the WiFi of tomorrow, the Internet of tomorrow—all contained in [one] device,” says Dennis Lombardi, executive vice president of foodservice strategies for WD Partners.
Gaining access to consumers as they go about their daily lives is a marketing holy grail, especially for restaurants, which can benefit immensely from being able to reach consumers at that crucial moment when craving strikes.
The mobile phone promises to allow restaurants to do exactly that. Furthermore, it can help create a more enjoyable and efficient customer experience by allowing customers to text their orders in ahead of time, easily transfer their personal ordering history from one location to another, and receive discounts on their smartphones at the point of purchase—just to name a few developments.
Besides increasingly using it to get customers through their doors, restaurants in 2011 will begin to broadly integrate mobile technology into their in-store operations, says Peter Wolf, CMO at ParTech, which provides technology solutions to the hospitality industry. From running entire POS systems on a mobile tablet to equipping servers with mobile ordering devices, Wolf says the restaurant industry will continue to find new ways to leverage mobile technology in the year ahead.
On the consumer side, he says mobile applications—ones that allow customers to bypass servers and cashiers and pay their bills directly, for example—will increasingly define the experience of dining out.
“This is an area that in 2011 is just going to continue to explode and grow,” Wolf says.
Cliff Courtney, who founded the Red Light Project, a department at Zimmerman Advertising that studies consumer behavior in the restaurant industry, sees mobile phones as a way for quick serves to make inroads with teenagers. While brands have strong loyalty among children, there is a “precipitous drop” in loyalty among young consumers “as they pass out of being McDonald’s kids and become fickle teenagers,” Courtney says.
But with today’s teens sleeping with their cell phones, quick serves have a more effective line of communication than they’ve ever had before.
“There is one constant for teens and that is the cell phone,” Courtney says. “I expect serious leaps in restaurants’ using mobile applications to try engage teens.”
2. Leveraging Social Media
As mobile technology becomes more robust and pervasive, leveraging social networking sites like Facebook and Twitter will only become more essential for restaurants in 2011. Right now many restaurants are still in the process of building their Web presence, having gotten a late jump on the craze. The next step will be turning “fans” and “followers” into regular paying customers or, better yet, “brand ambassadors.”
Developments in social media marketing may help restaurants achieve this goal. Jay Samit is CEO of SVnetwork, an advertising agency that helps restaurants integrate their brands into popular online games like FarmVille and Mafia Wars. In terms of revolutionizing advertising, the social game is the television of the 21st century, Samit says.
“The era when there were three television networks and you could reach pretty much everybody has been lost as television has fragmented,” Samit says. “We now bring back the ability to reach 200 million people, and get them to actually engage and spend time with their favorite brands.”
As an opt-in proposition, social-games advertising is fundamentally different than the disruptive advertising of traditional media. The really exciting potential of this kind of advertising, Samit says, is the ways it can actively engage consumers. One example is of a recent advertisement in which gamers were asked to rearrange the segments of a Kia Sol commercial. On average, Samit says, people spent several minutes cutting the commercial—an unheard of amount of time for consumers to voluntarily spend time with a brand.
Samit also cited an iTunes campaign where the average person spent three minutes and 24 seconds voluntarily engaging with the advertisement. A Visa campaign drew in people for an average of 90 seconds, while a General Electric campaign averaged 144 seconds of face time with potential customers.
“That is a long time to engage with a brand,” Samit says. “And this is really active attention.”
Since this new kind of advertising is integrated into social networks like Facebook, it is also more common for people to spread the word about a creative advertisement. In fact, Samit says 20–40 percent of people who view one of his company’s social-game ads share the experience with an average of 170 more people.
“The virality of it is something that television never had before,” he says.
SVnetwork has powered successful ad engagements for McDonald’s, Carl’s Jr., and Jack in the Box, and the company is working with several other restaurant chains “on a much grander scale,” Samit says. In 2011, he expects more restaurants to follow suit.
“I think you’re going to see explosive growth in the [quick-serve] segment,” Samit says.
The flip side to the increased consumer access the Internet and mobile technology give restaurants may be consumers’ growing expectation that restaurants be more transparent. In 2010, the passing of health care reform forced many chains to disclose calorie counts on their menus, and New York City requires restaurants to publicly display their sanitation grades. In Los Angeles—like New York, a bellwether for the industry—food trucks are also receiving sanitation grades.
Eric Giandelone, director of food research at Mintel, expects the push for more transparency to continue this year.
“Transparency is the big one,” he says. “Consumers expect more information, and they are getting more information.”
In 2011, Giandelone predicts consumers will continue to demand to know more about the ingredients restaurants are using and how they are getting them. He also expects more restaurants to follow the trend of open kitchens as a sign to customers that they have nothing to hide.
Restaurants need to proactively embrace this new era of openness, not resist it, Giandelone says.
“If you are withholding information, it looks like you’re hiding information,” he says. “If we [as consumers] are being more open, then we expect companies to be more open too.”
Mike Samson, cofounder of crowdSPRING, says many restaurants already use his site to outsource menu and signage design to its community of 77,000 designers. In 2011, he says more restaurants will switch from the traditional process of retaining a single agency to the crowdsourcing model.
“Our biggest barrier to growth is lack of awareness,” Samson says. “People just don’t know that there is an alternative way to go about sourcing creative services.”
5. Nothing Too Over-the-Top
This year has seen its share of outlandish roll outs. In April, KFC came out with the Double Down, a breadless “sandwich” that features melted cheese, bacon, and sauce between two chicken filets. In June, Massachusetts-based Friendly’s introduced its Ultimate Grilled Cheese Burgermelt, a burger patty between two grilled cheese sandwiches. And in July, CKE Restaurants began testing a foot-long cheeseburger in select Carl’s Jr. and Hardee’s locations.
Each of the items garnered a lot of publicity, and even though much of it was negative, the Red Light Project’s Courtney says 2011 will see a continuation of the over-the-top trend. In fact, he expects some restaurants to introduce even more outrageous items this year, even if it means subverting their own brands.
“In a pound of flesh economy where everybody needs to do whatever it takes to get a bigger piece of the pie, [restaurants] will throw the brand right under the bus if they think it will be successful,” Courtney says.
He attributes the recent spate of overindulgent products to the general increase in competition across the quick-service segment due in part to the growing popularity of fast casuals.
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“There’s more competition than ever,” he says. “So there’s pressure to do something, and the value of these sensational, over-the-top products is obvious. Look at the PR value alone. It really gets you on the radar very quickly.”
Even as Courtney sees more Double Down–esque menu items on the horizon, he also says 2011 will see a resurgence of the signature product. It is the Whoppers and Big Macs that can buoy a restaurant in hard times and put it on the path to sustained growth over the long term, he says.
“It can become a halo for your brand,” Courtney says.
But concocting a signature product—“something embedded into the brand” —is far harder than wowing customers with an over-the-top sandwich.
“The shortcut to fame is a signature product,” Courtney says, “but there’s really no shortcut to a signature product.”
6. Nontraditional Locations
It remains exceedingly difficult for restaurants to get a loan. This is one reason Jeff Levine, CEO of Salad Creations, says he opened six “nontrad” locations in 2010, and is planning to open 15–20 more this year.
Giant companies handle foodservice at airports and universities—Salad Creations’ nontrads of choice—and they have easy access to financing, Levine says.
“So from the standpoint of growth, it is one less problem that we as the franchisor have to deal with,” he says.
This single, significant advantage may persuade more restaurants to test out the nontraditional market next year.
7. Raising Prices
However slowly, the economy is improving, and this may tempt restaurants to start raising their prices in 2011—although they shouldn’t, says Lombardi, the WD Partners executive vice president.
“I think they will stub their toes if they do it too early,” he says. “Consumers are definitely still in a recession mindset, and they are not going to go back to the old ways of spending.”
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