One report says people are eating out more often. Another report says sales are flat. Public company results, for the most part, indicate very small increases in traffic counts. If financials are beating last year, they can be attributed to meager price increases. In a confusing picture, it seems that restaurant operators are feeling upbeat, but overall, the number of away-from-home eating occasions are slipping a bit.
That conclusion may or may not be valid. As an observer of industry results for many years, I have never been more puzzled when trying to answer the question: "How are we doing?" The big guys in burgers seem to be reflecting (McDonald's CEO) Don Thompson's comments about people eating out less often, and the business has become a share battle. The same situation seems to be true for the casual dining category. Pizza seems to be growing a bit, but is it just better deals, or the national brands taking sales from the mom-and-pops? Fast casual leaders like Chipotle and Panera are doing well. Are they picking up that many visits from the rest of the industry?
NPD, Technomic, NRA, whatever the source, the reports make headlines when they come out, but they seem to be contradicted by another report the following week.
Marketing tactics can give brands a sales bump, but few of them now sustain the increases for very long. Not long ago, consumers were turned on by new product introductions and they returned often to purchase the new item. Now, nearly all brands are promoting new products almost all the time. With a finite financial limit on the number of restaurant meals affordable, those windows close much sooner for new product introductions. If they have already tried one brand's new item, they jump to another introduction at another place because there are lots more of them being communicated. A new item has to be inordinately different, superior in taste and value, and not easily copied in order to make consumers buy it again and again. Wendy's Pretzel Bacon Cheeseburger is likely to increase sales...but for how long?
The marketing of Value Menus is also losing its effectiveness. Nearly everyone has a version of the "Dollar Menu," and is struggling with how to shape and promote it to increase traffic and still retain some profitability. Consumers buy from it frequently, but even that availability is no longer driving traffic. That's probably because there is little difference between offerings.
Eating healthier is another big issue. Perhaps enough people are no longer eating out because they feel they would be more tempted to indulge at a restaurant. Could there not be enough great-tasting choices that are good for you? Who wants to buy a meal and still be hungry when they are finished? Dissatisfaction with so-called better-for-you food at restaurants could be a big factor in the minds of consumers who once loved not-so-good-for-you-food.
"How are we doing?" Who knows? The opinion here is that the entities that publish state-of-the-industry reports should dig into the data a bit further, and try to sort out the contradictions. For example, has the renewed confidence in the business resulted in too much restaurant proliferation? Are there beginning to be too many seats chasing too many butts again? We have to remember that at any given point in time, there are a finite number of people buying meals at restaurants. Each of those purchases at one place is one less purchase at another. And, when the total number of purchases shrinks, sales have to decrease for just about everyone.
It would also be nice to know exactly what is causing the overall decrease in visits. Didn't we hear that consumer confidence was building positively because the economy is improving?
Barry Klein is best known for creating the Ronald McDonald character and led the "You Deserve A Break Today" advertising campaign for McDonald's. In his current occupation as a marketing consultant, Klein has developed business-building concepts, new products and more for Coca Cola, Pizza Hut, Quiznos, Cadillac, Ruby Tuesday, Friendly’s, Perkins, Pay Less Shoes and others. He has been a key contributor to such projects as Stuffed Crust Pizza for Pizza Hut, Prime Rib Subs and Torpedoes for Quizno