Report: Limited-service restaurants fighting harder for customers
The National Restaurant Association just released a report focused on limited-service restaurant trends and how quick-service and fast casual operators expect to navigate the remainder of 2013.
The sales outlook for the limited-service segment is estimated to be $225.4 billion in 2013, a 4.6 percent increase over 2012 (1.5 percent with inflation adjustment).
The fight for customers
One of the biggest challenges presenting itself in the limited-service space is the fight for budget-conscious customers. More than half (52 percent) of fast casual operators and 44 percent of QSRs said it is more challenging to compete with other limited-service concepts in 2012 than it was in 2011.
QSR leaders believe their biggest competition comes from grocery stores and c-stores, while fast casuals eye full-service restaurants as their biggest threat.
Additionally, about half of the respondents said it has become more difficult to attract new customers. Although economic conditions are expected to remain generally positive, the report indicates that operators are anticipating more challenges ahead, particularly when it comes to food costs and health care regulations.
Their top concerns include:
- Food costs (26 percent QSR; 28 percent fast casual);
- Health care reform (31 percent QSR; 18 percent fast casual);
- The economy (11 percent QSR; 19 percent fast casual); and
- Building and maintaining sales volumes (9 percent QSR; 10 percent fast casual).
Still, 54 percent of fast casual operators expect higher sales for the full year, while just 6 percent expect sales to drop. QSR operators aren't as optimistic; 36 percent anticipate improvement for 2013, while 10 percent are expecting a drop.
Getting customers in the door
As increased competition has concepts jockeying for traffic, the NRA's report has identified what those customers are most looking for when dining out: value and service rank the highest.
Additionally, according to the NRA's National Household Survey, 90 percent of consumers across all demographics said it is important that some of their favorite menu items are available. But, they also want variety — a majority of those between 18 and 54 are looking for something they haven't eaten before.
And, three out of four adults, including 80 percent of women, said they want to see healthy items at QSRs.
The top attributes customers are looking for at LSRs include:
- Good value, 94 percent;
- Good service, 93 percent;
- Favorite menu items, 91 percent;
- Enjoyable atmosphere, 85 percent;
- Healthy items, 75 percent;
- Kid-friendly, 68 percent;
- Locally-sourced food, 63 percent.
Motivating them to return
Repeat customers make up more than 70 percent of sales at QSRs and 68 percent at fast casuals. Operators also reported that repeat customers were more prevalent in 2012 compared to the prior year.
Frequent users rely heavily on the restaurant industry in their daily lives, according to the report. "As such, it's important for limited-service operators to know how to reach these customers, what their tastes and preferences are and what motivates their decisions," it states.
In doing so, more concepts are adding frequent diner programs. About one of every four LSRs now offers such a program, which typically includes gift certificates or discounts after a number of visits. Expect this number to increase: the NRA's National Household Survey shows that 66 percent of adults want more loyalty and rewards programs. Younger adults say they are more likely to visit a restaurant if it offered such a program.
Also to woo more customers, LSRs are adding off-peak hours and promotions, and building their off-premise businesses. McDonald's, for example, is planning to extend its "McDonald's After Midnight" menu after a strong test, while Burger King's delivery service has grown to a dozen markets.
As customers seek more value, the NRA's report suggests providing reduced prices during off-peak hours. Seventy-nine percent of adults say they would consider dining out more if menu prices were lower during these times. And a majority of adults said they would use delivery if it was offered from full- and quick-service restaurants.
Jumping into the retail is also a way to increase sales and build brand loyalty. The NRA's survey showed that 40 percent of adults said they would buy a restaurant's packaged food item, such as sauces or frozen items, if they were available for retail sale. Baskin-Robbins recently added a new retail line of freezer bars, while Chuck E. Cheese's added a line of squeezable yogurt products available at more than 2,200 U.S. Supercenter stores.
Also aiding in the fight for customers is a solid marketing plan, especially as LSR brands move away from direct mail and newspaper ads and more toward digital and social media. Seventy-seven percent of fast casuals and 56 percent of QSRs said they will spend more on social media marketing this year, while 65 percent and 59 percent, respectively, said the same about email and text campaigns.
Nearly 30 percent of adults say they will likely use a daily special that was emailed to them, while 22 percent responded similarly about text message deals.
The menu is the final battle line in the push for more traffic. Due in large part to the advent of cooking shows, 90 percent of restaurant operators think their customers are more sophisticated about food and beverages than they used to be. Restaurants are wise to be mindful of this in their menu creation process and in 2012, nine out of 10 concepts added new items.
The NRA's Restaurant Trends Survey reveals the top factors operators consider when choosing new menu items, with market research first, followed by customer feedback, seasonality and franchisor direction.
The top food trends named are gluten-free, locally-sourced produce and healthy kids' meals. Despite emerging categories, the report points out that it's important to rely on old standbys as well. Soft drinks top this list, followed by chicken, iced tea and french fries.
In addition to this report, the NRA also released:Restaurant Industry 2020: A Snapshot of the Future and Tableservice Restaurant Trends: How Family, Casual and Fine Dining Operators Navigate Challenges and Opportunities in 2013.
Photo provided by KWDesigns.
Read more about restaurant trends and statistics.
Alicia Kelso Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.