If trends always unfolded in linear fashion, any restaurateur could latch on for a ride. This week was a reminder that market tendencies are more likely to zig and zag like a rodeo bull with anger issues. Consider these examples of restaurateurs trying to stay astride the trends despite some neck-jarring changes in direction.
1. A shift on Shake Shack
Two weeks ago, Wall Street almost spontaneously combusted when the retro burger concept sold itself to the public. Stock buyers bid up the price to heavenly heights, jacking the value of the fast-casual chain to almost $2 billion.
Now consider this week’s assessment by the Street: “Shake Shack’s lofty shares leave investors wondering, ‘Where’s the beef?’,” read one headline in the financial media.
It wasn’t as if Shake Shack hid such essential details as having only 63 units, of new stores averaging half the annual sales of flagship branches in New York City, or of seeing room for just 450 outlets in the all-important U.S. market. Then, as now, investors were buying a promise, a chance at owning the Chipotle of restaurants’ biggest arena, the burger segment. It’s part of a larger trend of investors (and operators) embracing fast casual as the best play in the business today.
But feet turned cold, attitudes zigzagged and the price of a Shake Shack share fell from its high of $52.50. Still, don’t feel sorry for Shake Shack: Its stock price is back up to $43 a share.
2. Movies are a reel good customer draw again
Chains with a high percentage of restaurants in retail malls haven’t been in much of a holiday spirit this whole century. Consumers are shopping online instead of meandering past a Red Robin or Cheesecake Factory to see what’s on the racks at a brick-and-mortar Nordstrom’s. The kicker is the drop-off in business for movie theaters, the other major feeder for restaurants sharing common spaces with The Gap.
But that downward-sloping trend line may be zigging upward, the chief marketing officer of Red Robin observed this week. Denny Post told investors that “the Hollywood scenario is much more bullish this year.” Studios are cranking out sequels to past box-office smashes and scheduling the next installments of long-running serials like “Star Wars.” It’s the closest they can come to issuing a sure thing.
Movies that amount to brand extensions will not only pull more consumers out of their homes (and potentially into restaurants), but also provide more effective promotional opportunities, Post suggested.
“There are lots to choose from this year,” she told stock analysts. “We are not prepared to make any announcements on a go-forward basis about what we are doing, but I can assure you that this burgers-and-a-movie proposition is a high value one for our guests.”
3. A spike in gift-card sales
A likely spike in movie attendance isn’t the only positive shift in trends’ directions. Year-end gift-card sales remained strong even in the bleakest years of the Great Recession—a linear trend if ever there was one. But new signs emerged this week of a sharp upswing.
Post revealed that Red Robin ended last year with a 16 percent increase in gift card sales for the year.
Starbucks disclosed a few weeks ago that it has sold 46 million gift cards, which translates into one of every seven Americans carrying the money-loaded plastic in their wallets.
4. ‘A cooler delivery? Sure, we’ll pay.’
Pizza chains have had mixed results with levying a delivery fee to offset the expense of dispatching a driver to cart an $8 pie to customers’ doors. But consumers indicated this week that they’re eager, not just willing, to pay extra if their order is delivered by drone.
Indeed, four out of five would pay a premium, and almost half of the 1,400 respondents indicated they’d fork over $5 if the pie or chicken wings were flown to them.
The study, conducted by Walker Sands Communications, also found that two-thirds of consumers expect to have a purchase delivered to them by drone within the next five years.
5. Neo neo-temperance
A trend of paramount importance to Utah restaurants has been a loosening of restrictions on their bars in recent years. Now that current is being reversed or accelerated, depending on how you view it.
Even with an easing of regulations, it’s not as if a visitor would confuse Utah’s nighttime scene with Key West or New Orleans, but the state has come a long way. Because of the state’s large Mormon population, restaurant guests couldn’t get a drink in many places a matter of years ago. And even then, a restaurant with bar service had to be very prudent. The drinks had to be mixed behind a curtain, known locally as a Zion curtain, so children wouldn’t be exposed to the enticement.
Now a lawmaker is proposing that the Zion curtain be lifted. He wants to permit bar tenders to show their stuff, just as they would in California or Nevada. But they could only do it in an adults-only area of the restaurant, and the establishment would have to post a sign that warns guests about the open-air drink mixing.
But it remains to be seen if the zigzag will succeed. There’s been an ironclad tendency by the state to thwart any attempt to open the Zion curtain.
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