First, a public service announcement: This special edition of Restaurant Reality Check contains no mention of millennials. Except for that one.
That might surprise those of you who attended the Restaurant Leadership Conference this week, when we could have changed the name on the fly to the Restaurant Leadership & Millennials Conference. The “m” word was likely voiced more often from the stage than “restaurant.” Even Bill Marriott—Bill Marriott, at age 83!—focused on that vexing demographic group during his time in the spotlight. Clearly the generation is altering the industry in ways profound and small.
More intriguing were the subtler market shifts that came to light during our conference. They were big trends that have built slowly, with relatively little attention, but now merit a nod in agreement because they make so much sense for these times. “Of course! How could we have missed that?”
They also demonstrate that the industry is being shaped by more than the—oops, almost slipped up there.
1. ‘Frictionless’ is not fiction-less
A hot buzz-phrase for the last year or so has been “frictionless service,” or a growing desire by consumers, particularly those of the “m” persuasion, to order and be served their food with no more of an effort than breathing. Their preference is that the process not be impeded in any way, shape or form by distractions like being welcomed. Ideally, let them place their own orders via app or tablet without any human interaction.
Chains like Panera Bread Co. and Starbucks are spending bags of money to develop frictionless service set-ups. But several speakers at the RLC suggested that there could be considerable drag on the phenomenon.
A new study released at the conference by Anheuser-Busch made a compelling business case for sticking with friction-fostering human order takers. The data just does not support the theory that less give-and-take with a server is the preferable way to go, at least for business reasons. Indeed, 17 percent of restaurant transactions result from a server’s recommendation or answers to a question, suggested Josh Halpern, vice president of national retail sales, on-premise and military.
“Servers are a huge source of power, so why replace them?” he said during a breakout session. “Fifteen years from now, maybe we won’t need servers, but I don’t think so. It was servers who said, ‘Would you like fries with that?’ We can’t walk away from that.”
Technomic also offered statistical support for tolerating some friction. The research company suggested that fast-casual concepts like Chipotle and Blaze are increasing their sales at almost double the rate of the whole sector in part because customers like the interaction with whoever is making their meal.
2. Sorry, Yelp haters
It was presented as an article of faith during the conference that the impact of citizen-reviewer sites on restaurant sales and traffic has reached direct-drive portions. Indeed, TDn2K’s Victor Fernandez called social media assessments the most precise indicator today of a brand’s future sales and guest counts, and he cited Yelp scores as a prime example of what’s turning the dial.
Fernandez recounted some analysis his company performed on an unnamed chain. Units were ranked by their Yelp scores. The top-reviewed outlets were posting average comparable-store sales gains of 1.2 percent, while the lowest ranking stores were seeing same-store sales decline by a percentage point.
“Once you see those connections, you know something’s there,” Fernandez said.
Chimed in Anand Gala, CEO of Famous Dave’s franchisee Gala Holdings International, “We look at social media as a leading indicator of where we’re going to end up.”
3. Finer segmentation
Henry Ford once remarked that consumers could have any color of a Model T that they wanted, as long as it was black. Today, Ford has more models and options than a Cheesecake Factory menu. As the auto industry matured, brands were customized to particular splinters of the market in hopes of finding strong appeal and a steady, more satisfied, freer-spending clientele.
The restaurant industry finds itself at a similar juncture, with smart operators trying to carve out smaller turfs rather than trying to be all things to all consumers. Technomic noted the finer segmentation underway with its observation that the fast-food market is undergoing another split. In addition to traditional quick-service and the tonier fast-casual variety, there’s a pricing and quality bracket forming between those sectors called QSR plus, said the research company’s Darren Tristano.
“They have an average check of $6 to $9,” and “quality that’s much closer to fast casual,” he said.
Tristano mentioned such brands that fit as Chick-fil-A, Pita Pit, El Pollo Loco, Freddie’s and Potbelly. Obviously several of those are established regional brands, so it’s not as if the segment is growing from dust. Tristano suggested that there’s more of a concerted effort by those brands to define what they’re all about, stressing better value than a Five Guys and better food than a Taco Bell or KFC.
4. Cash hasn’t gone away
If the “m” group was the most common topic of discussion at the RLC, the need to engage them and other age groups through mobile devices was a close second. Enough was said about cashless payments to make you think greenbacks are barreling into obsolescence.
Not so fast. Cash management—not the theories for maximizing return on your cash on hand, but the nuts-and-bolts particulars of handling paper money—wasn’t as frequently discussed, but it definitely figured into some of give and take at the show.
For instance, Jim Evans, president of 200-unit Wendy’s franchisee Cedar Enterprises, spoke about the innovations his company has embraced to handle dollars and cents. Wendy’s is adopting high tech as a chain to bolster efficiencies, but Cedar is realizing a savings of 14 hours a week per manager simply by updating the way it puts cash in the bank. Once a week, armored cars pick up the dough from each store, eliminating the need for the manager to carry a bag of money to the bank and deposit it. In addition to the time savings and the heightened security, “the soft benefits of not having a manager leave the restaurant is tremendous,” Evans commented.
5. No crying over big data
A new term took wing at the RLC: one-to-one marketing, or using technology to focus on a single customer’s preference and buying habits, but across the whole consumer market. It’s aiming at the forest but speaking to every tree, so to speak.
Analyzing the reams of data pouring into restaurants was a theme that arose in sessions far afield from technology or even marketing. Indeed, it came up in several presentations on the new demands of restaurant leaders and the skills they need. Clearly handling and understanding Big Data is becoming a big part of the job.
And if that makes you queasy because you’re not a numbers geek?
We leave you with the advice of Wally Doolin, chairman of the research firm TDn2K and the former chief executive of TGI Friday’s, La Madeleine and Buca di Beppo: “Get over it.”