Until the spring of 2008, the lunch crowd at Stockton’s Pub and Grill, a full-service restaurant in Lake of the Ozarks, Missouri, was thick with professionals from nearby real estate, law and accounting offices. But as the nation settled into a recession, the lunch crowd begin to thin out, and owner Doug Stockton noticed that customers in business attire became especially scarce. “Our sales to business people began to steadily drop during lunch time and also during happy hour,” he says, noting that business meetings at the restaurant fell 70 percent from three years earlier, while catered lunches for business clients were down at least 50 percent.
Stockton isn’t alone. During the recession, the usually reliable business lunch crowd became scarcer and less profitable at restaurants across the country. Businesses, in an effort to be more frugal, cut back on the expense accounts and steak and seafood dinners that used to be standard. However, restaurant industry analysts and consultants say that there are still opportunities for restaurants to attract the business crowd.
Stockton reached the conclusion that he was losing many of his customers to fast-food or fast-casual chains, so he took a number of steps to compete more directly with those restaurants in terms of price-point and speed of service, including offering an “express lunch” menu and a frequent diner program. So far, the results have been mixed: Stockton’s sales are still down at least $200,000 from last year, but he believes the steps he’s taken have prevented an even deeper slide.
The statistics back up Stockton’s perception that customers are concerned about value. Restaurant industry analyst Ron Paul of Technomic notes that price has been a major factor driving customers over the last few years—including business people who previously tended to patronize fine-dining or casual-dining restaurants.
“In general, the higher the check average, the harder this period has been for restaurants,” says Paul. “Business people, like other customers, have been looking for more affordable dining options.”
Appealing to frugality
Operator Kevin Meeker took a more dramatic approach to the price problem. His 27-year-old Philadelphia Fish Company, which had been a popular spot for business lunches, began to experience a steep fall-off in business a few years ago as business customers were following orders to use their expense accounts with more discretion. Eventually, the decline in business prompted Meeker to take a drastic measure: He closed the restaurant and reopened it two weeks later as a casual dining restaurant called Q BBQ and Tequila Bar. “There was an immediate impact,” says Meeker. “Sales were trending down before, and now they’re trending up.” Since the reopening in the spring of 2009, he says, business has been booming, and many of his former regulars have come back.
Many operators are adopting similar ways of using value to appeal to cost-conscious business customers. Meeker used one such strategy at Cork, his fine-dining restaurant in southern New Jersey. He was told by a lawyer friend that his firm could no longer afford to hold its monthly meetings at Cork. Rather than lose the whole event, Meeker offered to let the firm bring its own wine, which cut the tab significantly, but still allowed Meeker to make a profit. The firm agreed to the deal, and Meeker has now used the same offer to bring in new business from other local law firms.
Building relationships with area businesses, as both Stockton and Meeker have attempted, is an essential part of attracting the business crowd. Deba Wegner, a consultant to restaurants in the Seattle area, says that corporations like Microsoft and Expedia, which are based in her region, develop long-term relationships with certain restaurants that practically guarantee reliable business. Although these companies have restaurants on their corporate campuses, they still use local restaurants for employee incentive programs, meetings and other events.
“Microsoft, for instance, has an endorsed vendor program,” says Wegner. “The vendor then provides the company with reduced pricing and other benefits.”
Developing a similar relationship with a major corporation is not easy, says Wegner. “It’s usually a formal process that’s generated internally, so your ability to reach out to them is fairly limited,” she says. “It helps to build relationships with human resources departments and meeting planners.”
Michael Mason, general manager of David Burke’s Primehouse in downtown Chicago, maintains contact with the human resources departments of area businesses, keeping them up-to-date on the restaurant’s offerings and offering incentive programs. “HR departments love to offer employees 20 percent-off cards,” says Mason. “And providing those cards to them just drives people to us.”
Mason’s business held up well during the recession. He attributes that largely to the convenient location of his restaurant—inside a 297-room hotel—and its combination of affordability and quality. But he also points to another factor: an appropriate setting and ambience.
“I think people feel comfortable doing business in the setting we provide,” says Mason. “It’s casual enough so that it’s a social space, but on the other hand it’s sophisticated enough so that it’s appropriate for business.”
Restaurants like Stockton’s Pub and Grill may continue to see their sales to the business lunch crowd drop as long as unemployment remains high and the economy lags. It’s also possible that the recession might not be solely to blame. “On the surface, it looks like the recession is the only factor influencing shifting consumer dining behavior,” says restaurant consultant Aaron Allen. “It isn’t.”
Allen claims that trends in business lunches are impacted by a wide range of factors, from the growth of fast-casual to the rise of a post-boomer market with distinct tastes. He suggests restaurant operators create environments that are conducive to business, be creative with their marketing efforts and, above all, remain confident. “Once a restaurant gets perceived as unsuccessful, things can deteriorate quickly,” says Allen. “Customers want to be associated with successful restaurants, not failing ones.”