Today we are highlighting a report by AlixPartners that was featured in Nation’s Restaurant News on the state of the industry and the outlook for 2015. As with most reports recently there’s good news for the restaurant industry. But what I found most interesting about the report were the findings around technology. You may or may not find some surprises, but I was enlightened on a few. Here’s a quick glance at some of the highlights:
- Only 12 percent of consumers said loyalty programs were “very influential” or “extremely influential” on restaurant choice
- More than half of consumers said they didn’t use loyalty programs at all, and 33 percent used one or two loyalty programs
- Only 30 percent of those surveyed have eaten at a casual-dining restaurant with a tablet in the last year
- Only 3 percent said they would only eat at a restaurant with a tablet
- 56 percent of consumers cited the ability to use tablets to pay for their meal as the top benefit of the technology
- Only 18 percent have used mobile payment technology at all
What are your thoughts on technology in your restaurants? We always hear a lot about technology on the consumer side of the business. Is technology on the operations side a top priority for you? Please feel free to engage in some conversation around this topic.
I have copied the whole article below:
Restaurants have spent the post-recession years shoring up their balance sheets and are now ready to grow, as consumers appear more willing to spend, according to the 2015 State of the Restaurant Industry report from the consulting firm AlixPartners.
Industry distress levels are near all-time lows, due to efforts by companies to reduce debt levels following the credit crisis of 2008. And now, with sales improving, the industry has shifted into growth mode.
“Folks spent time holding back dry powder to make sure they didn’t have liquidity concerns,” said Adam Werner, a managing director at AlixPartners. “They’ve got some cash. They’ve got stronger balance sheets. Now they’re thinking about growth.”
The report painted a rosy picture of the restaurant industry in 2015. Consumers are more likely to have jobs, as unemployment fell to 5.5 percent in March. Gas prices have fallen and consumer confidence has risen.
According to the study, dining frequency has increased 16 percent over the past year. Consumers appeared to shift their dining preferences from quick service and casual dining to convenience stores, grocery stores and fast-casual restaurants.
Fewer consumers are dining out on a deal. According to AlixPartners, 36 percent of consumers said coupons and discounts were important to their dining decisions, a decrease from 60 percent in 2012.
“For the last seven years that we’ve done this study, it’s as healthy as it’s been,” said Eric Dzwonczyk, a managing director at AlixPartners.
Still, customers are demanding value. Consumers said they were more likely to dine out for less than $5 per person, according to the study, and less likely to dine out for between $10 and $20 per person. Consumers said they would spend an average 6.2 percent less in 2015 than they did in 2014.
“Consumers aren’t saying they’re willing to pay a lot more,” Werner said. “People like the amount of time they’re going out to eat today.”
The market value for many restaurants is high. Companies have been sold in recent years for high prices. Stock values for many companies are high, and restaurant company initial public offerings have performed well, even if many companies have struggled to maintain that value over time.
Activism among shareholders has also driven up valuations, forcing companies to unlock hidden value and focus on cost discipline. Companies such as Darden Restaurants Inc. and Bob Evans Farms Inc. have recently faced proxy contests. Activist investors have targeted several other companies like Jamba Inc. and Famous Dave’s of America Inc.
“So many restaurant chains fall into the mid-cap space,” Werner said. “It isn’t as expensive to get in and have influence on the board of directors in one of these types of chains.”
There are some concerns. Margins, in particular, remain an issue, even though commodity costs have eased. Beef and poultry prices have both risen over the past year, although the entire commodity basket has fallen 13 percent during that time.
Labor costs have replaced commodities as a margin concern. There’s mounting labor pressure on the industry due to minimum wage increases in many states, as well as market-based increases like Walmart’s $11-per-hour starting wage announcement. Benefit costs are rising, too, due to the Affordable Care Act.
Restaurants have raised prices to deal with increasing costs. But they’ve also been far more aggressive in using technology to combat cost pressures. They’ve added tabletop tablets and scheduling software, and have upgraded mobile technology.
The study noted which types of technology efforts may or may not be effective. For instance, loyalty programs might not be as important to consumers as many restaurant operators think.
Only 12 percent of consumers said loyalty programs were “very influential” or “extremely influential” on restaurant choice. More than half of consumers said they didn’t use loyalty programs at all, and 33 percent used one or two loyalty programs. Eighty-eight percent of consumers used two loyalty programs or fewer regularly.
“Loyalty is not a huge influencer of dining decisions,” Dzwonczyk said. “We’re not saying that restaurants shouldn’t invest in loyalty programs. But the way they’re developed and executed needs to be thought through. And it’s just one part of a comprehensive strategy.”
Tabletop tablets don’t necessarily have an impact on casual-dining restaurant selection. Only 30 percent of those surveyed have eaten at a casual-dining restaurant with a tablet in the last year. Only 3 percent said they would only eat at a restaurant with a tablet.
But 56 percent of consumers cited the ability to use tablets to pay for their meal as the top benefit of the technology, according to the study.
Mobile could be important — particularly to locate or research a restaurant, or make reservations.
What consumers are not doing, at least at the moment, is paying for their meal with mobile. Only 18 percent have used mobile payment technology at all.