Time to Accept Reality—and Find Ways to Grow

Five years after the Great Recession, U.S. restaurant growth remains slow. Technomic’s new forecast shows sales growing one percent after inflation in 2014, just as they did in 2013. (We are seeing some movement of consumer dollars from one segment to another—fast-casual restaurants are still gaining market share while sales remain soft for most casual-dining chains—but overall, full-service and limited-service restaurants have the same growth rate.) It’s no wonder chains are no longer showing significant increases in unit counts.

Consumers remain cautious about spending disposable income on non-necessities. In many cases, they see little differentiation between restaurants within a competitive set. They are increasingly turning to other forms of foodservice. Ready-to-eat and ready-to-heat foods from grocers and other retailers are increasing in quality and variety and are now well accepted.

This all means that for the restaurant industry, the boom years aren’t coming back any time in the foreseeable future. Implication: Succeeding as a restaurant supplier or operator today is really, truly a take-share game. And taking share requires being creative to stand out from the crowd.

Some of the ways that operators and suppliers are being creative were explored in one of the studies presented at our recent Foodservice Planning Program meeting in California. While the research is proprietary, I’d like to share some of the findings here.

The study categorized successful forms of innovation, including:

Innovation in unique offerings. In partnership with their suppliers, restaurants leading innovation include Yum! Brands concepts Taco Bell (which found a huge hit with its Doritos Locos Tacos) and Pizza Hut (which grew its product line with stuffed-crust pizza).

Innovation in execution and service. When the drive-thru line at Portillo’s Hot Dogs in Chicago gets too long, staff members are sent out to take orders and run completed orders to cars.

Innovation in extending reach. Applebee’s inaugurated a late-night Club Applebee’s with special deals on food and beverages and DJs to bring a nightclub-like atmosphere.

Innovation through collaboration and cooperation. Caribou Coffee is cobranding with Bruegger’s Bagels, Burger King features rolls from Cinnabon, and Subway serves Seattle’s Best Coffee.

AS I SEE IT, wishful thinking won’t win in the restaurant game today. Suppliers and operators must carefully study market needs, as well as offerings from competitors within and beyond the restaurant industry, in order to be first to market with a truly new idea that resonates with the public.

Note: This content originally appeared in the February 2014 issue of Technomic’s Foodservice Digest newsletter.

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Ron Paul

Ron Paul founded Technomic over 45 years ago. As President and CEO, he directs the firm and all its research and consulting engagements, covering almost every aspect of the foodservice business. Ron has written extensively about management and marketing topics, as well as a broad range of food and foodservice issues. He is a frequent industry speaker and is often quoted in trade, news and business media, including the New York Times, Wall Street Journal, USA Today, BusinessWeek, Newsweek, CNN-TV and CNBC-TV.

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Comments

  1. The Rise of the Grocerant Niche Filled with Ready-2-Eat and Heat-N-Eat Fresh Prepared Food has created restaurant consumer discontinuity. Restaurant Consumers are Dynamic not Static. Brands must Evolve with Consumers or Risk Capitulating Market Share.

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