Restaurants Resort to Recession-Beating Strategies
by Susan Davis on 13/05/09 at 10:08 am
Even Fast Food Restaurants Are Feeling the Pinch
We’re not in full-fledged panic mode yet, but there’s definitely cause for concern. Restaurants at all price points are feeling the loss of customers as the economy continues to sputter, and there’s no relief in sight. The fast food chains are poised to lose the least, thanks to their initially low menu prices and their proactive marketing of dollar and value meals. However, they too, are feeling the pinch. (See FriendsEAT.com’s Fast Food Sales Decline; More Folks Eating at Home.)
So what are restaurants doing to stop the hemorrhaging of customers? Here are some of the cost-cutting measures savvy restaurant owners and managers have instituted.
They’re cutting back on portions, staffing and hours
Many restaurants are creatively cutting portions, by reducing the serving size of their meat, chicken or seafood entrees by 15 to 20 percent. There are fewer fries on the plate, more ice cubes in the drinks. The side order of cole slaw is smaller. Texturized vegetable protein may be added to recipes as an extender. Omelets are made with large eggs instead of extra-large, and you may find the garnishes on your plate to be more generous than the actual food. A number of restaurants have invested in smaller dishes, so their downsized meals look more substantial on the plate. Do you want some bread with your meal? You may have to ask your server … if you can find him or her. More than 60 percent of restaurants surveyed reported they had to let staff go during the past year. There are also a number of restaurants that have cut back operating hours or decided to close on Mondays, which has traditionally been a “slow” restaurant day.
They’re radically revamping their menu offerings
Restaurants at all price points, especially the independents and casual dining establishments, are making big changes in their menu offerings. Many are slashing prices. Others are offering totally new creations. Some are redesigning their menus and showcasing their more profitable items front and center.
T.G.I. Friday’s introduced a new line of sandwiches and salads specially priced at $5 each. Although this is a limited time promotion, it will make them worthy competitors with the fast food joints. T.G.I. Friday’s also has the “Endless Lunch” special, which offers all-you-can-eat soup, salad, breadsticks and a drink for $6.99.
Not to be outdone, Boston Market is also offering $5 meals, and Chili’s introduced 10 “perfectly portioned” entrees for $7. And Legal Seafoods, has an endless cup of chowder and salad for less than $9.
Even upscale restaurants, such as Ruth’s Chris Steakhouse, have designed meals with special $50 pricing for events such as graduation and prom night.
They’re offering coupon specials
More restaurants are participating in coupon programs, where the patron buys one meal and gets a second of equal or lesser value free or some percentage off. (Most coupons are buy one, get one at 50 percent off.) Some coupons may give a dollar amount off the final bill, some may allow children to eat free, and others may offer a complimentary dessert. Restaurants can design any type of promotion, but more and more are jumping at this inexpensive way to drive traffic to their establishments. Consumers are very coupon-conscious, so this can be a win-win situation.
They’re starting loyalty programs
If restaurants didn’t have a loyalty program in place before now, they’re rushing to start one. Sign up for a restaurant’s frequent diner program and you’ll be eligible for free meals or other perks after a certain number of visits. For example, Silver Diner’s Blueplate Club offers $5 off your meal for every five visits during a three-month period.
They’re participating in special food-related events
To reach new customers, many restaurants are signing up to participate in “Restaurant Week” events, community festivals and other civic events. All are ways to extend their marketing reach and cultivate potential new customers. (By the way, Raleigh-Durham’s Restaurant Week runs through May 17, with more than 50 participating dining choices.)
Another way restauarants are finding new customers is through an affiliation with Restaurant.com, which offers consumers a chance to buy $25 certificates for use at participating restaurants for $10 or less.
They’re changing the way they do business
Some of the cost cutting measures are happening behind the scenes. Restaurants are evaluating their suppliers and making changes to help reduce costs. Some are renegotiating their contracts or cutting back the number of deliveries they accept each week to save on freight charges. Others are purchasing less expensive and possibly lesser quality ingredients to save money.
Church’s Chicken is looking to squeeze out savings from the ingredients and other products it uses. The Atlanta-based franchiser is testing the idea of filtering the shortening for frying in order to stretch a batch’s use to 14 days from the current 10 days. That would save the company $1 million next year. It reduced the size of its biscuit scoops from three tablespoons to two tablespoons, which will save more than $1.5 million. The company also plans to change its french-fry packaging from cardboard sleeve to paper, which will generate $700,000 in annual savings.
Creativity is key
The good news is that many restaurants are finding new and creative ways to maintain their customer base during challenging economic times. Some of these adaptations and changes are long overdue, and may serve the restaurants well once the economy gets back on track. However, changing the quality of the food is always risky, since consumers will know when they’re eating an inferior product. And reducing the quantity can be just as chancey, since everyone likes to feel they’re getting their money’s worth. No one really knows what will happen over the long haul. We’ll just have to sit tight and see how things shake out.
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