The past few years have been a particular challenge for Restaurants. First came the pandemic, then inflation-fed ingredient price increases and labor shortages. Now, Generation “Z” diners are less inclined than their predecessor generations to dine out.
This conclusion is based on research by NPD group, which found that:
· People between the ages of 18-24 ordered from/at restaurants 218 times on average between February 2021 and 2022
· When Generation X diners were that age in 2002, they ate out 284 times a year on average
· When Millennials were this same age, they ate out 244 times over a year’s time
There are various reasons for this dining trend, and restaurants are being challenged to attract these diners via loyalty programs, partnering with social media and young stars, and some may have to lower their prices.
Some industry watchers attribute this to the pandemic-induced work-from-home. The pandemic also forced many workers of this age group to learn how to cook, a skill they’ve retained post-COVID. In addition, inflation and high gas prices are shrinking their level of discretionary spending. Another “wild-card” is the smart phone, which has been an appendage to these diners since they were kids. This has resulted in a phenomenon known as “committed consumption”, which means Generation Z consumers have already committed to mobile-device based goods and services before they consider dining out.
Industry experts are divided as to whether this is a short-term problem or a more fundamental shift in buying patterns. Some restaurants are not waiting to find out. Chicken wing restaurants like Wing Zone and Wingstop, as well as several donut chains are actively seeking out ways to attract GenZers. Their research has found that between 13-18% of visitors to their locations are this demographic vs. the industry average of a more modest 10% of visitors. One reason is that food items like wings and donuts are more popular with diners ages 18-24. The age old “value proposition” is at work here, for price is the most important factor this group values with choosing which restaurant to try.
As a result, some restaurants are seeking ways to lower their prices, while others are developing or refining their customer loyalty programs. Restaurants love online loyalty programs because they can use them to learn their customers’ preferences, and then market directly to them, and build on brand loyalty. One key factor in developing these programs is find a way to reach these consumers where they’re already spending a lot of time: their phones. It is widely accepted that Generation Z diners are more active on their mobile devices than any other generation of consumers.
As a result of this market segment’s use of mobile technology, Chipotle, McDonald’s, and Starbucks have been revising their marketing and loyalty programs. Others, like IHOP, have taken a more light-hearted approach, creating the International Bank of Pancakes, where customers earn PanCoins when they spend more money through their app. In addition, they find rewards in the app’s “Stack Market”.
Other restaurants are teaming up with celebrities and social media “influencers” to get GenZ diners excited about their food. Savvy restauranteurs will need to pay heed to this trend to ensure that they are able to appeal to a broader target market if they want to continue to be relevant for future generations of diners
A new poll from the National Restaurant Association (NRA) focused on the challenges and opportunities for restaurants during the balance of the current year and into 2023. Based on responses, the trade group compiled the following data:
· 96% cite supply chain delays as a significant challenge
· 90% cited high food costs
· 80% planned to increase their investments in and use of technology
· 80% anticipated modifying their menus due to supply chain issues
· 70% cited staffing shortages as an issue
· 54% were planning to explore take-out or delivery options
· 50% were planning to boost outdoor dining
· 50% indicated that recruiting/training employees to be their top challenge
· 40% expect that it could be another year or more before business returns to normal
· 25% are exploring more off-premises business options
Separately, one of the oldest challenges facing restaurants is how to boost off-peak hours, especially in light of some of the unique challenges that have emerged in the past 2+ years. Industry consultants suggest the following ways to boost sales and hopefully profits:
· Small plates: during off-peak times offer a few lighter options for the hours that bracket peak lunch and/or dinner hours
· Happy hours: consider adjusting the traditional 5-7 timeframe (if ABC regulations permit). Discounting of items may be needed, with the idea that customers may want to stick around for dinner
· Late night draws: it is likely that later hours attract younger customers, which means that menu items may need to be more affordable, and offering entertainment may be an additional draw
· Host meetings: consider renting out the space to business and/or community meetings during traditionally slow periods
· Know the market: use market research and your own knowledge about your customer base to enable the eatery to best select menu specials that appeal to the broadest range of clients
In short, restauranteurs will need to understand what attracts customers and how to generate repeat business. In addition, eateries that will survive and thrive in today’s environment are those that are willing to explore and embrace new ways of expanding their client base.
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