from Lori Karpman, President, Lori Karpman & Associates Ltd.
The restaurant industry has undergone tremendous changes over the past decade, mostly due to the same factors affecting other industries such as technology, increasing consumer awareness, changing lifestyles and economic conditions. However, it would be hard to find an industry that has seen an equivalent transformation in the last 10 – 20 years.
The biggest change has been in consumption; eat in and take out service has increased exponentially with diners eating out 3-4 times per week, formerly reserved for the wealthy and those with expense accounts. Eating out is no longer reserved for special occasions but have become a necessity borne from increasingly busy lifestyles, 2 income households and a general lack of time. More educated guests have forced restaurants to respond to consumer’s food needs and essentially re-evaluate their food offerings, their mode of service and payment. Adding to this trend is the steady growth of the pre-prepared meals sector and the rate of consumption soars. This shows no sign of slowing down any day soon.
There have been so many changes that I cannot address them all or in detail. So let’s take a look at the major areas that have seen the biggest changes and how they have impacted the food service industry.
The food offerings have changed dramatically primarily as a result of consumers becoming more educated about what they eat and where it comes from, changes in lifestyle, the breakdown of cultural rules over food choices and the acceptance of women in the workplace.
The Educated Consumer and Change in Lifestyle
Decades ago meals were prepared daily by the woman of the house with using fresh ingredients. Today’s trend of knowing the source of their food is increasingly important due to the use of pesticides and animal diseases that were not monitored long ago. Today’s consumer is educated and concerned about what goes in their bodies. In fact, with technology, mad cow’s disease can be traced all the way back to the single ill cow. Organic, natural, whole grain are the buzz words generating sales and the category of “processed foods” have been demonized, (and now so has “meat”, the entire category it seems), and this also feeds the natural foods trend. Restaurants now provide low fat, low carb choices on their menus as well as vegetarian and “organic ones”.
Restaurants must now provide the consumer with detailed nutritional information on their menu items including ingredients from highest to lowest concentration, calories from fat, carbohydrates, and more. This applies to all food service except for sit down dining where the information must be available. Some cities are going so far as to ban products that in their opinion are not good for us; try getting a Jumbo sized soft drink in New York City.
We have really come full circle back to eating what is good for us, though the items consumed have changed.
Given the change in lifestyle to the fast and furious, and the inclusion of working women in the marketplace, not everyone has the time to cook fresh made meals. The category of “pre-prepared meals” has been created as a response to that need. In most cases the foods are uncooked or flash frozen meaning that you are actually cooking the meal and not reheating one. Hence the name “pre-prepared”, meaning assembled fresh food ready to bake. Supermarkets now have an entire section devoted to “pre-prepared” meals right at the front of the store, many restaurants have freezers to take home your favorite meals and one franchise is solely dedicated to it. Last but not least, there is a service that will deliver all the ingredients and the recipe to cook one fresh and awesome meal. It is delivered to the customer in a box. In this case, it is not really pre-prepared but it is as close to making an entire meal with your bare hands as you can get!
The Expanding Menu
Remember when your local pizza joint only sold pizza and pasta? Today’s food establishments often stray from their niche and serve a variety of foods unrelated to their core products trying to please everyone. Pizza places serve hamburgers and souvlaki places serve deli sandwiches. Many restaurants expand their menu to attract a broader clientele or those who do not want the “signature” item that day. This causes mass confusion in the marketplace and competition just becomes stiffer. For many businesses this strategy fails because instead of focusing on their niche and doing it well, they eventually go out of business.
Jim Collins in one of the bestselling business books of all time, “Good to Great”, (Why Some Companies Make the Leap and others…Don’t”) said that:
“businesses that are good are not focused on their primary product and seek to expand into other niches to increase sales/ market share. However, those that go on to be “great” companies understand what their primary niche is and do it better than anyone else”.
Do you remember when McD’s introduced pizza? It was an unmitigated operational and financial disaster that cost the franchisees a small fortune. McD’s primary product is burgers- and they later expanded into all different kinds of burger or fillings in a bun or wrap. These are all consistent with its niche product and what customers expect to see on the menu. Customers would never go there for pizza; they go to the pizza specialist. So while there may be many food or service trends, the owner of a great business knows how to take those trends, pick out which are applicable to their business and apply them accordingly to its niche product. Sometimes none of them fit, and that is ok too, as long as the business is the best it can be in its niche.
Shape and Form
Originally restaurants were brick and mortar locations; many had take out stations, some had delivery. With the advent of technology the topic of guest service has been overhauled. Foodservice providers now have multiple avenues to reach and serve their customer. When enclosed malls became the norm, food court units which allowed people to buy restaurants at a lower price range and work more standardized hours, became very attractive investments.
The biggest driver of increased sales has been the growing use of the “drive thru” where hundreds of customers can be served quickly without ever getting out of the car. And it’s not just for coffee anymore; you can get any food, even a fresh baked hot pizza in 5 minutes! More than that, a drive thru creates a second and substantial revenue stream for the business that can be the same as if not greater than the revenue generated inside with significantly reduced costs and higher margins. Even delivery has changed; customers can now pay at the door using a credit or even a debit card.
Last but not least the newest yet oldest form of food delivery is the mobile food truck. While these trucks have been around for years, they have primarily been owned by independents selling the same things, hot dogs and pretzels. Lately, more sophisticated and exotic foods are now being served via these mobile units and in fact, franchises are being created around them giving the consumer a high degree of comfort eating at one. Unlike street vendors, these units are clean and attractive, run by friendly staff, usually the owner and some friends and they generally serve awesome food. Moreover, they are “mobile” so they can be moved to accommodate attractions or events. In effect, they can go where the money is. These mobile units are not only for newcomers, existing restaurants can create them and use them for events, sponsorships and any other place they would be allowed to sell food. It is a fabulous way to introduce your food, (with a mini menu) generate brand awareness and drive sales to the full locations.
The foodservice industry has been impacted by the advances in technology in too many ways to count; it has been massive and far reaching. Information on all guest services to automatic inventory control to getting specific demographics on your target market can be obtained from the variety of point of sale (POS) systems created for the industry. Some technological advances will improve the experience, yet some come with new challenges to. It’s how each restaurant handles these advances, and the challenges that will determine its success.
Speed and Efficiency for the Consumer
Speed and efficiency apply to every aspect of the dining experience from reservations to closing the bill. Guests expect things to be done quickly, efficiently and right the first time. There is no shortage of applications and tech options available to provide the absolute best service to customers. However, the consumer does not always respond by providing the same speed or efficiency to the restaurant and in fact, creates a challenge that reduces sales and profits. Here is a great example:
An upscale, long established and popular New York City restaurant posted this study anonymously on social media in 2014 about its business. Here is what they found, based on 45 customers:
2004: Customers spend approximately 8 minutes after being seated before inviting the waiter over and placing their order. Food begins to arrive in 6 minutes. 2/45 customers sent items back to be reheated. Waiters watch over their tables to respond to their needs immediately. Customers are done eating, cheque delivered, and leave within 5 minutes. Average length of stay from start to finish: 1:05
2014: Before even opening the menu guests interact with their cell phones. 7/45 summoned the waiter and took 5 minutes of their time. The majority needed assistance getting into the restaurant’s Wi-Fi and wanted the waiter to do it for them. It takes on average 21 minutes until they order. Food starts getting delivered within 6 minutes. 26/45 customers spend an average of 3 minutes taking photos of the food, taking photos of each other with the food, or as they are eating the food. This takes on average another 4 minutes as they must review and sometimes retake the photo. 9/45 customers sent their food back to reheat. 27/45 customers asked their waiter to take a group photo. 14 of those requested the waiter retake the photo as they were not pleased with the first photo. Given in most cases the customers are constantly busy on their phones it took an average of 20 minutes more from when they were done eating until they requested a cheque. Furthermore, once the cheque was delivered it took 15 minutes longer than in 2004 for them to pay and leave. Average length of stay from start to finish: 1:55
The additional 50 minutes in the average length of stay results in a real loss to the restaurant owner who now loses at least one (if not more) turn per table (per day) resulting in losses that can be in the tens of thousands of dollars if not more. The waiter also loses the tip money that is the largest part of their income. So while the customer wants everything quickly and efficiently- they do not return the favor and in fact, often create losses for the business owner. Some restaurants are considering not offering Wi-Fi but then are concerned about losing customers over it. It’s a fine line.
Websites and Social Media
The impact of social media has been a double edged sword that must be continually managed. By “social media” I refer to Facebook, LinkedIn, Pinterest, Twitter, Instagram and all others in one category.
Every business must now have a website, where it was never heard of 20 years ago, or 10 years ago for the tech savvy only, today it is essential. A website is a company’s number 1 selling tool. Over 97% of purchasers visit a business’s website before making a purchase decision. This is the first chance to interact with a prospective guest so it must be enticing enough to attract diners to try the restaurant. While what makes a website great is not the subject of this article, I refer you to 2 free online platforms wix and/or squarespace that have free customizable website templates. There are still way too many establishments that do not realize the importance of having a website, and unfortunately it is costing them dearly.
Everyone is a critic! Gone are the days of the disguised professional critics who would dine anonymously and then write a review that could make or break the restaurant. Today every consumer is a reviewer and so a bad professional review is no longer the kiss of death. Sites like Yelp, Trip Advisor, and even the restos social media pages are very popular rating sites. The everyday consumer will opine on everything; the food, décor, service, uniforms, cleanliness, atmosphere and the list goes on. So while social reviews allow anyone to comment, an owner must take the comments to heart and respond to the needs of their customers.
However, according to an article at DailyDealMedia, Yelp can also be a challenge or even worse for a restaurant’s business:
“43 percent of restaurant owners polled said that Yelp, the restaurant review site was a problem because it basically gives customers carte blanche to say whatever they want about a restaurant and a lot of the reviews can be very damaging. With Foursquare, customers can leave their thoughts on a restaurant – good or bad – when they check-in. In fact, they can simply be in the area of the restaurant and do that. If a patron has an experience they want to share on Facebook or Twitter, good or bad, they can influence hundreds of potential guests with just one update.”
The introduction and acceptance of websites and online media has been great for the industry as it is way more cost effective than most other media and allows a business to direct promotions to their specific target market. Furthermore, it creates a database of emails to be used later for marketing and email drip campaigns. Later on this list can be used to create additional and passive revenue streams, hence the latest expression, “the money is in the List”.
Online or Table Ordering/Payment
Restaurants have tried out table ordering by providing guests with an Ipad. This eliminates the need for a server and theoretically should cut down on labour cost. It also avoids errors that servers make in placing orders. Order chits print in the kitchen where the food is prepared for the waiter to serve. There is an education process that must take place first as the older generation is not as computer savvy. So each new customer will need the assistance of a waiter for their first visit, eating up valuable service time, so no time has been gained really. Much more accepted is electronic mobile payment at the table and this eliminates one task of going to a central cash to process the payment. This does speed up the checkout process and is a valuable tool. Remember having to stand in line at the cash waiting to pay?? However, switching a device for a human isn’t always necessarily the best option. When people dine out they are often looking for a human experience and to be catered to. For the owner the personal interaction is essential to build a relationship with the guest in order to generate loyalty, a machine cannot do that. This is especially true for high end, fine dining establishments. However, in take-out or at the counter service, less personal interaction is required so anything automated will reduce the service time. Ideally, this liberates a “cash” person and allows them to respond to internet (another new form or ordering) and phone orders. This increase in speed and efficiency in this setting will drive top line sales and profits. The deciding factor about how much technology to use at the consumer level is based on how much personal connection the restaurant needs to have with its customers.
Never before has a restaurant operator had the detailed information it needs to assess and run its business knowledgeably. Point of sale systems are extremely sophisticated and track explicit parameters such as food cost, labour cost, scheduling, inventory management, purchasing and more. There are 2 levels streams of meaningful information; the first being about your customer and (2) drilled down parameters such as: the average cheque, what sells the most/least, sales per hour, per day, and even the results of a coupon offer. This 2nd level of information is used primarily for targeted marketing campaigns and promotions. If there are multiple units most POS systems allow for the ability to manage all terminals from one central computer. The more sophisticated the system the more information you can learn; some produce over 200 reports. Those who know how to use the reports are already profiting from the financial benefits that even just a little knowledge can provide.
Over the past decade the restaurant industry has been completely transformed and in my opinion for the better. Most of the advances have been driven by technology and applications created especially for the foodservice industry. Overall business is faster, more efficient and more profitable as a result of sophisticated point of sale systems. Today’s owners have the ability to understand their individual businesses like never before. However, advancements are not without their challenges which take the form of longer table service times, instant and often misguided online reviews and the costs of creating and managing a website and social media strategy. One thing is for sure, technology is advancing every day, so the real challenge may not be in using it, but rather, in just keeping up!