The Frugal Diner: Here to stay?

Could the worst of the bust be behind us?

It’s hard to say. As of today, the Dow is up almost 20 percent from its abysmal low of March 9. Despite the daily dire pronouncements from CNN that we could still be on the brink of economic catastrophe, fears of the Later Greater Depression seem to be receding.

On the other hand, a Nation’s Restaurant News article today announced that consumer spending had taken a significant dive in early March, down more than 10 percent compared to January and February and more than 32 percent compared to the same period a year ago.

But that was early March, and as stated above, the Dow has moved convincingly northward since then.

Whether now or months from now, we can be sure that the market will recover and consumer confidence will rebound. When this happens, the death grip that even the comfortably flush have maintained on their wallets will ease.

To which restaurateurs from all corners reply, “Yes, but by how much?”

As Americans climb out of the consumer confidence basement (feeling a little like Auntie Em venturing out of the root cellar after an F5) … then what? Will optimism swiftly return and have consumers spending again like there’s no tomorrow? Or will caution prevail and keep consumers saving like there’s definitely a tomorrow … and it’s going to be absolutely terrible?

Most economists agree that the economy will show signs of recovery in the second half of 2009. Almost all also agree that increases in consumer spending will be more gradual than in past recessions, when spending has come roaring back based on pent-up demand. This time, it was consumer demand — specifically for credit and real estate loans — that created the bubble that burst so suddenly and dramatically.

So the likely answer is that consumer spending will resume … but with the housing market still gasping for air, working Americans desperate to bolster their diminished 401k plans and a pervasive sense of national animosity toward conspicuous consumption, spending won’t begin to reach previous levels for years, not months.

As markets and jobs stabilize, consumers will slowly but surely begin to trade up again in their choice of restaurants, just as they traded down when things were looking grim. But with a bit more hesitation this time. A key component of this trade-up will be the attraction of greater perceived value at more expensive establishments.

The best way to encourage this perception is to continue to promote the value-oriented menus, pris fixe dinners, two-for-one specials and combos that helped keep restaurateurs from losing loyal customers from defecting during the downturn.

The message, of course, must be freshened up from the “we’re helping you in hard times” mantra that consumers have heard throughout the recession. A new, optimistic message will be in order.

Additionally, restaurateurs will need to consider freshening the offers themselves to come across as being responsive to a changed outlook; diners will be looking for something new, a break from the value-menu staples that got them through their budget crisis. As long as that break doesn’t look too dramatic. And this presents an excellent opportunity to begin to walk margins back to a more comfortable place. “Walk” being the operative word.

Your new message, new look, new offerings and new specials will signal to your customers that you’ve weathered the downturn with them and are looking forward, just as they are, to better times to come.

Even if they don’t come quite as quickly as any of us would like.

What Do You Do When the Party’s Over?

Lent begins today. So? Why mention this in a restaurant blog unless it’s a reminder to stock up on fish fillets?

Well … actually, Lent is worth mentioning because it presents a fitting parallel to the economic climate restaurants find themselves in just now: After the mad abandon of the Mardi Gras party, a period of sober reflection.

Right now, plenty of operators are dazed and wandering in the desert of diminished expectations, wondering exactly when the refrain changed from “We’re in the Money,” to "Brother, Can You Spare a Dime?" and when — if ever — they’ll hear “Happy Days Are Here Again.”

All they know for sure is that it was Fat Tuesday and then, suddenly, it wasn’t.

But the thing about Lent is that we’re supposed to wind up better for having spent 40 days in a process of self-reflection, right? This is absolutely key, and dazed wandering absolutely does not count as self-reflection. So, the question becomes “What do we do during this time of consumer self-denial?”

The answer lies in a three-step process:

1) Stop wandering. In difficult times, the natural reaction is to bounce from gimmick to gimmick hoping that one will appeal to some demographic group that still has cash they’re willing to part with.

Stop. Just stop.

If consumer perceptions are hard to change in good times, they’re downright impossible to budge in hard times. If you’ve built your image as a family place, do not think that you will begin to draw millennials by firing up Jack Johnson on the PA and mentioning WiFi next to the $1.99 kids meal promo in your next FSI.

You are what you are. This is the time to refine your focus, not redefine it.

2) Start thinking. So, okay. Things are slower. Be still. Sit. Breathe. Take time out while you have it and contemplate where you were (and how you got there), where you are now (and why), and where you want to be when the music starts again. Because it will. It always does.

Make a list. Make many lists. There’s nothing more clarifying than seeing your thoughts on paper.

Who loves you? Why? What have you historically done exceptionally well? What do you do that nobody else can? How can you communicate this to the people who love you … and others like them who have not yet discovered you? How can you help them justify spending money on your products?

Remember: It’s the economy that’s changed, not the consumer. People still crave the same things, still aspire to the same experiences. Your task is to figure out how to package your products with empathy — that is, to appeal to your customers’ traditional cravings in a way that allays their insecurity about spending.

3) Begin planning. The U.S. economy will revive. Consumer confidence will return. Give consideration now to what you will need and want to implement when the time comes, from POS systems to marketing materials to franchising packets. In the process of looking ahead, you’ll uncover not only long-term objectives, but also some surprising short-term opportunities.
Again, it’s that pen and paper concept. When you begin to formalize plans, all sorts of related ideas and opportunities emerge.


Finally, during this time of self-reflection, consider this: the further you hold a looking glass from yourself, the more you see in it. Have someone with considerable distance from your enterprise hold the mirror for you — and the earlier in your “wilderness experience,” the better.
A responsible outside marketing and promotions specialist will certainly help you in the process of refining, list-making and preparing. And they’ll do it within the context and perspective of your broader market, not with just a close-up view to your brand.

Start now. This could take more than 40 days. And you’ll want to be ready when the music starts again.

A Downturn Is a Terrible Thing to Waste.

If you're one of the many casual dining restaurant operators who are terrified about the state of the economy, I've got some encouraging news to share.

I just returned from the Restaurant Finance and Development Show a week ago and what did I learn there? Things are going to get better for the restaurant industry next year.

Yes, that's right.

Here's why:

• The downturn will weed out weaker competition. Primarily, this group is made up of single-unit "mom and pop" restaurants, but it also includes inefficient chain operators. Once the dust settles, customers with fewer dining options will be yours to capture.

• Real estate opportunities are everywhere. Boarded-up "A" locations are up for grabs at a discount. So, keep your eyes open!

• Pretty soon aging baby boomers will be succeeded by a larger, untapped demographic group: Millennials. This is great news for restaurants because millennials have no desire (and no idea how) to cook! Instead, studies show they travel in packs to QSR, fast-casual and casual restaurants.

• Higher unemployment gives you the opportunity to upgrade your people. Highly qualified individuals will be looking for employment at all levels and in all positions.

If you want to turn things around, you can't just wait out the storm. You have to put forth serious effort and, probably, make major changes. Here are my recommendations:

• Conduct research to determine who your real core customers are, and why and how they use your concept. (Most operators think they know this, but they don't!) I recommend Perception Testing, a qualitative research instrument offered by the top restaurant marketing firms. It will reveal truths about your concept that you never even suspected.
  

• Based on what the research reveals, take a hard look at your branding. It must be one-hundred percent aligned with your core customer! If it's firing on all cylinders, stick with it. If not, find a trusted chain restaurant marketing firm to fix it.

• If you don't have one, invest in a new, professionally produced custom photo library. Do not cut corners in this area. People eat with their eyes, so give them top quality fare. Spend what it takes to get a mouth-watering "menu" of shots that will last for years to come. (See our white paper about this at www.ideastudio.com).

• Examine your trade dress. Is it time to modernize? If you want to succeed in downturn, you must be up with the times!

• Stay top-of-mind. Expand your marketing with promotions built around existing menu items that are operationally easy to execute. I'm a big believer in LTOs that utilize a variety of mediums, including inexpensive ones such as e-mail and four-walls marketing and PR events. But don't try to create your promotion on the cheap; hire a good marketing firm to do it.
  

• Step up your service. Every guest should be greeted upon entering or leaving your restaurant. If your customers feel especially appreciated, they'll tell their friends. (On the other hand, if they feel they haven't been treated well, they'll tell the whole world!)
  

So how will you respond to this economic downturn? Will you hunker down, slash costs and hope for the best? Or will you seize an unprecedented opportunity and position yourself to ride high on the upswing? You can be sure that the most agile and assertive operators today will be the powerhouses of tomorrow.