Outside Insights | By chris warren
These days, foodservice operators don’t need reams of statistics to know that the economy is hurting. Across the country, they see it in their own establishments, where customer traffic is down, as is the amount people are spending. Still, while the economy is undeniably struggling, that just means now is the time to redouble your efforts to build your business in order to boost your profits. By doing so, you’ll set yourself up to prosper once the economy does rebound—and it eventually will. But how can you grow your business without spending precious capital?
Fortunately, experts say there’s a host of low-cost and no-cost ways to attract more customers and improve your margins. And it all begins with your menu. “Operators need to reengineer their menus so they have more items that have better profit margins,” says Ron Paul, president and CEO of Technomic Inc., a Chicago-based consultant to the foodservice industry. “As an example, chicken and pasta obviously have lower food costs than meat, so you might want to consider making more of those dishes either permanent parts of the menu or promote them as daily specials.”
A Broad Definition of Value
It’s no great secret that consumers these days have good value at the very top of their list of priorities when selecting a foodservice establishment. Many chain restaurants have responded to this by heavily promoting value meals or by offering 99-cent or dollar menus. Even upscale establishments have jumped on the value bandwagon. One New York restaurant located near Wall Street lured patrons by offering $3 drinks if the stock market finished the day in the red, while a Los Angeles club held a Friday “Soup Kitchen Cocktail Hour” during which cocktails were 35 cents and grilled cheese sandwiches and tomato soup were free.
While attractive pricing is certainly essential, it’s also vital to have a broader definition of value. “As you plan for the long term, it’s important to remember that value does not just mean low prices,” says Irma Shrivastava, group director of Chain Marketing for Coca-Cola FoodService. “To compete in a value environment, focus needs to be placed on driving traffic and profits. Beverages can play a key role in delivering profit.”
Shrivastava also contends that variety is a way to offer consumers value. One way to do that, she says, is by offering varied package forms. “You may want to offer some bottled beverages in certain brands that are or are not currently offered on the fountain,” she says. “By choosing the right ones, based on your customer base, you could increase total beverage incidence and, consequently, profit.”
Don’t overlook the fact that any broad definition of value also includes customer service, particularly these days, according to Paul. “Service becomes an important differentiating factor,” he says. “When consumers get fussy and feel like they are now, they want no-hassle meals. So the level of service has to go up because they’re demanding more. Their own lives are stressed and they don’t want to go to a restaurant for more stress.”
Some restaurants are emphasizing good service by making sure that their best, most customer-friendly employees seat patrons, ensuring that their first experience at an establishment is positive. For his part, Paul believes that, with so many people looking for work, right now may also be an opportune time to find the kind of employees who might not be available when the labor market is tight.
The Power of Combos
Another powerful way to boost your bottom line without having to spend a lot is through the thoughtful use of combo meals. According to research conducted by the Coca-Cola Company, consumers already associate combos with value, which may be one reason why combos are twice as likely to be ordered versus à la carte.
Terri Polk, who headed up the quick-serve combo research for Coca-Cola, says one example of the economic value of combos for foodservice operators who offer them comes out of the fact that, by definition, a combo includes a beverage. “If they go à la carte, because it’s not suggestively sold, consumers only buy a drink half the time,” says Polk, senior marketing manager of Chain Marketing for Coca-Cola FoodService. “So you are losing the opportunity to increase your sales and the dollar value of your ticket by de-bundling.”
Polk offers a couple of means to boost the sale of combo meals. First, make sure the meals are fast and easy to order, which helps get customers in the door. Giving different numbers to combos has worked well for some operations, according to Polk. “Simplicity is a major reason for people buying a combo,” she says. But so, too, is an obvious suggestion that they are getting a good deal. “If what they get in a combo meal costs $2, and it would cost $4 if they paid for the items separately, that should be very clear,” she says.
Polk also notes that it can be profitable to give people the opportunity to upsize a drink in a combo meal. Research by the Coca-Cola Company shows that most consumers believe a medium-sized drink is the appropriate beverage for a combo, and that 88 percent of people who upsize with a combo do so with the drink. “By having the beverage that comes with the combo be a medium and then giving customers the opportunity to upsize,” Polk says, “they gain additional ounces and you gain additional profit.”