The 2019 industry forecasts are out and the consensus seems to be that 2019 will be a lot like 2018, with industry sales +3-3.5%. I have two concerns about these projections: 1) little if any of this growth is forecasted to be due to traffic; and 2) all of the key economic indicators (e.g. consumer confidence, inflation, unemployment, personal disposable income) are at very favorable levels. So I think there is a risk that things could “slip”. Now is the time to plan what you will do if there is a downturn.
Given the very real cost pressures, especially on labor, some say that +2.5-3% pricing will be needed this year just to hold margins. Smart brands are looking hard at the cost side in order to avoid this level of pricing.
Given these real business conditions, I want to offer a recommendation that should serve your restaurant well, regardless of what happens with the economy:
I recently attended Jefferies Winter Summit in Vail where I heard a number of C-level leaders of both established and new brands share about their business. One major takeaway that stuck with me is the importance Value plays in the strategy of winning brands.
Darden CEO Gene Lee – who feels strongly that it is their job to give consumers a compelling reason to dine out – spoke of how they reduced discounting at Olive Garden, while placing an increased focus on delivering everyday value. Their latest promotion “Never-Ending Stuffed Pasta” is an example of this. Price is a factor for Olive Garden, but far from the only factor: “It’s how we make (the guest) feel” that matters. I was impressed by the number of ways they are pursuing value to maintain their competitive edge. I admire this brand’s track record of success and consider OG to be “America’s Full Service Restaurant” today.
BJ’s is another brand that compiled an impressive string of “winning” quarters in 2018. CEO Greg Trojan emphasized “balancing BJ’s value equation across their menu”. The brand has rolled out successful daily specials, favorable afternoon/late night offerings, and often pulsed in their proprietary “Pizookie”; at the same time have had major success with menu pricing and their premium slow-roast line-up. Net, they are delivering value on both the high and low end. BJ’s has been methodically making ongoing investments in their restaurants to enhance the overall guest experience. They now have a plethora of strategic “levers” that they can pull to address value, based upon business conditions.
Case in point – Tomorrow, February 20th, is free Pizookie Day! Be sure to get yours, minimum purchase required. Full details and locations can be found here.
Beyond these two success stories, there have been recent articles on how Chipotle “has room for higher pricing”. Could Chipotle’s resurgence be at least in part be due to offering good/great value? Chili’s “3 for $10” promotion has struck a chord and helped to create one of the few full service brands with positive traffic. I like how these brands are positioned on value heading into 2019, and it will be great to see how they perform.
Offering a strong value proposition is an essential core strategy to winning business results – whether the economy keeps rolling along or if it hits a “speed bump”. Furthermore, there are many ways of delivering value; how YOU do it is what’s important. Then Marketing needs to determine how to best communicate it to the guest.
Winning brands today have a strong value proposition. Defining your brand’s unique value proposition requires innovation; sticking to the approach used over the past year or two leaves you at risk of losing valuable ground. If your team is not actively innovating today on how to enhance your brand’s overall value proposition, I recommend you do so. I would be happy to help …just contact me.
For 15 years, Growth Partners has provided outsourced Chief Marketing Officer consulting to restaurant companies. I am a fresh set of eyes for current CEO’s/ CMOs, as well as a Part-Time or Interim CMO for concepts looking to grow their businesses and brands. Follow me at here or at @growthpartnersllc.
The examples you provide to support the main point are very compelling. Thanks Neil. This was a nice piece.