NEW YORK - A new AlixPartners study suggests that the U.S. restaurant industry is bracing for another year of disappointing growth, as dining frequency is expected to drop slightly or remain flat over the next 12 months.
According the global business-advisory firm, restaurants €" no longer able to count on growth solely by opening new locations €" are facing a new reality that requires strategic brand differentiation, innovation in marketing and continued cost management.
"Moving forward, growth will be achieved through fierce competition for market share, or 'stomach share,€™ across and within segments in the restaurant industry. The winners will be those who have a firm grasp on the key drivers and influencers of consumers€™ dining choices, and implement targeted programs designed to drive growth in an uncertain environment," said Adam Werner, managing director at AlixPartners and co-lead for the firm€™s Restaurant & Foodservice Practice.
The AlixPartners Restaurant & Foodservice Industry Review gauged consumers€™ anticipated dining behavior and the drivers of dining choice across the quick-service restaurant (QSR), fast casual, casual, fine dining and convenience store segments.
State of the Restaurant Industry
The study reveals that the restaurant industry has struggled in the past few years, as consumers who continue to lack confidence in both the overall economy and their personal situations cut back on discretionary spending. Brutal price competition across and within all segments, coupled with spikes in most major commodity costs (e.g., beef, cheese, pork, fuel), made for a continuing difficult operating environment in 2011. The industry has seen an uptick in fine dining as corporate travel has increased, while value-seeking consumers have been trading down from casual to fast casual, QSR and convenience stores.
Convenience, Value and Quality Are Key
As restaurants pursue new strategies, AlixPartners suggests that it is important to keep in mind that food quality is still No. 1 for consumers. But not far behind on the pecking order is their demand for a balance of high-quality, on-the-go options with convenience, value pricing and variety.
The survey showed that 65% of consumers view food quality and taste as the most important area of potential improvement and innovation, followed by customer service, at 37%, and menu variety and healthy options, at 27% and 26%, respectively.
"Food quality is still king, and will need to be a central focus of any restaurant€™s strategy and brand positioning," said Kurt Schnaubelt, a director at AlixPartners. "We€™re starting to see innovative efforts around food quality from QSR restaurants, but convenience stores are the ones to really watch in 2012."
Over the past year, convenience stores increased their focus on quality food and beverage offerings €" and consumers took notice. According to the survey, across all segments, c-stores were the only segment to see an increase in traffic. Significantly, the survey also found that c-stores are evolving into a destination for buying food €" in the survey 46% of consumers visited c-stores to buy a meal.
"You can expect a lot more than a hot dog and a slushy from convenience stores today. The creative ones are now offering made-to-order sandwiches, improved coffee and tea programs, and even items like sushi," said Schnaubelt. "Both QSR and fast casual need to recognize the c-store threat and will need to up their innovation to protect against further encroachment."
Read more insights from the AlixPartners Restaurant & Foodservice Industry Review.