accustomed to fire sales on every kind of merchandise, from fancy dresses to gas-guzzling cars. Now, add another item to the list: the casual restaurant meal.
The informal, sit-down restaurant chains that blanket the nation are fighting their most intense price war in years. Applebee’s is offering dinner for two for $20. Ruby Tuesday is handing out coupons for two entrees for the price of one. Chili’s, not to be outdone, is promoting some entrees for $7 or less.
“It’s a tit-for-tat pricing war right now,” said Steve West, an analyst with Stifel Nicolaus, a brokerage firm in St. Louis. “Each one’s trying to outdo the other in a battle for consumers.”
The sit-down casual segment of the restaurant industry has traditionally competed more on advertising and location than price, but these days, the chains appear to have little choice. Consumers hurt by the recession are eating out less. So the restaurants are fighting one another for that shrinking pool of diners, using deep discounts, heavily advertised on television, to attract them.
The customers who do venture forth are delighted. “This is really an incentive for us to go out,” said Norma Rosado Blake, 38, an archivist, as she stood outside a T.G.I. Friday’s restaurant in Clifton, N.J., with her husband the other night, for an offer entitling her to $8 off.
But even as the chains compete to come up with the best deal, some of the analysts who follow them are worried. They fear that, as was the case with merchandise retailers that sold luxury goods for 80 percent off, the restaurants are hurting their long-term prospects by training customers to eat out only when they are offered a bargain.
“The problem with that is once you start dealing, you’ve got to deal forever,” said Harry Balzer, the chief food industry analyst for the NPD Group, a consumer marketing research company.
The heavy discounting is leading to tensions between the people who, as independent franchisees, operate many of the restaurants, and the corporate officers who control the brands, menus, advertising and strategy. The franchisees agree that discounts can get customers in the door, but wince at what they can do to profit margins.
A T.G.I. Friday’s promotion in April and May offering $5 sandwiches and salads led to a small-scale revolt among franchisees. Ross Farro, who has seven T.G.I. Friday’s restaurants in Ohio and Pennsylvania, said the promotion included salads that normally sell for as much as $10 and a steak sandwich priced at $11.89 on the regular menu. The ingredients alone for each steak sandwich cost about $4, he said.
The promotion brought in a flood of customers, but Mr. Farro said he could hardly afford to feed them. Within days of the promotion’s start in late April, many franchisees began complaining to the chain’s parent company, Carlson Restaurants Worldwide.
The promotion was supposed to run at lunch and dinner, but Mr. Farro said he and some other franchisees put away the $5 menu inserts at night to stop the bleeding
Franchise owners “were very upset that we’re getting hammered here, we’re giving the food away,” Mr. Farro said. In contrast, he said, another promotion offering two-for-one entrees had worked well.
Brad Honigfeld, chief executive of the Briad Group, which runs 69 T.G.I. Friday’s franchises in seven states, said he considered the $5 promotion a success because it greatly increased lunchtime traffic.
“My ultimate goal as an operator is I need to drive traffic, and if that traffic is going to Applebee’s or going to Chili’s, I need to take that traffic away,” Mr. Honigfeld said. “We are in a fierce competitive environment today.”
Unhappiness over the $5 deal has led some Friday’s franchisees to press Carlson for a rebate on royalties they pay the company. Carlson would not discuss the rebate issue.
“Like most promotions, the short-term economics were tough, but the long-term payoff comes from highly satisfied guests who become valuable loyal guests, which is critical for the health of our brand and franchisees,” Nick Shepherd, Carlson’s chief executive said in a statement.
The economic crisis has occurred at the worst possible time for the chains. For years they expanded rapidly. Technomic, a restaurant consulting firm, said that the number of chain restaurants devoted to casual dining (an industry term for midprice lunch and dinner restaurants that typically serve alcohol and have waiter service) rose to about 10,000 last year, from about 7,000 in 1995.
The economics worked in part because the chains steadily raised their prices. But some analysts said the quality of the food did not always keep pace — and as the economy soured, consumers began casting a skeptical eye on prices like $18 for grilled chicken breasts and $16 for herb-crusted tilapia.
“Restaurant prices were high, and in many cases the quality from a consumer perception just didn’t justify the pricing,” said Bob Goldin, an executive vice president of Technomic.
Now, forced by the recession into discounting, the chains are going beyond traditional advertising to get the word out. They are creating Internet clubs where people can sign up for coupons. T.G.I. Friday’s, which has nearly 600 stores in the United States, said it had signed up more than one million club members in less than a year.
One of those is Steve Mosior, 52, a Heineken sales supervisor. On a recent trip to T.G.I. Friday’s in Wayne, N.J., he took advantage of a two-for-one entree deal and used coupons for a free appetizer and a half-price drink.
“Coupons are found money,” Mr. Mosior said. But he added that once he is in a restaurant he will often buy items not covered by the discounts, such as dessert.
That is exactly what restaurateurs hope will happen. But Mr. West, the analyst, said it had not been happening enough. “These guys are coming in just for that deal, and they’re not buying the soda, they’re stiffing the waiter on the tip, they’re drinking water and they’re leaving,” he said.
Malcolm M. Knapp, a restaurant consultant who collects data from thousands of casual dining chain restaurants, said that preliminary figures for May showed that sales were down 6.7 percent from May 2008, when comparing restaurants that had been in business a minimum of 16 to 18 months. The number of customers was also down, but not as much.
“Dollar sales are decreasing at a faster rate than traffic because the promotions are bringing people in,” Mr. Knapp said. “But when you have deep discounts it takes much more traffic to have a positive sales situation.”
On a recent evening, an Applebee’s in Clifton, N.J., was nearly full. The manager, John Butcher, said that about 80 percent of his customers on a typical night were choosing the $20 promotion, which features two entrees and an appetizer (ordered a la carte, the items could total $31). Despite all the business, he said sales were down about 7 percent from a year ago.
Rick Hendrie, senior vice president for marketing at Uno Chicago Grill, which is offering a $9.99 meal of pizza, salad and dessert in some cities, said the deluge of competing discounts made it difficult to reach consumers. “In some ways it’s a real challenge because everybody is screaming the same thing: X number of items for $9.99 or less, or buy-one-get-one,” Mr. Hendrie said.
He also cautioned that some chains were discounting too deeply and risked hurting their brands.
“I believe, this is my own marketing philosophy, that you degrade your brand value if you’re saying, this is not worth but half,” he said. “At some point people go, ‘I guess it’s not really worth what they charge.’ ”
Tuesday, July 07, 2009
Friday, July 03, 2009
About 60% of consumers are concerned about the safety of food they purchase,
A new IBM (NYSE: IBM) study reveals that less than 20 percent of consumers trust food companies to develop and sell food products that are safe and healthy for themselves and their families. The study also shows that 60 percent of consumers are concerned about the safety of food they purchase, and 63 percent are knowledgeable about the content of the food they buy.
The survey of 1,000 consumers in the 10 largest cities nationwide shows that consumers are increasingly wary of the safety of food purchased at grocery stores, and their confidence in -- and trust of -- food retailers, manufacturers and grocers is declining.
The Debilitating Impact of Recalls
83 percent of respondents were able to name a food product that was recalled in the past two years due to contamination or other safety concerns. Nearly half of survey respondents -- 46 percent -- named peanut butter, the staple of school lunches for children across the nation, as the most recognizable recall. Spinach came in a distant second, with 15 percent awareness nearly two years after the incident.
Consumers are proving to be extra cautious in purchasing food products after a recall. 49 percent of the respondents would be less likely to purchase a food product again if it was recalled due to contamination. 63 percent of respondents confirmed they would not buy the food until the source of contamination had been found and addressed. Meanwhile, eight percent of respondents said they would never purchase the food again, even after the source of contamination was found and addressed.
These findings underscore how the rise in recalls and contamination has significantly eroded consumer confidence in food and product safety, as well as with the companies that manufacture and distribute these products.
Changing Consumer Behaviors
63 percent of respondents report they have purposefully changed their grocery shopping behavior in the past two years because they wanted better value for their money. And almost half have changed shopping behavior to access fresher foods (45 percent) or better quality foods (43 percent).
"Especially in today's economy, if consumers are going to pay a little extra for a branded or organic product, they want to be assured that they're paying for something different and better quality," said Guy Blissett, Consumer Products Leader, IBM Institute for Business Value. "Across the board, consumers are demanding transparency and more information about the food they purchase to ensure their safety and that of their families. As the government, industry associations, retailers and manufacturers work through the operational issues associated with ensuring food safety, we can each become more aware and take greater responsibility for the food we purchase."
Where is my Food From?
The survey found that over the past two years, consumer appetite for information about food products increased. 77 percent of consumers want more information about the content of the food products they purchase, and 76 percent would like more information about its origin. 74 percent are willing to dig deeper and seek more data about how the food products are grown, processed and manufactured. Despite industry efforts to keep consumers informed with more detailed product information, there's still a significant gap between consumer expectations and what retailers/manufacturers are providing.
The survey also found that consumers are spending more time poring over food labels to know which ingredients were used, questioning supermarkets and product manufactures about product detail, paying closer attention to expiration dates, and doing more in depth background checks on specific food brands and their origin. This will have an even bigger impact as the younger, more Internet savvy generation of consumers evolve into being the primary purchasers of groceries.
An estimated 76 million people in the United States get sick every year with food borne illness and 5,000 die, according to the U.S. Centers for Disease Control and Prevention. Food safety is top of mind for governments, retailers, manufacturers and consumers alike, and in fact, President Obama's proposed budget includes $1 billion for the FDA to spend on improving food safety. More than 600 bills addressing food safety have been introduced in state legislatures since January 2009.
"The ability to trace a contaminated product all the way back to the source of production is key to modernizing our food industry. It would also allow producers to more precisely identify the source of a problem in order to improve production practices and could help narrow the scope of recalls by more quickly identifying the specific plant or country of origin," said Caroline Smith DeWaal, director of food safety, Center for Science in the Public Interest.(1)
Are Food Retailers and Manufacturers Looking Out for Me?
55 percent of respondents trust food manufacturers when handling a recall in the event that a food product is contaminated, indicating a decrease in their level of trust over the past two years. Meanwhile, 72 percent said they trust the store where they buy groceries to properly handle food product contamination recalls.
57 percent of consumers report they've stopped purchasing certain foods, even for a short time, within the past two years due to safety considerations.
Take Responsibility: "Smart" Recommendations for Consumers:
• Seek out other concerned consumers: connect with those interested in food safety issues. Share information and insights with others.
• Make yourself known: Speak up and let your local grocery know you'd be interested in more information on the products they are selling and their origins. Grocers want to listen; they are in a very competitive marketplace. Research from IBM shows 75 percent of consumers are dissatisfied with their grocer.
• Ask your retailer: Assess who provides more information about the products they sell. This is being accomplished through in store kiosk and touch screen computers and brochures.
• Read the packaging closely: Some products are providing more information than ever, including specific details on the farm where ingredients were grown.
• Take responsibility: Leverage the Internet and visit consumer products company websites to learn more about the companies and processes behind the products you buy. Companies are providing a wealth of background information on their products to gain consumer credibility and shift consumer attitude.
Survey Methodology
IBM conducted a survey of adult grocery shoppers (once a month or more) in the 10 largest U.S. cities during June 2009. The study is intended to gather grocery shoppers' opinions about food safety issues. The survey was fielded by Survey Sampling International (SSI) using random samples from their managed online panels in: Atlanta, Boston, Chicago, Dallas-Forth Worth, Houston, Los Angeles, New York, Philadelphia, San Francisco-Oakland-San Jose, and Washington, DC. Cities were identified using Nielsen Designated Market Areas (DMA). There are 1,000 responses in the final dataset - 100 in each city. IBM was not identified as the sponsor of the study. The results have a 3.1-point margin of error overall (95% confidence level).
The survey of 1,000 consumers in the 10 largest cities nationwide shows that consumers are increasingly wary of the safety of food purchased at grocery stores, and their confidence in -- and trust of -- food retailers, manufacturers and grocers is declining.
The Debilitating Impact of Recalls
83 percent of respondents were able to name a food product that was recalled in the past two years due to contamination or other safety concerns. Nearly half of survey respondents -- 46 percent -- named peanut butter, the staple of school lunches for children across the nation, as the most recognizable recall. Spinach came in a distant second, with 15 percent awareness nearly two years after the incident.
Consumers are proving to be extra cautious in purchasing food products after a recall. 49 percent of the respondents would be less likely to purchase a food product again if it was recalled due to contamination. 63 percent of respondents confirmed they would not buy the food until the source of contamination had been found and addressed. Meanwhile, eight percent of respondents said they would never purchase the food again, even after the source of contamination was found and addressed.
These findings underscore how the rise in recalls and contamination has significantly eroded consumer confidence in food and product safety, as well as with the companies that manufacture and distribute these products.
Changing Consumer Behaviors
63 percent of respondents report they have purposefully changed their grocery shopping behavior in the past two years because they wanted better value for their money. And almost half have changed shopping behavior to access fresher foods (45 percent) or better quality foods (43 percent).
"Especially in today's economy, if consumers are going to pay a little extra for a branded or organic product, they want to be assured that they're paying for something different and better quality," said Guy Blissett, Consumer Products Leader, IBM Institute for Business Value. "Across the board, consumers are demanding transparency and more information about the food they purchase to ensure their safety and that of their families. As the government, industry associations, retailers and manufacturers work through the operational issues associated with ensuring food safety, we can each become more aware and take greater responsibility for the food we purchase."
Where is my Food From?
The survey found that over the past two years, consumer appetite for information about food products increased. 77 percent of consumers want more information about the content of the food products they purchase, and 76 percent would like more information about its origin. 74 percent are willing to dig deeper and seek more data about how the food products are grown, processed and manufactured. Despite industry efforts to keep consumers informed with more detailed product information, there's still a significant gap between consumer expectations and what retailers/manufacturers are providing.
The survey also found that consumers are spending more time poring over food labels to know which ingredients were used, questioning supermarkets and product manufactures about product detail, paying closer attention to expiration dates, and doing more in depth background checks on specific food brands and their origin. This will have an even bigger impact as the younger, more Internet savvy generation of consumers evolve into being the primary purchasers of groceries.
An estimated 76 million people in the United States get sick every year with food borne illness and 5,000 die, according to the U.S. Centers for Disease Control and Prevention. Food safety is top of mind for governments, retailers, manufacturers and consumers alike, and in fact, President Obama's proposed budget includes $1 billion for the FDA to spend on improving food safety. More than 600 bills addressing food safety have been introduced in state legislatures since January 2009.
"The ability to trace a contaminated product all the way back to the source of production is key to modernizing our food industry. It would also allow producers to more precisely identify the source of a problem in order to improve production practices and could help narrow the scope of recalls by more quickly identifying the specific plant or country of origin," said Caroline Smith DeWaal, director of food safety, Center for Science in the Public Interest.(1)
Are Food Retailers and Manufacturers Looking Out for Me?
55 percent of respondents trust food manufacturers when handling a recall in the event that a food product is contaminated, indicating a decrease in their level of trust over the past two years. Meanwhile, 72 percent said they trust the store where they buy groceries to properly handle food product contamination recalls.
57 percent of consumers report they've stopped purchasing certain foods, even for a short time, within the past two years due to safety considerations.
Take Responsibility: "Smart" Recommendations for Consumers:
• Seek out other concerned consumers: connect with those interested in food safety issues. Share information and insights with others.
• Make yourself known: Speak up and let your local grocery know you'd be interested in more information on the products they are selling and their origins. Grocers want to listen; they are in a very competitive marketplace. Research from IBM shows 75 percent of consumers are dissatisfied with their grocer.
• Ask your retailer: Assess who provides more information about the products they sell. This is being accomplished through in store kiosk and touch screen computers and brochures.
• Read the packaging closely: Some products are providing more information than ever, including specific details on the farm where ingredients were grown.
• Take responsibility: Leverage the Internet and visit consumer products company websites to learn more about the companies and processes behind the products you buy. Companies are providing a wealth of background information on their products to gain consumer credibility and shift consumer attitude.
Survey Methodology
IBM conducted a survey of adult grocery shoppers (once a month or more) in the 10 largest U.S. cities during June 2009. The study is intended to gather grocery shoppers' opinions about food safety issues. The survey was fielded by Survey Sampling International (SSI) using random samples from their managed online panels in: Atlanta, Boston, Chicago, Dallas-Forth Worth, Houston, Los Angeles, New York, Philadelphia, San Francisco-Oakland-San Jose, and Washington, DC. Cities were identified using Nielsen Designated Market Areas (DMA). There are 1,000 responses in the final dataset - 100 in each city. IBM was not identified as the sponsor of the study. The results have a 3.1-point margin of error overall (95% confidence level).
Thursday, July 02, 2009
Parents magazine released its list of the top 10 fast-casual restaurants
Parents magazine recently ranked the top 10 fast-casual restaurants in the foodservice industry in their July issue. The magazine based their list on nutritional value of the menu and in-store family-friendly conveniences, like having changing tables in the restrooms. Cosi took the top spot on the list, followed by Jason's Deli, Noodles & Company, Fazoli's, Panera Bread, ZPizza, Atlanta Bread Co., Corner Bakery Café, Taco Del Mar, and McAlister's Deli
Wednesday, July 01, 2009
A second-generation of hamburger chains is spreading across the U.S.
Scott and Don Harris, brothers and business partners, have spent 25 years in the burger business as owners of Wendy’s franchises.
When they were looking a few years ago to become franchisees of a new concept, the Harris brothers were drawn again to burgers. Last year they opened a Roswell outlet for The Counter, a California-based burger chain, and they plan five more in metro Atlanta in the next five years.
You can always go back to the hamburger as this one basic element of American society,” Scott Harris said. “Give me a great hamburger and you’ll have a following.”
Decades after Ray Kroc started a fast-food empire with a franchising deal for McDonald’s, a second-generation of hamburger chains is spreading across the United States and metro Atlanta. They offer slightly pricier burgers, typically $5 to $10 for their mainstay items, and feature hand-made patties from fresh-ground beef.
In the past three years, Five Guys Burgers and Fries, based in Virginia, has put almost 30 restaurants in metro Atlanta. Cheeseburger Bobby’s, a Kennesaw-based chain started last year, has four outlets in the area. It expects to add two more this fall.
Canyons Burger Company, based in Atlanta, has opened two outlets since 2007. It expects to open six to 10 units in metro Atlanta in the next three years. California-based Fatburger and Florida-based Evos also have entered the Atlanta market.
Hamburger chains represent the largest and still one of the fastest-growing restaurant segments in the United States, according to Chicago market research firm Technomic.
Last year, sales at limited-service hamburger restaurants rose 4.1 percent to $64 billion, Technomic reported. Only the sandwich and bakery cafe categories grew faster.
Burger outlets are growing on two different fronts, said Darren Tristano, Technomic executive vice president.
The traditional chains — McDonald’s, Burger King and Wendy’s — are broadening their menus with chicken sandwiches, beverages and breakfast fare, Tristano said. This has left an opening for a “better burger” category to emerge that focuses on a premium hamburger, he said.
The recession could slow down growth of the number of units for the new burger chains, Tristano said. Some customers might trade down temporarily to save money, he said.
But the long-term trends remain positive, Tristano said. “I don’t think it’s anywhere near a saturation point,” he said. “In fact, it’s probably five more years of good growth before you even begin to see it flatten.”
These new chains are not the first to take the burger up a notch. Fuddruckers, a Texas-based chain started in 1980, has eight metro Atlanta locations and still claims to have the “world’s greatest hamburger.”
Bob Stoll, co-founder of Cheeseburger Bobby’s with his brother Richard, said there is room in the market for new burger concepts as long as they’re well-run.
Cheeseburger Bobby’s tries to differentiate itself by using fresh ingredients and giving customers a topping bar that allows them to customize their own burger.
“I think people are willing to pay a little more for a quality burger,” Stoll said.
The Counter also allows for greater customization. Guests can choose from more than 50 different cheeses, toppings and sauces.
The traditional and new burger chains can both co-exist, said Scott and Don Harris, the Counter franchisees. They still own seven Wendy’s restaurants as well as six Panera Bread outlets.
The Counter offers a California-themed environment with bright beach colors and surfboards on the wall. Customers also can pair their burgers with beer and wine.
“I think it’s more about convenience when you go to Wendy’s,” Scott Harris said.
“This is more about experience.”
When they were looking a few years ago to become franchisees of a new concept, the Harris brothers were drawn again to burgers. Last year they opened a Roswell outlet for The Counter, a California-based burger chain, and they plan five more in metro Atlanta in the next five years.
You can always go back to the hamburger as this one basic element of American society,” Scott Harris said. “Give me a great hamburger and you’ll have a following.”
Decades after Ray Kroc started a fast-food empire with a franchising deal for McDonald’s, a second-generation of hamburger chains is spreading across the United States and metro Atlanta. They offer slightly pricier burgers, typically $5 to $10 for their mainstay items, and feature hand-made patties from fresh-ground beef.
In the past three years, Five Guys Burgers and Fries, based in Virginia, has put almost 30 restaurants in metro Atlanta. Cheeseburger Bobby’s, a Kennesaw-based chain started last year, has four outlets in the area. It expects to add two more this fall.
Canyons Burger Company, based in Atlanta, has opened two outlets since 2007. It expects to open six to 10 units in metro Atlanta in the next three years. California-based Fatburger and Florida-based Evos also have entered the Atlanta market.
Hamburger chains represent the largest and still one of the fastest-growing restaurant segments in the United States, according to Chicago market research firm Technomic.
Last year, sales at limited-service hamburger restaurants rose 4.1 percent to $64 billion, Technomic reported. Only the sandwich and bakery cafe categories grew faster.
Burger outlets are growing on two different fronts, said Darren Tristano, Technomic executive vice president.
The traditional chains — McDonald’s, Burger King and Wendy’s — are broadening their menus with chicken sandwiches, beverages and breakfast fare, Tristano said. This has left an opening for a “better burger” category to emerge that focuses on a premium hamburger, he said.
The recession could slow down growth of the number of units for the new burger chains, Tristano said. Some customers might trade down temporarily to save money, he said.
But the long-term trends remain positive, Tristano said. “I don’t think it’s anywhere near a saturation point,” he said. “In fact, it’s probably five more years of good growth before you even begin to see it flatten.”
These new chains are not the first to take the burger up a notch. Fuddruckers, a Texas-based chain started in 1980, has eight metro Atlanta locations and still claims to have the “world’s greatest hamburger.”
Bob Stoll, co-founder of Cheeseburger Bobby’s with his brother Richard, said there is room in the market for new burger concepts as long as they’re well-run.
Cheeseburger Bobby’s tries to differentiate itself by using fresh ingredients and giving customers a topping bar that allows them to customize their own burger.
“I think people are willing to pay a little more for a quality burger,” Stoll said.
The Counter also allows for greater customization. Guests can choose from more than 50 different cheeses, toppings and sauces.
The traditional and new burger chains can both co-exist, said Scott and Don Harris, the Counter franchisees. They still own seven Wendy’s restaurants as well as six Panera Bread outlets.
The Counter offers a California-themed environment with bright beach colors and surfboards on the wall. Customers also can pair their burgers with beer and wine.
“I think it’s more about convenience when you go to Wendy’s,” Scott Harris said.
“This is more about experience.”
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