The restaurant industry, walloped by the recession, is going beyond the traditional two-for-one deal or free beverage in an effort to attract diners. These days, restaurants are partnering with entertainment venues, hair salons and even education companies to offer customers discounts unheard of even a year ago.Shorts."
"I can't ever recall these kinds of incentives to get traffic through the door," said Bonnie Riggs, an analyst for NPD Group and a 28-year veteran of the restaurant industry.
That's because the $556 billion industry, across all 70 distinct segments, hasn't seen this kind of consumer-spending pullback in nearly three decades.
"We would have to go back to the early 1980s to see this magnitude of weakness in the restaurant industry," Riggs said.
Sales at fine-dining spots have been hardest hit, down 14% year-to-date, while family-style restaurants such as Denny's and Cracker Barrel have seen sales retreat by 6%. Casual-dining restaurants such as Olive Garden, Applebee's and T.G.I. Friday's are off 4% overall. Fast-food restaurant sales have slumped only 2%, thanks in part to consistent gains at two ubiquitous chains, McDonald's and Subway.
And with the jobless rate at 9.4%, businesses that are tied closely to work -- think grab-and-go breakfast, lunch and happy hour -- are declining by double digits.
Certainly high unemployment, consumers' current penchant for saving, and the overall loss of household wealth have packed some powerful punches, but the industry faced some challenges even before the recent downturn.
Growth in the dinner segment, for example, has been weak since 2002 as more women chose to stay at home with their children, Riggs said. "When female participation in the labor force started to level off, so did the growth in take-out meals," she said.
That put the industry in heavy coupon drive as a means of attracting customers. With the double-whammy of the recession, smaller chains like Häagen-Dazs that have never had national promotions are now turning to them. The ice cream shop is promoting its Sorbet Sipper, a summer refreshment whose sales were dormant in recent years, as an affordable luxury.
"People are just happy to get something for a couple of bucks," said Dawn Uremovich, the president of the company's store division.
Dinner, plus a half-price movieAt larger chains, customers are now looking for more value than a complimentary glass of wine or for the kids to eat free.
"Operators have become quite innovative at seeking new partners to promote with, which under normal economic times they may not have considered," said Hudson Riehle, the senior vice president of research at the National Restaurant Association.
He said operators are much more focused on their core customer and aligning their promotional and marketing activities to that demographic group.
McCormick & Schmick's sees its "Reel to Reel" program as a way of putting its seafood chain top of mind the next time a customer is thinking about dinner and a movie.
"Consumers are spending less and demanding more," said Bill Freeman, the chief executive of McCormick & Schmick's. "Our challenge is to find ways to connect with our customer in a broader, more lifestyle-driven manner.
"As long as we are providing them value that they appreciate and not just value that we think is important, it puts us in a better light with them," he said.