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Restaurant traffic, even in stronger segments, turns negative

Arby’s and Taco Bell executives share strategies to give consumers what they want

Restaurant industry traffic continues to be weak, and will only grow weaker unless operators start giving consumers more of what they really want, according to officials at market research firm The NPD Group.

“The industry is just not addressing the needs of the marketplace,” said NPD analyst Bonnie Riggs. “The drivers, the incentives … they’re just no longer there.”

According to the latest research from Port Washington, N.Y.-based NPD Group, restaurant industry traffic turned negative in the latest quarter, marking the fourth consecutive quarter of weak traffic and the first time the industry has experienced quarter after quarter of weakness since the recession.

Every segment is feeling the impact, including quick service, which had bolstered the industry’s modest traffic growth in previous quarters. Traditional quick-service outlets were able to hold steady, while quick-service retail turned negative, with the exception of convenience stores, which continued to post traffic gains. Meanwhile, fast casual performed slightly stronger in the last quarter, but for the year remains below its unit growth of 7 percent.

“It’s too much price, not enough value,” Riggs said. “Not enough incentive to appeal to lower income groups, people who are still very cautious [about spending].”

Traffic would have been even weaker were it not for deal activity, Riggs said. In the last quarter, deal traffic increased 3 percent, while the majority of traffic not on a deal declined 2 percent. With the average quick-service deal check coming in at $5.84, only 16 cents less than the average non-deal check, what’s out there just isn’t a huge incentive for consumers, she added.

On the brighter side, consumers made 61.8 billion visits to restaurants in the year ended May 2017.  Many of the visits occurred during the breakfast daypart, the only meal occasion to post any traffic gains. Still, Riggs noted that breakfast growth has slowed as well.

While there were many declining categories, some quick-service-oriented segments grew traffic. Last quarter, Coffee/Donut/Bagel, Asian and Mexican were among the industry’s top-growing categories.

“It’s uniqueness,” Riggs said. “A lot of [the brands in these categories] are making a lot of innovations, satisfying a need.”

Leading the way

While traffic growth continues to elude many chains, some are bucking the trend. Below, Taco Bell and Arby’s executives share what’s driving customers and keeping sales and traffic positive.

Arby’s

Arby’s emphasizes quality and value

Arby’s has been outperforming many of its competitors in part through a strong focus on delivering innovative menu items that it said meet consumer desire for “quality, abundance and variety.”

“What we’ve found is that our guests are willing to purchase menu items with quality, variety and abundance, at a competitive price,” said Paul Brown, Arby’s CEO. “For menu items like our Smokehouse Porkbelly sandwich, or the Triple-Thick Brown Sugar Bacon that is in restaurants now, for example, we’re offering an alternative to restaurants where you would have to sit down and pay a much higher price for a sandwich of the same quality and abundance.” 

Arby’s is not only serving unique, premium sandwiches at competitive prices, it’s also offering them, and other new products, more often. Since 2013, Arby’s has been introducing on average about 14 limited-time offers a year, up from an average of six per year previously, according to Brown. Among the chain’s most recent limited-time offers was The Liger, a striped milkshake made with orange cream and Ghirardelli chocolate that was available through June. 

The innovation-centric strategy has been paying off in increased sales and transactions. During the first quarter, Arby’s same-store sales grew 1.3 percent, and rose 7.6 percent on a two-year basis. The more-than-50-year old quick-service sandwich chain has reported 26 consecutive quarters of same-store sales growth and 12 consecutive quarters of transaction growth.

Also helping to drive sales and transaction growth is Arby’s progress in remodeling existing restaurants and adding locations in a new design, as well as a successful “We Have The Meats” marketing campaign that Brown said “continues to resonate with Arby’s meat-loving guests.”

Taco Bell

Taco Bell taps customer cravings

For Taco Bell, knowing its customers and their culture is a large part of what’s behind the success of the quick-service chain, which is responsible for nearly all of the growth in the Mexican category. 

“A big piece of it is understanding what consumers are looking for — youth culture,” said Melissa Friebe, Taco Bell senior vice president of brand marketing and Insights Lab. “We continue to mine culture, talk to consumers and dream up ideas.” 

Among the things Taco Bell sees its consumers looking for are unexpected yet familiar products, convenience and value. Having a menu structure that is like a “house of sides” is one way the chain says it’s able to keep offerings affordable and interesting.

“The size of our products are made for the price point and lifestyle of consumers today,” Friebe said.

Additionally, while other quick-service chains have eliminated dollar menus, Taco Bell has stayed with its $1 price point option and continued to offer items it says consumer want, such as a Beefy Fritos Burrito and Shredded Chicken Mini Quesadilla.

And when it comes to ideas, Taco Bell keeps ’em coming. In February, it tapped into the growth of chicken with limited-time Naked Chicken Chalupas, a taco made with a fried, all-white-meat chicken shell stuffed with shredded lettuce, diced tomatoes, Cheddar cheese and creamy avocado ranch.

“These are things that are definitely helping,” Friebe said.

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