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NRN 50: Profitably late

Restaurants burn the midnight oil to capture lucrative market share

After midnight, stomach-growling night owls seeking flavorful authentic Mexican food show up at Tampa’s popular Taco Bus restaurant hungry for chicken burritos, beef tacos and veggie tostadas.

Late-night hours weren’t always in place at the Taco Bus, though. The “bus,” located on busy Hillsborough Avenue north of downtown Tampa, used to serve its popular Mexican dishes only until 9 p.m., which meant Taco Bus fans, including cops and partygoers, had to find late-night grub elsewhere.

But about a year ago, the Taco Bus went round-the-clock — and revenue soared, said chef-owner Rene Valenzuela.

Tapping into the potentially lucrative late-night and early-morning market of hungry third-shift employees, clubbers and snack-seeking locals has developed into the next frontier for restaurants.

For Valenzuela, expanding to a 24/7 operation meant revenues have increased a whopping 25 percent.

“To me, [extending hours] was a no-brainer from the business perspective,” said Valenzuela, who owns another Mexican restaurant near the University of South Florida in Tampa and is set to open a new Taco Bus in St. Petersburg, Fla., in January 2011.

“All your fixed costs like rent are already paid for by your first or second shift,” Valenzuela said.

A number of restaurant chains also have made strategic forays into the wee hours hoping to lure customers and generate revenues.

Taco Bell, based in Irvine, Calif., rolled out its Fourthmeal campaign in 2006 as a ploy to create a meal between dinner and breakfast. Taco Bell also reached out to musicians and bands to promote the campaign in its “Feed the Beat” program, figuring the musical late-night rockers could use a “fourth meal.”

Jeff Houck, food writer for the Tampa Tribune, said those efforts tap into the under-25 demographic.

“Taco Bell, which requires very little food preparation or cooking, can serve customers relatively quickly at drive-thru windows,” Houck said. “It does well because it requires the bare minimum of staffing.”

Last year, the Minneapolis-based Buffalo Wild Wings chain joined the fray with its “Late-Night Snack Menu,” available from 9 p.m. to close on Sundays through Thursdays and featuring such $3 items as Mozzarella Sticks, Chili con Queso Dip, Mini Corn Dogs, Chips & Salsa, and Regular Onion Rings.

Another chain that considers itself an expert in luring late-night diners is Denny’s, the 1,600-unit family-dining chain based in Spartanburg, S.C.

The 10 p.m. to 5 a.m. market is “very lucrative,” said John Dillon, Denny’s vice president of marketing. “We realize it’s an important part of the business, which is why there are so many competitors.”

Dillon said the chain’s “$2 $4 $6 $8 Value Menu” is ideal for appealing to hungry late-nighters, who range from factory third-shift employees to teenagers coming from parties.

“A lot of the items are tailored to late night,” he said, citing the All You Can Eat Pancakes and the Fried Cheese Melt, each of which costs $4, Dillon said. “[Late-night customers] are looking for good value.”

Houck said a market’s demographic and the restaurant’s food specialty determine the viability of late-night operations.

“Large-market cities like New York, San Francisco or Chicago already have well-established, locally owned, quick-serve restaurants that serve deep into the night. In those markets, chains tap into suburban customers,” Houck said. “In mid- and small-market cities, chains specifically target college-age customers with late-night offerings and low-dollar menu items.”

Indeed, Dillon of Denny’s said college towns are ideal because “clients stay up later,” and he noted that future Denny’s promotions may be geared toward colleges.

The lucrative daypart isn’t without some downsides, however. The Tampa Tribune’s Houck noted that staff members need to be mature and capable enough to handle the post-nightclub customer stream and the security risks that come with being open late.

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