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In the battle for customers, service matters

In the battle for customers, service matters

Leading brands do better when it comes to service and retaining employees, TDn2K says

Want more customers? Keep your managers and focus on service.

That’s the lesson from workforce and information firm TDn2K, which presented Sunday at MUFSO. Amid growing concerns of industrywide weakness, brands that do a better job of keeping managers and focusing on service see better sales.

“Turnover does cost you in sales and traffic and customer satisfaction,” said Wallace Doolin, chairman of TDn2K.

Turnover at the top-performing brands is 11.2 percent lower than their industry segment overall. Struggling brands report management turnover of 10.6 percent higher than their segment overall.

Service also matters: The top-performing brands were less likely to receive negative service scores on social media. In a case study comparing social media scores between a top-performing brand and a bottom-performing brand, the biggest difference was in service.

“That’s a huge, huge, huge story about how important service is,” said Bob Rycroft, managing director of TDn2K.

The recommendations from TDn2K, parent company of restaurant industry same-store sales tracking firm Black Box Intelligence, come amid weakening same-store sales.

Same-store sales have fallen for three straight quarters. The industry is currently fighting a market-share game, not just with restaurants, but with grocery stores and other retailers.

“We’re overbuilt,” Doolin said. “There’s too many restaurants. If you see that restaurants are closing, that’s why they’re closing. There was a tremendous amount of growth before the recession. Then the recession came, and restaurants closed, but not enough.”

Doolin added that leases kept many restaurants open that should have been closed. And many restaurants are burdened with “poor performers” that are “dragging their results down.”

Recently, industry same-store sales peaked in the first quarter of 2015, “one of the strongest quarters we’ve seen in recent years,” Rycroft said. But sales have been trending downward since. The last positive quarter was the third quarter 2015.

But the industry has been weak for years. Since 2008, the restaurant industry has generated positive sales through higher prices, while traffic has declined. Cumulative same-store sales over the past eight years have risen only 0.2 percent.

Meanwhile, traffic has fallen 13.3 percent over that time, while average check has climbed 13.5 percent.

“Traffic has been down consistently every year,” Rycroft said.

The recent weakness has been broad-based. Only two of six segments that Black Box Intelligence tracks reported positive same-store sales in the most recent quarter: quick service restaurants and upscale casual. Same-store sales in the casual-dining segment fell 1.5 percent, and declined 1.1 percent at fast-casual concepts.

Traffic has fared even worse. Four of five brands in the index are reporting negative trends so far this year, according to Rycroft.

“Few brands have positive traffic trends,” he said.

The top-performing brands are more likely to have positive online review scores. For instance, 72 percent of scores are positive on Google for top-performing brands,
compared with 66 percent for bottom performers.

Similarly, nearly 51 percent of top performers’ Yelp scores are positive, compared with 44 percent for bottom performers. And top-performing brands have twice as many social media mentions as bottom-performing brands.

“Top performers have more social buzz,” said Kathleen Buehler, senior director of operations at White Box Social Intelligence. “Traffic is higher. More people are in their restaurants, posting and sharing about the brands. And brands are doing things to encourage social conversation.”

Top-performing brands have fewer negative value mentions — meaning that fewer reviews say the brands are “too expensive” — than do poorer-performing brands. And top-performing brands have lower average checks than other concepts in their segment.

The top-performing brands also have turnover that is 23.5 percent lower among hourly employees, and 21.8 percent lower among management, than low-performing brands.

“Management turnover is most correlated with results,” said Victor Fernandez, executive director of insights and knowledge at TDn2K.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

TAGS: Finance News
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