Sponsored by Conagra Brands
Facing rampant inflation and rising menu prices, restaurant customers are changing their dining habits—but in a different way than they have done before.
In the past when the economy was rocky, patrons tended to order fewer or cheaper menu items in restaurants or trade down to lower-priced restaurant segments. Today, many are reducing the frequency of their restaurant occasions but are still demanding a full dining experience with high-quality foods and all the add-ons when they dine out.
In fact, when Technomic polled consumers as to which of their behaviors were most likely to change due to menu price inflation, 45% said they would cook at home more often while 29% said they would use restaurants less often. Compare that to the 14% who said they would order fewer items or lower-priced items and the 12% who said they would patronize less-expensive restaurants. The conclusion is that customers are not more price sensitive than they were before the pandemic, and they still maintain high expectations for the dining experience.
Seizing opportunity
This signals a major opportunity for restaurant operators to attract patrons who want a full dining experience and improve their profitability in the process. There are two primary ways to do so.
One is to encourage customers to bundle add-ons into their meal that enhance the experience as well as boost checks and margins. For instance, adult beverages, appetizers, and desserts all had year-over-year growth on menus Q2 2021-Q1 2022, according to Technomic.
Another powerful way to please guests and hike margins is to build the menu with high-quality, value-added products that help operators get the most out of kitchen crews that are typically shorthanded and less skilled since the pandemic. To address the labor situation, 30% of operators say they are using more value-added products, Technomic reports.
Leading examples of value-added products include heat-and-serve frozen pancakes, waffles, and French toast. They allow even understaffed and inexperienced kitchens to produce breakfast and brunch items that consistently look and taste great with minimal labor.
In another example, operators can use high-quality, plant-based meat and poultry alternatives to create meatless specialty dishes to engage the many consumers who want to eat less meat. And when it comes to beverages, they can use convenient foam toppers to make eye-catching specialty coffee drinks that do not require barista skills to execute.
Cooking sprays also add value. They save operators time and labor by reducing food waste and equipment cleanup time. These products also ensure nonstick cooking and baking performance and, in some cases, add flavor to recipes.
Countering rising costs
Using more value-added products, along with streamlining back-of-the-house operations, are vital moves operators can make to counter rising food and labor costs and ongoing supply chain headaches.
Celebrity chef David Burke, who operates 19 restaurants ranging from New York City to Saudi Arabia, vouched for the importance of rightsizing menus in a recent Nation’s Restaurant News article. He said that instead of the 12-14 main courses and appetizers that were formerly typical of his menus, he is now offering just eight of each—provided they are fresh and seasonal. “Therefore you need less staff and have lower food cost because everything sells better and is turned over quicker,” says Burke.
Repairing crushed margins
Even with such moves, turning a profit today is difficult given the spiking costs and margin compression operators have faced since COVID. When Datassential asked operators what their three leading concerns were, they cited packaging costs that have jumped on average 18% in the last six months along with food costs up 17% and labor costs up 12%. Not surprisingly, average margins across all segments have declined from 21% before COVID to 13% today, Datassential reports.
“There's no doubt why their margins are crushed,” said Jack Li, executive chairman of Datassential, speaking in the Datassential One Table 2022 webinar. “They're afraid to pass along a lot of these prices to their customers. So that's just the reality they live in right now.”
To ease the crunch, 17% of operators said they will transition toward more premade products, versus 9% who will transition toward scratch preparation and 74% who will maintain their current food prep system, according to Datassential. Li summed it up: “There's a real appetite to move towards more convenience-oriented product formats because of the environment we're in.”
Operators can find solutions to today’s business challenges in the Conagra Foodservice portfolio, which includes value-added products such as Krusteaz® waffles, pancakes and French toast, Gardein® Ultimate Plant-Based Products, PAM® cooking sprays, and Reddi-Wip® Barista Series foam toppers. Visit www.conagrafoodservice.com for details.
