July 4th is perceived by most Americans as the beginning of the summer season, in addition to the celebration of the country’s independence. This year, were predicted to travel 50 miles or farther from home during the July 4th holiday, the highest number since AAA (American Automobile Associations) began tracking the statistics in 2000.
When more Americans are on the road, more patrons can be expected in hotels and restaurants. For the restaurant industry then, is the record-breaking number of travelers during the July 4th holiday a good indication of a prosperous second half of 2018?
Restaurant predictions for rest of 2018 by CNBC’s
According to , the restaurant industry can expect the following in the second half of 2018:
- Mobile ordering becomes more critical. Delivery (or “mobile ordering + delivery”) will continue playing an important role in restaurant operations. Domino’s Pizza, for instance, who is already ahead of other restaurants in mobile ordering, are now delivering items to hot spots, such as a concert or special events.
- Value wars will continue. Examples include McDonald’s dollar menu and the afternoon discounts at Starbucks, a case of how dynamic pricing strategy works in restaurants. Casual dining restaurant chains, such as Olive Garden and Apple Bee’s, also offer value meals.
- Innovation is the key, especially in areas of marketing and menu development. A good case in point is the IHOB ad for IHOP.
For the most part, I agree with Kate Rogers’ predictions, but when I look deeper, I feel concerned about the casual dining restaurants.
I do not think it is fair to blame at the Millennials for killing casual dining chains, but I believe that the shifting preferences among consumers, some of which come from the Millennials, are the reasons why quick service restaurants are performing better than casual dining restaurants in the market. Referring to Kate Rogers' predictions, I would say:
Mobile ordering works better for quick service restaurants
Mobile ordering technology allows consumers to minimize their human interactions with the service staff and at the same time, empowers them to take control of the ordering process. The design or the concept of a quick service restaurant limits the utilization of mobile ordering. First of all, most people still expect to be served by real human beings in a casual dining or a fine dining restaurant. Yet, there are already minimal human interactions in quick service restaurants. It is hence easier for consumers to switch their behaviors --- rather than asking someone to click a few buttons for them, they can place an order by themselves in a kiosk or with a mobile device.
By design, quick service restaurants are not the place for people to hang out or get together. Most people visit a quick service restaurant for a quick bite, usually by themselves or in a small group. Mobile ordering can help restaurants speed up the service and avoid human mistakes during the ordering process.
Quick service restaurants tend to have relatively simple menus for a specific type of food (e.g., burgers, sandwiches, or tacos). It is not difficult for consumers to negative a simple menu even if they are not familiar with what the restaurant offers. Mobile ordering will not become a big challenge for consumers even when they receive no assistance.
Some casual dining chains, such as Chili’s and Applebee’s, have already placed a tablet on every dining table in the restaurants, which also enables consumers to place orders without talking to a server. Such tablets are not designed to cut labor costs, however, as consumers are probably not ready to eliminate all human contacts in a casual dining restaurant. Instead, they could be a good source of revenues through the paid gaming services that come with the devices.
It is easier for quick service restaurants to compete with price
When it comes to “value meals,” McDonald’s dollar menu will probably come up to the top of consumers’ mind, but casual dining restaurants are also embracing this trend. Last year, Chili’s Grill and Bar introduced a new menu with fewer items (cutting from 125 items to 75, or 40%), including such value items of $6.99 half-pound burger and fries. So far, Chili's new and trimmed-down menu has brought in some positive changes to the restaurant chain.
I am glad to see a "cleaner" menu with fewer items in general but more value items are working for Chili’s. Yet, I am still feeling somewhat skeptical about the value positioning of the casual dining restaurants in the market. To me, it does not seem realistic for them to compete with quick service restaurants with price, especially when both the labor cost and gas price are the on the rise.
Who is doing better in innovations? Quick service or casual dining?
Staying innovative is no doubt the key to a business’ long-term success, but which sector is doing better? Quick service or casual dining restaurants? Through my own observations of how new technology is adopted in the hospitality industry, quick service restaurants are slightly ahead as compared to the casual dining chains.
What is offered in casual dining but not in quick service restaurants
I am positive that casual dining restaurants are also working very hard to win customers. They have tried mobile ordering and have added new value items to the menu. They also want to stay innovative. Yet, they are still struggling in the market in terms of same-store sales.
Maybe, it is time for casual dining restaurants to reassess the very basic question: Why people want to eat in a casual dining restaurant? For better quality of food? For the service provided? For the atmosphere? Or for the dining experience?