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 As a seemingly never ending wave of new restaurants open in an attempt to try and satisfy an ever hungry dining public, a stark fact or two should give us pause for consideration.
Consumers are a bit nervous. They hear the news about recession. The stock market and their 401k are well into negative territory and to make it worse they have trouble seeing past their neighborhood's “For Sale” signs and notices of foreclosure auctions. Despite a very gloomy economic picture, the American consumer remains pretty consistent in their dining habits. A typical American consumes an average of four restaurant meals per week (and that's from 2002 study). This is an increase of 23% from just a few years earlier. It's data like this that causes the restaurant industry to continue to open as many restaurants as possible to gain market share in this buoyant dining market.
In my local town 6 new restaurants have opened in the last year alone. If each only takes a modest million to 2 million dollars a year in revenue that's at least a 10 million dollar addition out of the local economy. Where exactly does all that money come from? Not from buoyant stocks and increasingly valuable home equity or increasing salaries. It comes from the existing discretionary income of busy, time strapped folks who would rather eat out than find the instruction booklet for their unused high-end stove in their unused gourmet kitchen (a whole other subject for me).
If the economy gets worse and I suspect that it might given the $109 a barrel price of oil, then what? Well here's the bad news. Studies have shown over and over that as belts tighten, it's the discretionary income that suffers first. If you have to pay $4 for a gallon of gas, it has to come from somewhere. You can't skip paying the mortgage, but you can skip a visit to an expensive restaurant and go to one of the national chains instead. As belts tighten consumers become more sensitive to value and look to avoid what might be considered spending frivolous amounts on money on their weekly dining budget.
If you are with me so far then you probably are wondering what do I propose we do? The answer is pretty complex. Not investing another couple of million in a new restaurant might be a good idea for now. If you already own one, then realizing the true mood of the public might give you a significant clue.
Some of the hottest new restaurant concepts are those that promise value pricing, with a good atmosphere and great, friendly customer service. If you are paying $50 plus for an entree then you absolutely expect to be waited on hand, foot and finger. What's great is when you find a comfortable place, with reasonably priced good food and friendly service. The average consumer is going to find something else to give up (maybe the $5 lattes) before they give up on a enjoyable and affordable dining experience. In reality, many Americans see restaurants as an extension of their homes, a sort of food annex. That's a concept that can be leveraged.
Next time I will take a look at marketing and how you can market into a down market. Oddly, now is the time to spend dollars on promotion not cut back, but more on that later.
P.S. Just an aside - get rid of that $7 bottled water – nothing proves to a consumer that you and your restaurant are out of touch with reality than when you offer them a bottle, from half way around the globe that is the same stuff that comes out of our taps for just pennies. Even if you care nothing for the huge carbon footprint it creates and the fact that it tastes the same as the filtered water in your restaurant, why continue to look like you have lost touch with economic reality?
Please note: This article and all of our editorials are prepared in good faith. They represent my opinion and my opinion alone, bolstered by facts that I have researched and gathered from a variety of sources. However they are also incredibly biased to promote my opinion and support my arguments. Please don't base any significant business decision on what you read here, without consulting an appropriate professional advisor.
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Ignore the economy at your peril 
