VIEWPOINT: Lessons from the casual dining sector by NPD's Dominic Allport
The casual dining sector has been in the news regularly this year, with most headlines focusing on the challenges facing operators. The causes of stress are many and worth remembering in case something similar were to happen to the coffee sector.
But it is important to remember that, as a whole, casual dining continues to grow in Britain, with many casual dining operators – especially newer, challenger operators – continuing to focus on expansion. NPD’s CREST consumer panel reports visits growth up +6.4% in the 12 months to May 2018. This means that an additional 33m visits were made to casual dining restaurants compared to the previous 12 months.
This growth in visits is around three times faster than the visits growth seen in the quick service coffee sector, a sobering statistic for many people reading this article. As such, casual dining offers up some valuable lessons, both in terms of things to avoid doing, as well as things to focus on for success.
Similar to the wider hospitality industry, casual dining has been hit by a wave of rising cost inflation; business rates, rent and increases in food and labour costs. At the same time, sales growth has been hard to come by, due to oversupply and weak consumer demand. Combined, this will have put pressure on many operators’ profit margins, leading eventually to the CVAs (Company Voluntary Arrangements) and store closures that have featured so prominently in recent headlines.
Differentiate your offer
In terms of lessons for the coffee sector, then, what are the things to avoid? Two thoughts immediately spring to mind:
First, the rapid, large scale roll-outs of casual dining brands will have driven sector growth, but this ‘space race’ implies that, on occasion, quantity of sites might have been more of a consideration than the individual quality of sites. ‘Scaling up’ too quickly – before having the right infrastructure or processes in place for example - can be a high risk strategy for any operator.
Second, it is clear that a fundamental part of business success is having a brand proposition that can be easily understood and appreciated by the public. The casual dining sector, as is the case elsewhere, is perhaps guilty of having nurtured too many businesses that appear too similar. While the brand name might be different, what is offered to consumers can be somewhat similar; a similar menu, a similar venue and a similar customer experience.
So what are the key focus areas for continued success?
Win consumer loyalty
One thing uniting successful chains is having a clearly differentiated brand offer that is understood and trusted by consumers. Trust is a big consumer trend right now. In a world of post-truth politics and unsubstantiated media, consumers are gravitating towards brands that offer transparency, honesty and reassuring facts.
Consumers are also looking for a good quality experience when they go out and eat. The experience needs to entertain and offer a seamless, frictionless customer journey, from before they enter the store to long after they leave. Get this right – including an emphasis on delivering excellent customer service - and you will go a long way to gaining long-term customer loyalty.
Of course, having a credible value offer is up there as probably the most important trend, particularly as consumers show signs of cutting back on eating and drinking out. But don’t assume that just offering the lowest price, or an enticing array of discounts, is the answer.
Along with brand clarity and a good customer experience, combining value with a menu that emphasises quality and healthier options will probably be the most likely route to success.
- Dominic Allport is Insights Director at the NPD Group and has over 20 years research experience, with a particular focus on retail, foodservice and FMCG. He has provided consumer insight, competitor intelligence and strategic recommendations to many leading retailers, manufacturers and financial institutions in the UK and abroad.