You could say the business forecast for the restaurant industry is as rosy as a vodka blush sauce. Research conducted by the National Restaurant Association, the leading business association for the restaurant industry, indicates that consumers will continue to allocate more of their food dollars to meals outside of the home. Currently this figure hovers around 40 percent, but Hudson Riehle, senior vice president, research at the National Restaurant Association, estimates it will hit an unprecedented high of 50 percent within the next few years.
And the economic impact of this consumption trend on the spending power of the restaurant industry will be significant, Riehle points out. “For every consumer dollar spent in restaurants,” he explains, “another $2 is spent by restaurants” to service customers and grow their businesses. The restaurant industry, on average, spends $183 billion annually on food and beverage purchases alone, he adds.
So just how many sites are we talking about? The National Restaurant Association reports as many as 925,000 restaurant/food service operations in the United States, which employ 12.5 million people. “The restaurant industry is the second largest employer in the United States, after the government,” says Edward J. Mueller, publisher of Chicago trade publication Chef magazine. And it’s a business sector, he informs, that is aggressively promoting women and minorities into management positions.
Who’s the Boss?
Beyond the fact that more women and minorities are assuming decision-making roles in the restaurant industry, marketers interested in selling to this sector need to consider other factors that affect who is likely to be running the business.
For example, the National Restaurant Association tracks more than 39 different industry segments—from sole proprietorships to multi-unit chains to individual franchisees, and from fine dining establishments to ice cream parlors to pizza stands. Each business model and corporate structure is different, and so are the primary contacts and business needs.
Of these 39 segments, however, one restaurant type dominates: More than seven out of 10 eating-and-drinking places are independent operations, and of these independents, seven out of 10 have fewer than 20 employees, says the association. At these restaurants, the head chef is likely also the owner, and thus the chief decision maker. Sometimes sole proprietors have investment partners who help with business plans and operations; others hire business managers.
From Bread to Business Loans
Regardless of who calls the shots, Riehle says that some challenges in the industry are shared by all restaurant owners, and they are, in order of importance: employee recruitment and retention; rising energy costs; and growing the business. Given that hiring and staff turnover leads the list, it’s no surprise that research from the National Restaurant Association indicates more than one out of four tableservice operators will increase the portion of their budget allocated to training in 2006. And it’s just as logical that 56 percent of table service operators have purchased energy-saving equipment in the past two years.
But the range of offers that appeal to restaurateurs expands from the operations side of the business to the individual’s passion for food. Nancy Spielmann, senior account executive at list management and brokerage firm Statlistics, reports that everything from cookware to credit cards to high-end food magazines do well with this audience. And, she notes, depending on the type of list selected, the offer even could be for some waterfront property. “Nation’s Restaurant News goes to the franchisee/chain store owner set. You could have a realtor somewhere in … Iowa who wants to bring a chain into the area,” she explains.
Liz Jackson, an account executive with list management and brokerage firm MeritDirect, manages the Restaurant Hospitality magazine list. The kinds of continuations she sees tend to be from food industry magazines and trade shows, office supply firms, HR resources, specialty food purveyors, computer hardware/software companies and, of course, banks.
But not all promotions are B-to-B in nature. “Consumer and promotional items catalogs are good for this market,” says John LoGuidice, senior list manager at Edith Roman Associates, a list management and brokerage firm that manages the Restaurant Business magazine file. Take into consideration that the majority of restaurant owners are small business owners, he explains, and so might get ideas for, say, a floral arrangement for their tables, from a consumer catalog. Some out-of-category continuations on Restaurant Business’ file do suggest that restaurant owners have a variety of interests that can be explored; both Bicycle Health magazine and Smith & Hawken catalog have mailed at least a second time to this audience.
On the business front, two areas that seem ripe for offers are Web marketing and loyalty program development/management. Research from the National Restaurant Association shows that 31 percent of consumers have used the Internet to view a restaurant’s menu, up from 12 percent in 2000. To remain competitive, restaurant owners will find it important to host a Web site and spend money on services that help them present an attractive and perhaps interactive site to lure diners and loyal customers. And with 48 percent of tableservice operators that offer gift cards expecting this portion of their business to grow in 2006, this trend provides a good opportunity for companies that help companies manage their gift-card services to increase their penetration into this market.
A Five-course Media Plan
Restaurateurs have a full plate on a daily basis, especially those that run individual locations. “Restaurant managers are notoriously pressed for time,” Riehle says, “and although they understand the importance of marketing to grow their sales, in many instances these individuals focus on the more demanding challenges of the moment”—such as what to do about a nationwide ban on bagged spinach when spinach salad is one of the most popular items on their menu.
He continues: “Smaller mom-and-pop operators tend to be at their restaurants for much of the day, so it helps to develop relationships with these prospects.” If you’re selling to a more franchise- or chain-oriented restaurant, then understand that many spending decisions are dictated by the corporate headquarters, or at least by a regional or district executive.
Since this market puts in long hours, it can be hard to get your message in front of them. For this reason, a multichannel approach is recommended. “One telemarketing call, one e-mail or one direct mail piece can fall by the wayside,” says LoGuidice. Of the marketers Jackson sees developing multichannel campaigns, she points out that most pair e-mail with telemarketing or direct mail follow-ups. And she reports that those marketers using e-mail are getting good clickthrough rates.
Spielmann emphasizes that the focus of these small business owners’ livelihoods also tends to be their life’s passion. While most postal addresses on the files she manages tend to be their office location, there are chef- and food-oriented lists on the market that feature more home addresses for restaurateurs. In the case of Art Culinaire, a high-end magazine for chefs that is hardbound and costs $59 for four issues, subscribers receive the publication at home rather than risk ruining the issues with stock or sauces in the kitchen—or even the chance that another member of the waitstaff will purloin their copy, she explains.
A final piece of advice for reaching this market: “Don’t try to do business—especially phone calls or in-person sales visits—during peak meal times,” says Riehle. These professionals have to squeeze in their business management activities when the restaurant is quiet, such as the early morning or late night hours, making direct mail, e-mail, Web sites and space ads in magazines good tools for helping restaurateurs make the most of their “down time.”