Reading the headlines lately — or if you’ve been following along with our Weekly Wraps — you might think that restaurants as we know them will soon be a thing of the past. Tariffs are killing margins, consumer confidence is shaky, and traffic is down across the board. Chipotle just revised its sales forecast downward, citing inflation and economic uncertainty. French fries are under threat from a tariff-fueled canola oil crisis. And full-service chains like Hooters, Red Lobster and TGI Fridays are filing for bankruptcy amid declining foot traffic and rising costs.
The majority of the casual sit down dining sector is in a free fall, save for Chili’s, whose value focused menu is driving a boom in sales. Several quick-service/fast-casual operators are struggling, though there are glimmers of hope in that sector; Wingstop announced massive growth and revenue and profit increases, Taco Bell also saw Q1 increases. But these are the outliers; the majority of the restaurant industry is stressed and uncertain.
We’ve been here before. After 9/11, the Great Recession, and the Covid-19 pandemic, it felt like we wouldn’t make it. But we’re still here. Not without losses, of course — there are definitely scars. But in each instance grit, innovation, and ingenuity got us through.
Today’s challenges are legitimate. The National Restaurant Association estimates tariffs could cost the industry over $12 billion, forcing operators to raise prices or cut costs. That’s no joke, and we will likely see real attrition from what’s happening right now.
But here’s the thing: with all the adversity and gloom, there is opportunity. Independent restaurants are adapting by exploring new revenue streams, like ticketed events, pop-ups, prepaid memberships, and exclusive tasting menus. Chains like Chili’s are streamlining menus, focusing on value, and enhancing customer experiences to stay competitive. Even amid a challenging year, fast-casual brands like Cava and Wingstop have seen growth in same-store sales and traffic. And even though they may have the capital and resources well beyond most mom-and-pop spots, there’s so much to learn and take away from how these brands are approaching this moment. Here are a few places to start.
1. Offer a Unique Value Proposition
Chili’s takes a unique approach to a value menu with its “3 for Me” deal of a beverage, starter, and entree for $10.99. But it recently deployed an even more unique approach to its marketing. With its ‘Big Smasher’ meal deal, the casual dining chain made a direct play for McDonald’s, claiming their burgers have “twice the beef of a Big Mac” at a comparable price. It was the first time I had ever seen a casual dining establishment treat a quick service restaurant (QSR) as a competitor (most similar establishments avoid the comparison like the plague). But it paid off, and the proposition of casual restaurant quality at QSR prices really appealed to consumers. For regular operators, finding an item or items that offer a great value proposition can be key. In an area where every steak is $45-60, you might offer an alternative cut at a far lower price (think hanger steak). Or if your competition is charging $14-17 for signature cocktails, you can offer $11-13 signature cocktails without drastically altering your beverage COGS.
2. Invest In Your Staff
I can’t speak enough about the importance of valuing your staff. Cava invests heavily in their staff via training. And a well-trained and well-treated staff will benefit your business as much as if not MORE than having good food and design. And it’s not just training your staff members, but actually valuing them with how much you pay. Cava pays their team at the top end of industry standard range. It’s one thing to tell your staff you appreciate them, it’s another to tell them you appreciate them and then pay them more to show you value them. A happy, friendly staff makes for better guest experience and in turn more repeat guests.
3. Use Tech to Your Advantage
Wingstop has leaned heavily into tech — with a proprietary digital platform, personalized, data-driven marketing, and integration with third-party services — as a way to streamline and drive sales outside the traditional manner. And it’s worked. A large portion of the tech spend has been towards digital sales, which now account for about 65 percent of Wingstop’s business. Savvy operators can use technology to automate, connect, and streamline day-to-day business, and can focus more attention and resources on their digital presence. But be careful not to become overly reliant on these tools. The key is using technology to enhance — not replace — the human touch that defines hospitality.