By Chris Elliott, Senior Economist (Nov. 23/15) These are challenging times for the foodservice industry. With sales showing signs of a slowdown, operators are also experiencing rising food and labour costs. According to the latest data from Statistics Canada, foodservice sales moderated to 2.7% growth in August. Adjusted for menu inflation, real sales fell by 0.1% representing the weakest growth in nearly two and a half years.
A new survey of nearly 1,000 Canadians reveals a few innovative ideas that may help operators grow their traffic.
Off-peak time discounts
One way to bring in more traffic is to offer a price discount during off-peak times – in other words, non-traditional breakfast, lunch or dinner hours. Customer interest in dining at off-peak times increases dramatically once you move beyond a 10% discount.
When asked the likelihood of dining out if menu prices during those times were 10% lower, 9% of Canadians said they were ‘definitely likely’ or ‘very likely’ to try. A 20% discount is of interest to 31% of Canadians while a 30% discount would be of interest to 60% of Canadians.
A 30% discount appealed to 65% of 18 to 34 year olds, compared to 58% of Canadians 50 years of age or older. A 30% discount is also most popular in Atlantic Canada where 69% of respondents were interested.
Fully prepared meals
Another possibility is offering fully-prepared food that just needs to be heated up at home. This is similar to prepared meals at grocery stores where customers heat up the food in their own ovens. This is a convenient solution for customers who don’t have time to eat out at a restaurant, but who still want to enjoy restaurant-quality food.
When asked the likelihood of purchasing fully-prepared meals, only 4% of Canadians would be interested if the price was the same as in the restaurant. If there was a 10% discount, 7% of Canadians would be interested in this type of promotion.
If the discount climbs to 20%, then 22% of respondents would be interested. A discount of 30% would attract the biggest interest with 43% of Canadians.
While discounts of 20% and 30% are of interest to most Canadians, the reality is discounts that size can put a strain on most operators given the razor-thin profit margins. You will have to consider whether the surge in traffic will offset the decline in price.
In the coming years, operators will need to come up with new and creative ways to bring in customers. Restaurants Canada’s latest industry forecast calls for average commercial foodservice sales growth of 3.5% per year between 2016 and 2019. Adjusted for menu inflation, real sales will grow just 1.1% per year – a pace that is in line with overall population growth. But you can grow your business by capturing market share from other establishments that don’t have this information at their fingertips, or that don’t act on it.
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