Grab Market Share

The Bad News
According to the National Restaurant Association, there is one restaurant for every 662 people in the U.S. Based on the following, there will likely be a few to fall off this year:

- surcharges due to increased fuel costs
- proteins increasing due to feed costs
- dairy prices increasing due to feed
- average American families eating out less due to increased gas, tighter budgets
- don't even want to think about minimum wage increasing

Technomic forecasts a 2.1% increase in restaurant sales nationwide this year, a figure that also assumes a 4% increase in menu prices. Guest traffic is down, mainly due to frequency of visit (207 outside meals per year vs. 211 two years ago).

The Good News
The above data (it's data only, not information) assumes that the pain will be spread equally, that everyone is in the same boat. Not true.

A scenario: a family of four eats out an average of four times per month. They rotate between four restaurants that both the kids and the parents enjoy (or at least can tolerate). Their economic circumstances cause them to cut back to twice per month.

Which is more likely:
a) they continue the same rotation of restaurants, each getting a visit from them every other month (decreasing the restaurants' revenue by half); or
b) they eliminate the restaurants they merely tolerated, continuing to dine at the restaurants they truly enjoy (no effect on two of the restaurants)?

Most of us will consolidate our dollars, meaning two restaurants have no share of wallet and the other two are unaffected. It's human nature.

Clearly, customer service, perceived value, and overall experience are critical at this point in time.

But what of the restaurants that lose their customers? If they don't survive the downturn, where will their existing customers go?

Now is the time to grab market share. Total number of customers is more valuable now than overall profitability (I said profitability, not profits - read on).

Would you rather have 4,000 customers with a profit margin of 14%, or will you settle for 3,000 customers but cling to your 16% margins?

4,000 x $10/week x 25 weeks = 1,000,000 x .14 = $140,000 profit
3,000 x $10/week x 25 weeks = 750,000 x .16 = $120,000 profit

This is at a time when people are eating out less. Use the same figures in a better economy:

4,000 x $10/week x 35 weeks = 1,400,000 x .14 = $196,000 profit
3,000 x $10/week x 35 weeks = 1,050,000 x .16 = $168,000 profit

And if you can gather those customers, and that frequency, without purchasing media you'll save another 2%-3% toward your bottom line. The next Local Store Marketing Newsletter provides suggestions for doing just that.