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Can the restaurant industry learn from retail's mistakes?
CJ Gaffney, director of Strategic Planning, Partners + Napier, believes there are several lessons reastaurants can take from their retailer predecessors to avoid falling into what he calls, "the ugly middle."
October 25, 2019
By CJ Gaffney, director of Strategic Planning, Partners + Napier
The "ugly middle" never lasts. Not in retail, and not in restaurants. What we're seeing right now is a very similar situation that the retail industry faced in 2008 — too many options and not enough money to go around. Those that survived this over saturation in retail were split on one of two sides of the spectrum: either they focused on speed and efficiency or on delivering an elevated experience.
Now, as Eugene Lee, the chief executive of Olive Garden's parent company recently reported, we have restaurants growing at twice the rate of the population. A similar contraction is likely.
The parallels between the restaurant and retail industries have been well-covered, but we wanted to find out what restaurants can do about it in order to be successful. We talked to some of the thought leaders in the restaurant industry to find out what's working, what's not, and what we can expect next. The good news is that there are several lessons restaurants can take from their retailer predecessors to avoid falling to the ugly middle: know the power of human connection, diversify your revenue streams, and differentiate from competitors.
The power of human connection
Walk into a McDonald's, and you'll likely place your order on a touch-screen kiosk. The chain started rolling out kiosks in 2015, and plans to open 1,000 kiosks per quarter through 2020, in an attempt to win back nearly $2.7 billion in lost sales. However, a recent poll shows that diners aren't fans of the kiosks: 78% of customers said they would be less inclined to go to a restaurant that has automated ordering kiosks.
Why wouldn't a fast-food customer want to get their food even faster? Because people go to restaurants to feel taken care of. They're outsourcing that service, and by removing the human interaction entirely, customers are not getting the experience they've been conditioned to expect.
Domino's, on the other hand, is a different story. You can order online or via your favorite smart assistant, but you get to know the name of the person making your pizza. Then you can use the tracker tool to follow your pie's journey from the moment it's prepared to the moment it hits your doorstep. They're using technology to improve an otherwise impersonal order and delivery process—providing a level of transparency that makes customers feel more connected.
Diversifying revenue sources
LA-based Moon Juice is a great example of diversification done right. Owner Amanda Chantal Bacon realized earlier than most that juice shops were no longer a sustainable business model — they had become elitist, overpriced and oversaturated. But rather than shutting her business and moving on, Bacon took stock of what made her business buzz-worthy. Her packaged supplement powders were selling really well and had a strong following, so she created a wholesale herbal supplement business in addition to her shops, with fantastic results.
Differentiating from competitors
Strong branding is a great way to differentiate in a crowded category — and that starts with a brand promise that is made and kept. That promise should ladder up to a purpose that unites the front of the house and the back of the house, for an experience that stands out for customers.
BurgerFi, a fast-casual chain that launched in Florida in 2011, has been able to break through the burger clutter and become one of the fastest-growing food chains in the U.S. by using a strong product differentiator to create a higher purpose. They promise to use beef sourced from the top 1% of all beef worldwide. The purpose that unites them is that their burgers are not towering clichés of meat and cheese — they're one-of-a-kind, just like the people they make them for.
Every restaurant has an opportunity to adapt either by connecting more deeply with customers, diversifying or differentiating.
