The restaurant industry is facing an ongoing wave of
disruptions, shaking the foundations of once-thriving chain brands according to
Steven Johnson Grocerant Guru®
at Tacoma, WA based Foodservice Solutions®.
The post-pandemic landscape has only intensified a pattern
that has been unfolding for years—one of brand migration, pricing wars, renewed
channel competition, and stagnant messaging that fails to resonate with today’s
consumers. What we’re seeing is not just a continuation of pre-existing trends,
but an acceleration into more challenging waters.
Brand Migration: Consumers Seek New
Experiences
Brand migration, where consumers shift from established
chains to new or alternative dining formats, continues to rise. Chains that
dominated the scene a decade ago now face stiff competition from innovative
local eateries, meal kits, and grocerant options. As of 2023, data shows that
nearly 45% of consumers choose to frequent non-traditional outlets like grocery
store meal sections, meal delivery services, or fast-casual brands over
traditional chain restaurants.
This migration is driven by a desire for better
personalization, fresher options, and value-added experiences that many legacy
brands have failed to deliver. As Steve
Johnson, the Grocerant Guru®, pointed out in 2019, the undercurrent of
consumer movement from dining-out to eating-in is only getting stronger.
Consumers increasingly seek the convenience of mixing and matching meal
components, curating their dining experiences from multiple sources. According
to a recent study, nearly 55% of consumers now actively bundle meals across
various channels, whether it’s getting sides from a grocery deli and entrées
from a restaurant, or mixing takeout with homemade items.
Menu Pricing Wars: Short-Term Gains,
Long-Term Pain?
In response to shrinking margins and rising operational
costs, chain restaurants have engaged in aggressive menu pricing wars. Dollar
menus and extreme discounting, while drawing in foot traffic temporarily, have
not led to sustainable growth. In fact, some experts argue that it erodes brand
equity and damages consumer perception in the long run.
From 2020 to 2023, nearly 40% of national chain restaurants
introduced limited-time offers (LTOs) and deep discounts, hoping to regain
market share. But these tactics often fall flat. A survey by Technomic found
that nearly 60% of consumers who switched to these deals didn't remain loyal to
the brand once the promotion ended, citing dissatisfaction with quality and
portion size. This short-term focus on discounting at the expense of innovation
in menu design is leaving many brands stuck in a cycle of temporary spikes in
traffic, followed by prolonged periods of stagnation.
Channel Competition Intensifies
Renewed competition from alternative channels—like grocery
stores, meal delivery apps, and fast-casual outlets—has heightened pressure on
legacy chain brands. The rise of grocerants (grocery restaurants), which blend
retail and restaurant formats, continues to siphon customers away from dine-in
and quick-service restaurants alike.
Consumers are increasingly choosing grocerant meal
solutions as a way to have fresh, ready-to-eat options without the perceived
hassle of traditional dining. In fact, grocerant sales have climbed 7.2%
year-over-year in 2023 alone, while the restaurant industry's overall growth
rate has stagnated around 1.8%. This competition isn’t going away; rather, it’s
pushing restaurants to innovate their own off-premise and to-go offerings to
stay relevant.
Stagnating Brand Messaging: Lost in
the Noise
One of the most critical issues facing chain restaurants is
the failure to evolve their messaging to match consumer desires. Many brands
are still relying on outdated messaging, positioning themselves as value-based
or focusing on nostalgic themes that no longer resonate with today's
forward-thinking customers.
According to a 2023 industry report, 68% of consumers feel
that restaurant chains are out of touch with their needs. Brands like
Applebee’s and Chili’s, which once led the industry with clear, differentiated
messages, are now struggling to convey relevance in a crowded market. The
demand for transparency, sustainability, and culinary innovation has never been
higher, yet many chains are failing to adapt. The risk is clear: stagnation in
brand messaging leads to a loss of consumer connection, pushing once-loyal
diners to explore fresher, more authentic alternatives.
Think About This: The Road Ahead
As we move further into 2024, the challenges facing chain
restaurants are clear. Consumer migration, fueled by a desire for
personalization and convenience, shows no signs of slowing down. Pricing wars
may temporarily buoy sales but could inflict long-term damage on brand equity.
Renewed channel competition from grocerants and fast-casual formats is
reshaping the dining landscape. Finally, outdated and stagnant messaging risks
leaving brands in the dust of more agile competitors.
Restaurants must not only address these challenges but
actively work to innovate across the board—from their menus to their brand
communication strategies. The future of dining is dynamic, and brands that
remain static in their approach will struggle to survive.
Foodservice Solutions® specializes in
outsourced business development. We can help you identify, quantify and qualify
additional food retail segment opportunities or a new menu product segment and
brand and menu integration strategy. Foodservice Solutions® of Tacoma WA is the global leader in the Grocerant niche
visit us on our social media sites by clicking one of the following links: Facebook, LinkedIn, or Twitter
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