Mapping a Route Through Industry Saturation

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By Dustin Minton and Vince Stasiulewicz, BDO USA, LLP

At times, learning how to manage in an oversaturated market can feel like trying to drive on a crowded highway during rush hour. In the moment, roadblocks and traffic may slow you down—but what matters most is that you ultimately reach your destination.

Pump the Breaks

Market saturation in the industry is limiting same-store sales growth despite macroeconomic positives like job growth. According to BDO’s The Counter, same-store sales decreased on average through Q3 2016, with public companies reporting same-store sales decreases of 0.1 percent. As a result of capacity growth and labor constraints, expect 2017 to see a continued softening of same-store sales and higher labor costs driven by minimum wage hikes and the rising cost of benefits. While this may seem like a reason to flash your hazards, remember outliers working to overcome recent setbacks may be temporarily keeping segments down.

Merge with Caution

Just because traffic is slow doesn’t mean you shouldn’t travel at all. Instead, use your blinker to find your space in the flow. Keeping your restaurant relevant shouldn’t require a huge spend; start by implementing little changes. When’s the last time you refreshed your menu? Simple changes to menu selection—such as healthier ingredients— can be a cost-effective way to encourage customers to keep coming back.

Other often-overlooked areas for improvement can be found in staffing and technology upgrades. Ensuring your staff is as competent as possible can be the difference between a one-time and repeat customer. Additionally, switching outdated technology for upgrades like tabletop tablets can add efficiency to the business and excitement to the customer’s visit. For many, it’s about the experience as much as it’s about the food, so if the visit is not exceptional, consumers may not be willing to pay a premium price—or any price at all.

Find Your Fast Lane

Perhaps you’ve already found your perfect menu, and the service can’t be beat. So what’s your differentiator? Rather than staying on cruise control, it’s time to take advantage of what sets your restaurant apart.

When looking at examples of success stories, think about chains that are filling underserved niches or departing from industry norms. Pret a Manger, for example, stands out as a result of its promise of always being natural, fresh and “ready to eat.” That, combined with consistently friendly staff, keeps customers loyal. Additionally, Blaze, the fast casual pizza chain, sets itself apart by fast-firing custom pizzas in 180 seconds at a lower price point than traditional pizza chains. Though these strategies may not be a perfect fit for your business, these are just a couple of examples of how carving out your role in the industry can set you up for success.

The fast casual segment is currently the most optimistic in the industry and, often, traits that make fast casuals trendy provide a unique opportunity to create a niche by nature. The generally better price points, fresher and higher quality food options, improved efficiency and better user experiences are bringing the customers in, so why should they come back? Discover your differentiator to get through the bottleneck.

Arriving Safely

When the industry feels like a congested highway, take a step back and evaluate your business for ways to improve. Look for built-in differentiators to take your restaurant to the next level while keeping in mind that little changes can result in big improvements. Much like being stuck in a traffic jam, if you focus on arriving safely versus the bumps in the road, you’ll get to your destination in no time.

This post originally ran on Fast Casual.

 

This article originally appeared in BDO USA, LLP’s “Restaurant Selections News” newsletter (Spring 2017).  Copyright © 2017 BDO USA, LLP.  All rights reserved. www.bdo.com

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