Evok Advertising - COVID-19 Impact on Restaurants · 2020. 3. 20. · COVID-19 Impact on...
Transcript of Evok Advertising - COVID-19 Impact on Restaurants · 2020. 3. 20. · COVID-19 Impact on...
Executive Summary
The restaurant industry we knew prior to the COVID-19 pandemic is vastly different from the one we are in today.
In a matter of months, the global spread of COVID-19, or coronavirus, has impacted or effectively transformed
nearly every sector and business. The restaurant industry is amongst those hit most severely.
Prior to COVID-19, foodservice sales soared, fueled by a positive economic climate and the combination of convenience
and excitement that restaurant dining experiences offered. As the pandemic unfolded, the idea of eating at a
restaurant went from delightful to dangerous.
From “social distancing” protocols asking customers to refrain from public places, to more stringent food safety
measures, restaurant operators must stay up to the minute on the latest developments surrounding the pandemic.
Successful operators will need to adapt to evolving consumer preferences and behavior as they relate to what they
expect from restaurants during a global pandemic, the growth of off-premise dining, timely marketing strategies,
robust app-based loyalty programs and more.
This state of the industry report covers areas of focus as they pertain to the restaurant industry, inclusive of trends,
best practices and opportunities to combat losses, recover revenue and capture market share even as diners are
slow to place their trust in establishments. Based on these findings, this report also includes our predictions for
emerging avenues for growth and what is next for the industry.
T A B L E O F C O N T E N T S
04
08
13
17APP-BASED LOYALTY PROGRAMS & MOBILE ORDERING
NAVIGATING COVID-19’S IMPACT ON THE RESTAURANT INDUSTRY
OFF-PREMISE DINING: DELIVERY, TAKEOUT & CATERING
RESTAURANT MARKETING STRATEGIES DURING COVID-19 PANDEMIC
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Navigating COVID-19’s Impact on the Restaurant IndustryINTRODUCTIONRestaurants are where people come together. At least, they were until the COVID-19 pandemic forced eateries
to close their doors to prevent the spread of the disease and allow for social distancing. Before COVID-19, the
restaurant industry was projected to outpace at-home food spending, new establishments were popping up at a
furious pace, and one of the biggest challenges operators faced was finding and retaining workers during a labor
shortage. As 2020 progressed, these projections have been replaced with daily operations turned upside down
and never-before-seen strategies to stay afloat during difficult times.
While full-service restaurants have been hit the hardest due to a lack of drive-thrus and more room to catch up
with delivery and takeout programs, limited and quick-service restaurants have also seen the pandemic’s impact
reflected on their revenue. As we look at the coming months and the long-term implications of the pandemic,
our team identified opportunities for restaurants to capture market share and recover sales.
SITUATIONAL ANALYSIS
67%48%
of diners trust independent
restaurants over chains
18%of consumers want to hear about
restaurants’ employee-focused
initiatives, including healthcare
and competitive payof consumers say offering all employees benefits is the top way to show brands are
socially responsible
23%
of consumers want to hear about
community or charitable giving
BY THE END OF 2020, THE FOODSERVICE
INDUSTRY IS PROJECTED TO LOSE
$240 BILLION
IN REVENUE AND MORE THAN
8 MILLION EMPLOYEES
42% OF DINERS
want to hear about food safety and
sanitation from restaurants
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OPPORTUNITIES
Short Term: Bring New Experiences into Consumers’ HomesThe experience of eating at a restaurant is one of the main drivers in dining decisions. With limited opportunities
for indoor dining in some areas, capacity limitations and a portion of consumers not quite ready to come back to
public spaces, operators must find ways to bring the restaurant experience to homes across the country. A few
of the trends we have watched emerge during the pandemic include:
“Take and make”
Restaurant meal kits have been a hit with diners and offer a win-win for operators, allowing restaurants to prep
orders at high volumes while giving customers a fun alternative to dining out.
Virtual cooking classes
From fine dining to bars, hosting online cooking or mixology classes via social media or live streaming allowed
establishments to remain top of mind with consumers, even if they were not able to visit in person.
Restaurant grocers
To offset lost revenue from on-premise dining, some restaurants allowed customers to shop raw ingredients
from their inventory. This proved especially successful as grocery stores struggled to keep shelves stocked.
Reopening: Shine a Light on Safety and SanitationBefore COVID-19, cleanliness and sanitation practices were important parts of running a successful restaurant.
During and after the pandemic, these practices are and will continue to be integral to driving sales. Consumers
want to know your eatery is taking the necessary precautions and will be critical in ensuring their business goes
to restaurants with a focus on safety.
As guests demand tighter procedures, transparency will be key to winning their confidence. Customers must be
able to see precautions being taken first hand. Whether it’s handwashing and sanitation stations throughout your
establishment, mobile waitlists to prevent crowding, or single-use condiments, measures must be comprehensive
and clear to see. Consider posting signage outlining the steps you are taking to protect customers and limiting access
or providing alternatives to high-touch surfaces like kiosks, self-serve beverage fountains and credit card readers.
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Long Term: Focus on Employee WelfareWhen choosing where to eat, brand ethics play an important role in consumer decisions. After food quality and
promotions, consumers want to hear about restaurants’ community or charitable giving, as well as employee
benefits such as healthcare and fair wages. In fact, 61% of consumers agree offering all employees benefits is
the top way for brands to show they are socially responsible.
During the COVID-19 pandemic, consumers used their wallets to demonstrate their values. These consumers want
to support brands and companies who “pay it forward” to their communities and their workforce. Restaurants
must demonstrate a genuine desire to care for their employees and their safety, with genuine being the key word.
Whether it is by enforcing the wearing of masks inside their locations, practicing social distancing in dining rooms
or focusing on the physical and psychological wellbeing of their staff, leading with ethics can prove essential not
only during the pandemic but also beyond it.
WHAT’S NEXT: CONTINUED COMMUNITY SUPPORT
If there is the faintest silver lining to the COVID-19 pandemic, it can be seen in the way communities rallied
to support local businesses during challenging times. In the U.S., 66% of consumers say they try to buy from
local companies whenever possible, a mission which has helped keep countless local restaurants in business
even at the height of the pandemic.
As the global crisis unfolded, restaurants took to social media and community groups to ask for support
to survive drastic drops in sales. Even as mandates allowed for dining rooms to open in some areas, locals
continued to give their business to smaller operations. While the fact that 48% of diners trust independent
restaurants over chains may have contributed to the ongoing support, we can expect to see communities
continue to rally behind smaller brands.
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Off-Premise Dining: Delivery, Takeout & CateringINTRODUCTIONEven before the COVID-19 pandemic led restaurants to prioritize takeout and delivery as a means to recoup
revenue during quarantine periods, a surge in off-premise dining had already begun revolutionizing the
restaurant industry. An area once reserved for pizza delivery and cold cut catering, food-on-demand trends
have elevated consumer expectations. Convenience and consistency have become the two pillars of a
successful off-premise strategy. In fact, “virtual restaurants” with no storefronts and no servers continue
to pop up, existing only inside mobile apps.
SITUATIONAL OVERVIEW
UPSERVE REPORTS:169% increase in the number of restaurants
actively using online ordering from February–April 2020
840% increase in weekly online ordering sales
3,866% growth in online ordering in large suburbs
RESTAURANT DELIVERY was the most popular
product purchased online during the pandemic
REAL-WORLD RESULTS: Shake Shack launched “Shack Track” stores with drive-thrus
and walk-up windows and grew total revenue by
8%
70%
year-over-year increase in meal delivery
spending in the last week of March 2020
60% of U.S. consumers
order delivery or takeout at least once a week
TOP THIRD-PARTY FOOD DELIVERY SERVICES
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OPPORTUNITIES
Off-Premise Dining Continues to Rule As consumers came to rely on delivery and curbside pickup throughout the pandemic, they will continue to have
high expectations for off-premise food quality, convenience and low prices. Restaurants should prioritize these
key value drivers with off-premise offerings as much as on-premise options.
While a large number of diners ordered off-premise meals pre-pandemic, with safety concerns and limited
seating capacity, it’s expected to continue representing a large part of orders for months to come. Even as social
distancing guidelines ease, diners will be hesitant to flock to restaurants, meaning takeout, pickup, and delivery
will continue to be necessary options for consumers and vital revenue streams for operators with low capacity.
Fast-casual chain, Shake Shack, announced in May 2020 that it would turn some locations into “Shack Track”
stores—modifying exteriors by adding drive-thru lanes and walk-up windows to accommodate social distancing
requirements and allowing for quicker takeout. Since announcing this addition, Shake Shack’s total revenue
increased by 8%.
Developing and Enhancing a Delivery Model
Adopting a delivery model is not a question of if, but when. Operators are facing a crossroad—keep delivery in-house
or outsource to a third-party service? When deciding whether to join a third-party delivery system, like UberEats, or
starting your own delivery service, it’s important to look at what will provide the most value for your business.
Eliminating startup cost barriers while mitigating liabilities, third-party delivery services have opened the door for
operators to enter the delivery market with minimal upfront investments. These delivery services, many of which
are app-based to cater to consumer demand for mobile ordering capabilities, leverage an existing customer base
and brand recognition to increase revenue potential and reduce staffing and labor requirements for restaurants.
However, while many restaurants have embraced third-party delivery services, the 20–30% commission fee
discourages some operators from joining. Brands have increasingly encouraged diners to order directly from
restaurants instead of through a third-party app to try to cut down on those costs. Many restaurants have chosen
to invest in their own delivery services to avoid paying commission fees, maintain food quality, and retain access
to valuable customer data.
Additionally, on- and off-premise dining exist on two vastly different planes and therefore should not be treated
in the same fashion. The most popular items on your menu may not be suitable for travel or carry a low profit
margin. Operators focused on creating an off-premise dining strategy inclusive of delivery, takeout and catering
may choose to create unique off-site menus excluding items that do not work to maximize strategic efforts.
Even as social distancing guidelines ease, diners will be hesitant
to flock to restaurants, meaning takeout, pickup, and delivery will continue to be necessary options.
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Competition and Disruption in Third-Party Delivery Services
As third-party delivery business skyrocketed during the COVID-19 pandemic, so did competition in this space.
Users “window shopped” for the lowest delivery fees and fastest delivery times, with little to no loyalty for a
specific app in areas where multiple services are available. We have also seen acquisitions take place, with
Just Eat buying out Grubhub for $7.3 million in June 2020.
The third-party delivery space is also ripe for disruption as new players emerge, boasting an alternative to the
costly fees of the big names and other companies already in market shift their models to better benefit restaurants.
Instead of a per-order commission fee, ChowNow now features a monthly fee of $99-$149 per restaurant location.
The delivery service also partnered with Instagram to offer an “Order Food” button right on a restaurant’s Stories.
Additionally, Upserve, a prominent POS company, has launched a delivery platform that will be free for its
restaurant clients for at least a year.
Streamlined Takeout for Maximum Convenience
Social shifts are often represented in the QSR industry, and the accelerated pace of the modern lifestyle has led to
a surge in demand for quick, convenient takeout options. Pairing ease of ordering with the convenience of avoiding
long lines at peak dining hours, takeout options cater to the needs and preferences of today’s restaurant guest.
Curbside check-in and restaurant layouts facilitating order pickup with designated takeout areas have begun to
gather traction within the restaurant industry, with a huge rise throughout the pandemic.
Following the introduction of rapid pickup, Panera reports 10% of its sales stemmed from this option which
allows guests to grab their to-go orders from a specified location and eliminates the need to interact with
front-of-house employees. The introduction of these options means it is only a matter of time before they
become the expectation, not the exception.
While takeout, delivery and other off-premise orders continue to climb, the impact of this trend on in-restaurant
dining revenue is offset by larger average ticket sizes and increased visit frequency. Reports show guests who order
takeout or delivery online are more likely to place additional orders within 60 days than their walk-in counterparts.
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Catering with a Quality Focus
Catering industry revenue has doubled in the past decade, carving an opportunity for restaurants to capture a
share of this lucrative market. Although catering order volume is lower, spend-per-order trends are significantly
higher than in-restaurant tickets. Further, catering expands market reach, introducing new, potential customers
to your menu at corporate or social meetings or events.
With online group ordering capabilities having spurred industry growth, app and loyalty program integration
creates added opportunities for repeat business. When crafting a catering strategy, presentation and portability
are two crucial factors for operators to consider. Approached and executed correctly, catering creates a seamless
brand experience for guests on and off-premises. Successful catering focuses on customer satisfaction—a single
negative experience with your brand may impact dozens of potential customers.
In catering corporate or social events, attention to detail works to secure repeat orders from existing catering
customers and attract both orders and visits from new guests. Ensure your restaurant’s catering packaging allows
food items to travel without compromising quality while showcasing your brand in a beautifully plated display.
WHAT’S NEXT: GHOST KITCHENS
With off-premise dining projected to continue outpacing on-premise sales, both restaurant operators and
third-party delivery services have been on the hunt for ways to further capitalize on this shift. This has led
to the dawn of delivery-only concepts known as virtual restaurants or ghost kitchens.
A single ghost kitchen may serve multiple restaurants, offering delivery, takeout and group ordering from
a central location. These commissary kitchens allow restaurants, particularly franchises, to expand into new
territories at a fraction of the traditional cost. Instead of investing in a $500k brick-and-mortar restaurant,
renting space in a shared kitchen while still preparing food to brand specs would allow franchises to have
a delivery presence in areas with high propensity to order, without the need for a physical location.
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Restaurant Marketing Strategies During COVID-19 PandemicINTRODUCTIONThe impact of COVID-19 on the foodservice industry will be far-reaching. Restaurant marketing strategies must
remain adaptive and fluid to accurately reflect the implications of the pandemic nationally, while keeping a pulse
on the varied impacts by community.
SITUATIONAL ANALYSIS
of U.S. consumers
have a budget they
strive to stick to
68%
of diners believe that restaurants
should listen and adapt to their
consumers’ needs
81% 68%
of consumers are on
the hunt for good
restaurant deals
PERCENTAGE OF CONSUMERS WANTING TO HEAR ABOUT FOOD SAFETY/SANITATION
(by age)
0
10
20
30
40
50
60
Gen Z
Millennials
Gen X
Baby Boomers
WWII/Swing
PERC
ENTA
GE
PROMOTIONS MOST LIKELY TO BE USED BY GUESTS:
BOGOPercentage
off
Mealdeals Limited
timeoffer
Free menuitemwith
purchase
PERC
ENTA
GE
0
10
20
30
40
50
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OPPORTUNITIES
Emphasize Value
With over 30 million Americans filing for unemployment since the beginning of the pandemic, encouraging
diners to spend at restaurants will be a challenge. Marketers will need to center their messaging around value.
Not just the traditional cost savings promotions but also the convenience of saving time by not having to
prepare a home-cooked meal.
Even before the current economic crisis, 68% of U.S. consumers had a budget they were trying to stick to.
Now, budgets are even tighter, and consumers are trying to get the most bang for their buck, including when
it comes to purchasing food. Offering promotions that are simple and flexible to redeem and require minimal
commitment will be well received and will encourage consumers to place their order.
Ten-percent-off coupons are a great way to encourage customers to order from your restaurant and they
certainly increase the value of your meal, but other offers like serving sizes, BOGOs, and bundled family meals
are also motivating factors.
Operational Changes Should Play a Role in New Marketing Strategies
When the coronavirus hit the United States, restaurant marketers had to quickly shift strategies to reflect the
current climate and legal limitations imposed on eateries. Operators and their marketing teams halted planned
advertisements in favor of pandemic-focused and consumer-sensitive messaging, as well as a communication on
operational changes, such as food safety, sanitation protocols, and social distancing and face mask requirements.
Up until recently, consumers did not explicitly care to see what was happening behind the curtain at restaurants.
Many simply trusted that food establishments were following food safety guidelines. Today, understanding a
restaurant’s sanitation procedures is to most consumers as they choose a place to eat. It is simply not enough
to tell customers that you are taking employees’ temperatures when they clock in—you must show them as well.
Today, understanding a restaurant’s sanitation procedures is to most consumers as they choose a place to eat.
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WHAT’S NEXT: FLUID MARKETING BASED ON WORLD EVENTSAt the beginning of the COVID-19 pandemic, certain brands went under fire for publishing “tone-deaf”
content and advertising or failing to adhere to social distancing guidelines inside their locations. Whether
it was footage of large groups dining out together or crowded lobbies lacking special accommodations
to keep those waiting on orders safe, the restaurant industry was one of the most heavily affected by the
pandemic and it saw a severe drop in consumer trust levels. To this day, restaurants are struggling to regain
that trust despite best efforts.
As the number of cases fluctuates more rapidly than we can keep track, restaurants must be mindful of their
marketing. Eased social distancing restrictions or a drop in the number of cases in your area are not green
lights to go back to pre-COVID approaches. We expect the “new normal” is here to stay for the foreseeable
future, and restaurant marketing should reflect current climates to remain relevant and respectful.
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18State of the Industry: Restaurant EvokRestaurantMarketing.com
App-Based Loyalty Programs & Mobile OrderingINTRODUCTIONOnce two distinctly separate channels, the realms of mobile apps and loyalty programs have merged to offer
guests a more accessible, convenient way to interact with restaurants. For operators, the integration of these
channels affords an opportunity to build deeper, more robust guest profiles and establish a loyal customer
database. With the addition of intuitive mobile ordering systems, restaurants employing a strategic approach
to implementation face boundless potential to inspire more frequent visits and grow ticket averages.
SITUATIONAL OVERVIEW
67%
40%
of consumers prefer
ordering food online
of consumers adjust order size to earn
more points
26%
spend more online than
they would in restaurant
3.8 BILLIONloyalty program memberships in the U.S.
Millennials are most likely to belong to food and beverage loyalty program
Generation X – discountsMillennials – points
REWARD PREFERENCES
REAL-WORLD RESULTS
3Xaverage ticket
size for loyalty
members vs.
average customer
STARBUCKS
4 MILLIONactive users on loyalty program app
CHIPOTLE
increase in customer lifetime
value with loyalty program
DUNKIN DONUTS30%
of consumers say they either want to use a mobile-app-based loyalty program again or are interested in trying one
81%
of diners would join a restaurant’s loyalty program
58%
79%of customers are opting for contactless payments due to safety and cleanliness
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OPPORTUNITIES
App-Based Loyalty Programs: A Must—Not an Option
In the current pandemic landscape, features that allow for limited face-to-face contact, including app-based
loyalty programs, have become a safety feature rather than one of convenience. As terms like “contactless” and
“curbside pickup” have become a part of daily conversations, and as restaurants find new ways to accommodate
customers’ health and food safety expectations, modernizing your loyalty program is a necessary part of this
process. Punch cards are out and app-based loyalty programs are in.
Guests may be wary of handing a cashier a rewards card, or they might not want to take the extra step of pulling
out their card when they are paying on with their smartphone. By adopting technology, like app-based loyalty
programs, restaurants will be able to generate high visits even when consumers are wary of dining in.
Data reveals that throughout the pandemic, loyalty members continued to order at those restaurants, while
non-loyalty customers dropped exponentially. Loyalty programs cultivate relationships that withstand even
through a global crisis.
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Loyalty Programs Increase Average Ticket Size
Mobile apps and loyalty programs offer guests undeniable value. The return for operators can be equally
rewarding. Today, Starbucks boasts over 18.9 million active loyalty program members accounting for 41% of
all Starbucks’ transactions.
Recognizing guests for repeat visits, loyalty programs inherently increase average ticket size and order frequency.
The “gamification” component of loyalty programs encourages additional spending from guests as they may feel
they are receiving more value from their experience. Guests who are only one visit, or a certain dollar amount away,
from a reward are motivated to return or increase their order size to maximize rewards. In fact, the average guest
spends 67% more in their third year as a loyalty member than in their first.
Drive Customer Insights with Data Collection
Delivering value for guests and a measurable return for operators is a single facet of the sophisticated strategy
surrounding effective loyalty programs and mobile apps. As a gateway for each order placed by registered
guests, apps with a loyalty program component also collect guest data in real time.
With point of sale (POS) and third-party delivery integration, apps with a loyalty program component serve as a
funnel for valuable customer information, including food preferences, most visited locations, guest demographics,
visit frequency and check average. Access to this information allows operators to identify slow days or times
of day, drop offs in repeat visits or opportunities to grow same-store sales. This data can be used to formulate
insights into not only which items guests are ordering, but also what time or day they are ordering and types of
offers to which they most respond favorably.
Further, those insights may be applied to future marketing and promotional decisions, guiding initiatives
with proprietary research and an in-depth understanding of guest behavior. Operators are able to gain a
comprehensive view of individual guests to build customer loyalty and projected lifetime value (LTV).
Today, Starbucks boasts over 18.9 million active loyalty program members accounting for 41% of all Starbucks’ transactions.
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WHAT’S NEXT: VOICE ORDERING
Voice shopping through smart speakers and voice assistants, like Google Home and Amazon’s Alexa,
is expected to reach $40 million in revenue by 2022 with 40% of the adults now using mobile voice
search at least once daily. With 56% of consumers saying they are ready to order food using their voice
devices, voice ordering may be the next big opportunity in the restaurant industry.
Major chains including Domino’s, Pizza Hut and Wingstop have positioned themselves at the forefront of
innovation, investing in voice activation at its earliest stages. However, implementation of this technology
remains at its infancy, offering an opportunity for restaurants to be amongst the pioneers of this integration.
A partnership between LevelUp and Orderscape aims to help restaurants make the most of that
opportunity. For the tens of thousands of restaurants on the LevelUp network, this partnership brings
access to voice-activated chatbots and the technology to implement them across mobile ordering systems.
The Personalization of Online Ordering
Online ordering is no longer an option, it is a requirement for quick-serve and fast casual restaurants aiming to
capture the modern consumer set. Not offering a reliable, fast and secure online ordering system was once seen
as an inconvenience. Today, it all but guarantees rejection from potential guests.
Integrating ordering systems within your mobile app creates a central hub for guests to interact with your
restaurant, building comprehensive guest profiles inclusive of order data and preferences. This is critical as
restaurant guests are demanding better, quicker and more personal service delivered on an entirely digital
platform. Beyond the ability to select menu items and place an order, guests seek intuitive interfaces that predict
and cater to their unique taste. Relevance is essential, as is the ability to customize menu items to adhere to each
guest’s individual standards.
From an operational perspective, online ordering systems present the potential to alleviate extended wait times
in-restaurant while streamlining processes to serve more guests per hour. A proven driver of sales, online ordering
encourages repeat visits and an increase in average ticket sales when compared to walk-in orders.
Evok Advertising is America’s premier boutique
advertising agency specializing in restaurant
marketing, headquartered in Orlando with satellite
offices in Tallahassee, FL and Memphis, TN .
For more information on our agency, our services
or to participate in our next published State of the
Industry Report, contact us at407-302-4416,
restaurantmarketingevokad.com or visit our
website at EvokRestaurantMarketing.com.
Secondary data sourced with admiration and appreciation from: National Restaurant Association, Mintel, Statista, FastCasual.com,
Restaurant News, Nation’s Restaurant News