Restaurant Trade Area Research

Often when owners do the MarketView at their fast food restaurants they find in the crosstabs interesting information of which they simply were not aware. For example, a store may find that ONLY `Drive-Thru’ customers before 5 PM had a low frequency of usage (compared to all after 5 customers at the drive-thru OR any segment of in-store users) - and specifically target JUST that `tight targeting’ to get the most bang for the buck.

OR, the data may show that one age group - say those over 55 - indexed lower on frequency of usage than all other segments - resulting in an easy `visual’ `tight targeting’ effort with those customers.

OR, the data may show a particular zipcode that simply isn’t performing for the store (on-site it requires asking) which would allow for a `tight targeting’ marketing effort. In the new normal - tight targeting may be all one can afford.

More about the MarketView here - www.squidoo.com/tradeareasurveys

The other day RBC Capital Markets released the results of a monthly tracking survey of interest to the restaurant industry - here’s the link - http://www.nrn.com/breakingNews.aspx?id=365256. As a market researcher, perhaps most interesting - to me - was the headline “Restaurants May See Diners Spending More”. This statement was, of course, seemingly backed up by the results of the survey - but, really folks, it’s time to be a little more realistic and accurate about `survey results’. (That said, the title doesn’t over promise - just spins non convincing data.)

The `facts’ to support the headline were gathered from the survey with a sample of over 2,700 respondents - and the survey showed an `increase’ - from 5% to 6% -  in the percentage of people who said they were planning to spend more at restaurants over the next three months. The key fact in support of the headline.

So, you mean that as we come into summer, and vacations, that the sliver of folks who take these surveys to heart and wording at its true meaning - might realize - that because of `vacation’ and not being home as much (or substitute the end of being cooped up because of winter weather) - that they `plan’ on `more’ restaurant purchases in the next three months? And, THAT, is what we are to be encouraged by?

Oh, please.

(And, what if last months survey results were 5.4% rounded to 5% and this months was 5.6% rounded to 6%. Even with a sample of 2,700 it’s hard to point to hard evidence with a 1% point move.)

Also, the survey indicates just how `the down’ sentiment and usage of restaurants has been - via the poll. And, supposedly, this also has `glimmers of hope’(?) - in that data - compared to the previous month - this months survey showed that the % of people who say that they are planning on eating less at restaurants in the next three months `dropped’ from 50% to 44% - and, indeed, that looks like good news - until you think deeper about it.

The obvious first — 44%, nearly half of your customers are still trying to cut back on their restaurant usage - a nearly record high number probably.

If this survey is `rolling’ - theoretically - each month - 1/3 of the sample is `doing’ the effect of the `answer’ from the previous month (meaning the folks of three months ago who said `eating less’ - will have - three months later - adopted a lower frequency level) - and when - `re-interviewed’ (theoritically three months later) would be at that `new level’.

Let me explain more. ———- If three months ago 50% anticipated (planned) on eating `less’ at restaurants — one would expect that they indeed cut back to a new level — which the restaurant owner — hopes they DON’T decrease again — hoping that they are now going to answer to such a hypothetical question “about the same (reduced) level” — one certainly - doesn’t hope for those folks - who already reduced their level of restaurant usage to be saying “I’m going to be reducing it more”.

Further, if 6% fewer people are saying they will be reducing their restaurant usage - why did only 1%  (1/6th of that sample) move into `increasing’? Could it be that those 6% are doing exactly as I say above — finding a new `minimal’ leveling off of their own restaurant usage - while others are STILL reducing?

Honestly, one would have to be `creative’ to say the new poll is good news. To me, IMO, as a research analyst, it seems to reflect the `New Normal’ - which is establishing a reduced level of restaurant usage into the future - more and more.

Not only that,  the poll goes on to talk about other economic numbers they crunch that also seem to reflect a `bottoming’ if not an outright `surge’ in consumer optimism. Yes, a surge.

All I can say is - Really? In a worsening job market? In which, the worst on the employment side of our Great Recession  is yet to come? Is that a believable number or is something going on in even the asking of the question and the nations dynamics.

Or, is this consumer number reflective of something else - like new loyalty to a new very different president - more of a hope than anything else. And, indeed, the 38% confidence number (it’s not really called a confidence number but is a roll up of similar characteristics) - up from an 8% reading the month before (do things economically seem 4 times better to you in the last 30 days?) — and, this percentage (38) is strikingly similar to the true hard core percentage of Democrat loyalties and percentages.

And, the poll, in March, after Obama was dissed in the press for being `negative’ and `too realistic’ about our economy in February (when the poll bottomed) - found Obama, in March - being `positive’ with his rhetoric (responding to the critics in Feb.) - indeed, much more-so - (do you remember the change in tone).

And, I bet, the result seen in this survey, was this supposed `huge surge’ in confidence. (The market was also in a bear bounce in March.) Indeed, if such confidence had really returned - the `more often’ number on the planning to eat out more in the next three months - would have spiked too. And, it didn’t.

Finally, I encourage you to look at this incredible visual map of the job losses that have hit each of the 3,000 counties in America - again, this map - which shows the change from job gain to job loss from Jan. 2007 to Feb. 2009 — will leave your head spinning - and in dis-belief — that a surge in confidence is already underway. http://slate.com/id/2216238/

Thanks for visiting today - make a point to read my best posts of 2008 right here http://restauranttradearearesearch.com/important-posts-in-2008/ – and, please visit my Squidoo page too at www.squidoo.com/tradeareasurveys- to learn much more about the research I most suggest to restaurant owners - the MarketView.

As far as the Woodstock Georgia fast food market is concerned  - restaurants continue to be under competitive pressures with strong discounting and `new and interesting’ promotions to offset the continued shrinking of customer bases. Indeed, just recently, ABC - the Atlanta Bread Company in Woodstock had a Sunday evening `Murder theater’ (with actors of course) near closing time for which tickets at 10.00 per head were sold. These `patrons’ would have an additional chance to purchase food and dessert from the unit too - for enjoyment when watching the play.

And, the discounting continues at all levels from Waffle Houses 4.99 meals, to 4.00 KFC meals, to 99 cent Dunkin Donut specials, to the buck level at Checkers, Wendy’s and — whatever special Arby’s has going at a various promotion period. In the nearby Sandy Plains/Shallowford area the Boston Market was doing bounce back coupons for buy one meal - get one meal —— that’s up to a 6.99 value — (and one our family took advantage of) and up to 50% off. And, within the past month, Arby’s was giving the `RoastBurger’ away with the purchase of a drink (& Quizno’s also gave away it’s small sandwich.)

Couple all this with promotions from the last posting - many of which are still going on in one form or another (including daypart pricing) - and you have a very sensitive price market the likes of which haven’t been seen in a long long time, if ever. Increasingly, `eating out’ is positioned by the media as the one way that Americans are cutting back and saving money. And, again increasingly, the eating out `habit’ is being broken at some level.

Indeed, the extreme multi times a week users (4+ times a week)  - while usually not  a huge element in most fast foods - is largely gone - as these hardest regulars have become part of the once a week users - generally. And, while most of the two times a week or once a week users have hung on in most circumstances - especially in white collar, lunch oriented restaurants - those users are probably most reduced in the evening timeframes.

Probably most affected frequency wise in customer bases are the occasional once a month type users - who have often fallen into the `never use anymore’ or seldom use category - as consumers tighten up into their most favorite choices. NEW customers, once a mainstay at 3-8% of all fast food customers is again - almost nil. (Why waste precious money on places without a proven track record?)

So, with all this - with restaurants of all kinds closing (which does help others who survive in degrees) - with frequency rates dropping - with price pressures at every turn - the question must be asked if this is the bottom to be endured - or - a new normal? (No one wants to think it could be worse - and indeed - as competition closes - the `replacement effect’ of the `new meal occasions’ to be filled in the local market - will modify - to a degree - further downturns.)

Indeed, if the downturn continues for much longer - say - another year (an overly negative view compared to consensus) - we could see some companies go to a more innovative way of pricing their food products. Perhaps combos will once again reflect a real `savings’ as opposed to an easy way to order in a few words. Perhaps we will see the drive thru priced in a different manner - compared to inside customers. Perhaps drinks will become cheaper at the drive-thru (as no re-fills occur).

Indeed, perhaps we will see `customer loyalty’ cards be set at effective levels - buy two combos get one free - for example —- as opposed to cards that required too many uses to motivate a customer base. Or, even `in-store’ contests to motivate the bigger instore spender - or - targeting the very largest purchasers (only) with a `discount’ on that next purchase (setting the level at transactions in the highest 5% total) - showing recognition of these remaining `special’ customers.

Because, as Dylan said, the times,  they are a changin - and, previous practices and marketing approaches - especially if they all sound the same - may have little useful effect. It may take new approaches and new ideas of consumerism to survive to the other side of the downturn - and - it’s not too early to begin to consider such ideas.

Recently, I conducted the MarketView in an eastern seaboard market at all the units of a particular ADI and all owned by one owner. The MarketView is my name for a type of research design that digs into the fundamentals of any market. All kinds of interesting and useful information comes from doing real marketing research at your stores.

An example of this is shown below:

Store One                                                 Store Two

820,000               2006 Sales                             790,000

13%        Uses This FF Brand Most               24%

20%       Uses This FF At Least 1 Week       42%

161K       Annual Sales To 1+ Week User    331K

20K        Total Repeat Customer Base*        13K    *customer base formula

Smart marketing can address each of these stores specific marketing needs. Only by having real customer based information allows for smart spending of those precious marketing dollars. Make sure to visit my Squidoo page that explains more about the MarketView at www.squidoo.com/tradeareasurveys.

Today’s Restaurant Links

`Former Bojangles Exec’s Now Qdoba Men’

http://www.chainleader.com/article/CA6607112.html?industryid=47555

`Fast Food Shops To Be Banned Near Schools In UK’

http://www.dailymail.co.uk/news/article-1079655/Fast-food-shops-banned-near-schools.html 

`IS Fast Food Poised For A Fast Fall?’

http://www.forbes.com/markets/2008/10/22/mcdonalds-earnings-closer-markets-equity-cx_mp_1022markets44.html

Thanks for stopping by today — much more is below too. Bookmark this site and return for more updates. If you have some comments we’d love to hear them. 

Last year, I personally interviewed several thousand fast food customers (in-store and drive-thru) in a variety of fast food brands for Trade Area Research purposes. (Do you need trade research before expanding your market?) This was normal for me as I have  personally interviewed thousands of fast food customers for dozens of years. And, as you might know, certain questions are nearly standard on questionnaires trying to understand customer behaviour - such as the fast food restaurant that the customer uses `most often’.

In the 1980’s and even into the late 1990’s - when adults answered that question for me — when the answer was McDonald’s - they would immediately offer a `reason’, in an apologetic tone, which invariably was `the kids’. That is not to say that I didn’t hear `they are everywhere’ and `they are cheap’ on occasion. Nevertheless, the interesting thing was that `other brands’ such as Wendy’s or Arby’s or Chick-Fil-A  or others (such as sandwich chains Subway) - most often users ALMOST NEVER offered up `embarrassing’ reasons for their usage of a particular brand most. Only McDonald’s. It was almost a case of doing `marketing’ too well.

Then, McDonald’s focused less on kids and more on product and product quality. I began to hear folks say that they liked a `particular new product’ at McDonald’s that they went for `most often’. Kids, as a reason, was definitely fading quickly (I informed my clients who at first seemed surprised in the early 2000’s — it was the kind of information that only came from literally being on the ground for multiple brands for decades) - the return of McDonald’s was approaching.

The moral - If the biggest can change a negative perception — other brands, most of which have neutral images, can also build a positive one - like McDonald’s has done.

Today’s Restaurant Links

“People are requesting kids premiums that are more socially responsible,”

http://www.ajc.com/business/content/business/stories/2008/08/16/restaurant_toys_educational.html Wendy’s and Chick-Fil-A jump on `Educational’ kids toys. Strong feedback. Three minute read.

Individual Responsibility And Its Enemies

http://www.mtexpress.com/index2.php?ID=2005122089  Bringing ethics into the fast food discussion with force. Shows how `choices’ and having a restaurant business are related. Three minute read.

Parking Mad At McDonald’s

http://icwestlothian.icnetwork.co.uk/courier/news/tm_headline=parking-mad-at-fast-food-chain&method=full&objectid=21526230&siteid=92284-name_page.html After the positive McDonald’s opinion above - here is an example of not respecting the customer. Probably.

Arby’s Expands Savings Potential With Cellfire Mobile Coupons

http://money.cnn.com/news/newsfeeds/articles/prnewswire/200808130900PR_NEWS_USPR_____AQW047.htm Here’s a new coupon niche.

Are Restaurant Stocks A BUY?

http://www.chicagotribune.com/business/yourmoney/chi-ym-restaurants-0817-cpaug17,0,4787885.story Article says yes if you have a longer time horizon of 2-3 years; while detailing how over stocked the trade areas are with restaurants. Predicts store closings. Four minute read.

Many Many more - current links below. Bookmark and return please. Leave a comment if you wish.

Hello, welcome back. This blog is one of the few on the internet about restaurants by a real market researcher of fast food restaurants. I’ve been sharing some insights and I hope you bookmark my blog and return on a regular basis.

Today’s post is dependent on the previous two posts - so, you may need to dig down for a fuller understanding. Essentially, I’ve been outlining some specific REAL information from about a decade ago for a 3 store FF brand that had sales of @2,670,000.00 combined. And, in the last post I revealed the actual size of the combined customer base - based on my Customer Base Formula. Today, I’d like to show what that MEANS in terms of spending by any individual customer within a specific frequency of usage scale. For example:

49 - 4x’s a week users - spend 80,000.00 per yr - @1.6k yr-130mo-31 week

400-2-3x’s week users - 348,000.00 per yr - @870.00 yr - 72mo-16 week

1,800 - Once a wk users- 642,000 yr - @357.00 yr - 30mo - 7 week

3,600 - Once every 2-3 wks - 642,000 yr - @177.00 yr - 15mo - 3.40 week

3,700 - Once a month users - 321,000yr - @86.00 yr - 7mo - 1.66 week

5,400-Once every 2-3 mtn - 241,000yr - @ 44.00 yr - 3.68mo - 85cents/wk

2,100-Once every 4-6 months- 26,000yr - @12.00yr - 1.00mo -24cents/wk

21,700-Less than every 6 mo - 187,000yr - @8.61yr - 72cents a month and 18 cents a week

These stores had 7% first time users spending about 187,000 a year — 2,100 new customers a month or about 25,000 new customers in a year.

Now, just to ask you as a  restaurant owner — if you knew that @21,000 of your 38,000 customer base spent less than 9 dollars a year at your store - would you be willing to try a method to change it? IF SO, give me a call on my cell ——– you can find that information by going to my site about Trade Area Surveys — www.squidoo.com/tradeareasurveys

Now - today’s restaurant links.

“…nutritious fast food. Maybe it’s not so bad after all.”

http://blog.nj.com/parentalguidance/2008/07/i_was_wrong_about_fresh_apple.html Maybe, just maybe, the Tide is turning.

“…research from Just Kids Inc’s Global Kid Study, which showed that children daydream about helping others and are becoming more altruistic.”

http://www.brandrepublic.com/News/838897/McDonalds-launches-conservation-themed-Happy-Meal/   Perhaps someone will beat McD’s at this in the states?

Economic Slowdown Forces Choices in Food

http://www.ausfoodnews.com.au/2008/08/12/economic-slowdown-forces-trade-down-in-food-spend.html   Holds true worldwide.

Panda Express Thrives On Orange Chicken

http://www.latimes.com/business/la-fi-panda13-2008aug13,1,3381302.story Success story - focused on customers.

That’s all for today — remember to bookmark this page. Thanks.

Hello restaurant owners, and welcome back to Restaurant Trade Area Research - where I share over 30 years of insights from doing restaurant research - and, link to the latest of interest in the restaurant universe. Today I want to share with you the actual findings in a 3 store market about a decade ago.

While I won’t go into the extreme measures that need to be employed to have a VALID sample to begin with at a fast food restaurant (but you can find out more at my other information site www.squidoo.com/tradeareasurveys) - here are the results I want you to consider.

3 stores - $2,670,000 Sales (rounded)

customers that come 4+ times wk - 3% of trans - 80,000 in sales

2 or 3 times a week - 13% of trans - 348,000 sales

Once a week - 24% of trans - 642,000 in sales

Once every 2-3 weeks - 24% of trans - 642,000 in sales

Once a month - 12% of trans - 321,000 in sales

Once every 2or3 months - 9% of trans - 241,000 in sales

Once every 4to6 months - 1% of trans - 26,000 in sales

Less than every 6 months - 7% of trans - 187,000 in sales

First time users - 7% of trans - 187,000 in sales

You would be surprised how many owners DON’T think of their real customer base in this manner - what levels ACTUALLY provide the real dollars to a store. This weekend in this blog - I will expand on the data above. But, now, to today’s restaurant links - feel free to comment too.

Today’s Links

Fast Food Prices On The Rise

http://c13.zedo.com//ads2/f/341180/1/172/0/305001132/305001132/0/305/331/zz-V1-pop1217960041201.html?a=;l=;p= Video report too with story.

Healthy Fast Food For Kids A Tall Order

http://www.webmd.com/parenting/news/20080804/healthy-fast-food-for-kids-a-tall-order  This is a report issued by Center for Science in the Public Interest which rips a new opening for many restaurant brands. Detailed read with lots of interesting facts.

New Jobs In Fast Food

http://www.istockanalyst.com/article/viewiStockNews+articleid_2450358.html This article is about a company that provides your drive thru order taking with folks working out of their home.

Is a Fast Food BAN - Racist?

http://www.momlogic.com/2008/08/fast_food_banned_in_poor_areas.php#over1 After all, how can those fatties in Beverly Hills be helped?

Arby’s Signs Development Agreement For 41 New Stores In New York Metro Area Over 10 Years

http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080805006617&newsLang=en

Again, would love to read your comments. Thanks for stopping by - bookmark for more this weekend.