Restaurant renaissance: how to revive an ailing industry

After a period of voracious interest, it looks like people’s appetite for restaurants may be waning, especially in the UK. Even millennials, the generation that has dined out the most in recent years, are making fewer restaurant visits. According to research by hospitality platform Flyt, they are the most likely to be eating out less than last year and the amount they spend when they do has gone down by 3 per cent, costing the industry around £800 million a year.

Restaurants must offer a good range of dietary alternatives, use high-quality ingredients, source locally as much as possible, and factor in environmental and ethical concerns

Dining out becomes a luxury, not lifestyle choice, as food prices shoot up

One reason for this shift is the cost of food itself, both for restaurants and customers. “These are the most challenging times that I have seen in my 20-plus years in the industry,” says Maurice Abboudi, executive director of K10 restaurants and former chairman of orderTalk, an online ordering platform acquired by UberEats earlier this year. “The exchange rate is making imported food more expensive, there has been inflation of food costs over the past few years, rents and rates are unsustainable, and labour costs are rising.”

For customers, this price elevation has meant that visits to restaurants have become a luxury, rather than a lifestyle choice, and many food and beverage brands are pivoting their service to reflect this. In the commercial sphere, drinks giant Diageo recently sold 19 of its lower-end brands for $550 million to focus on its premium business in a bid to increase slowing sales.

In the restaurant sector, many brands are choosing to add high-quality items likely to appeal to more discerning customers. “A lot of it has to do with knowing that better options exist in the first place,” explains Amir Gehl, founder and owner of luxury coffee company Difference Coffee. “When given the choice, you will find a good selection of people opting for high-end specialty coffees at restaurants, much in the same way that people are aspiring to eat better food and drink better wines.”

One unexpected example of the move to premium is Dunkin’ Donuts. Rebranding as Dunkin’, the multinational has dropped unpopular items, adopted a sleek new ordering system and introduced an espresso menu to feed customers’ insatiable coffee demand. With a view to challenging Starbucks on price and efficiency, the company is also investing heavily in a beverage-first concept, with new nitro-brewed coffee taps and mobile ordering drive-thru lanes set to launch in 2019.

The ethically-minded customer demands more from their food

There is also an increasing focus on provenance and supply chain as consumers’ ethical resolve shows no sign of abating. Results from PR and digital marketing agency FleishmanHillard’s Shaping the Future of Food survey showed a growing sense of responsibility over improving the foods we eat and a duty to share this information. For restaurants to re-engage consumers, the ethical element of food production must become a top priority.

“People are much more engaged and knowledgeable about food, where it comes from and how it’s prepared, and this has made people more sceptical and easily critical of restaurants who fall short,” says Leanne Masi, owner of healthy street food business Luna & Fennel.

One big mistake some businesses have made, explains Mr Abboudi, is reducing the quality of the product or “menu-engineering” an item to a cost, rather than focusing on serving a great product. “Don’t cut back on what people go out for: great food and great service,” he says.

Ms Masi adds: “Brands need to focus on a key concept and execute it well. To appeal they must offer a good range of dietary alternatives, use high-quality ingredients, source locally as much as possible, and factor in environmental and ethical concerns.”

For restaurants to survive, savvy marketing is key

A more discerning, ethically minded, cash-sensitive consumer base may seem an insurmountable obstacle for many restaurants, but there are key things which can make mid-market brands more competitive. And the first is marketing.

“Restaurants need to make eating out an experience,” says Nadia Leguel, UK business director at Bookatable by Michelin. “They need to touch all the senses, not just focus on product. High street brands are losing appeal because they always have the same offering. It’s not ‘cool’ to post a picture of a meal at a chain restaurant because there are so many people all over the country eating the same thing.”

Brands would be remiss to underestimate the power of social media marketing in revitalising ailing brands. Struggling with falling visitor numbers, American diner-style chain Denny’s adopted a social media strategy, which relies heavily on pop culture and meme humour to stay culturally relevant and appeal to the young crowd they welcome through their doors. And it seems to be working, with total operating revenue up 3.1 per cent in the third quarter of this year and two new UK branches opened since 2016.

Is technology the secret to the restaurant renaissance?

Most crucial to survival of mid-level restaurants, however, is embracing the opportunities offered by technology. A powerful resource in any industry, in the restaurant business it can be the difference between keeping and losing customers, and those brands that choose to innovate can change the sector itself.

Ten years ago, London restaurant inamo did just that. Noel Hunwick and Daniel Potter had an epiphany while struggling to catch a waiter’s attention at a friend’s birthday. “We wanted to buy more and give the establishment our money, but they weren’t letting us,” says Mr Hunwick. The result was their patented E-Table technology, which enables customers to order food, call a waiter or get their bill through the interactive table set-up.

Beyond the basic dining experience, customers can also play games on the table, change their virtual tablecloth and peek into the kitchen through the live chef cam. Most importantly, however, they can give feedback on the dishes and service, right there and then.

“We always knew that to stay relevant, the quality of the experience had to be measured as a whole, not only the concept’s edge,” says Mr Hunwick, adding that this feedback has helped measure team performance, reduce the turnover time for tables and even drive up average spend by making it easier for guests to order more dishes. The Soho branch of inamo is now achieving 16 per cent revenue growth year on year.

inamo’s patented interactive E-table in their Soho restaurant

The true secret to restaurant success is customer experience

Innovative technology is part of inamo’s brand, but other restaurants need not embrace such an all-encompassing strategy to see signs of improvement. The clear value of the interactive table lies in the benefit to the customer. Beside reassessing the offering and remaining competitive on prices, restaurants must put a stronger focus on customer experience if they are to survive.

In the era of one-click ordering and next-day delivery, customer expectations of service are high. A lack of ease in ordering, difficulty splitting the bill and long waiting times are all elements of the customer experience that can stand in the way of repeat business. For restaurants to thrive, they must use every tool at their disposal to put the customer at the heart of everything they do.