Competitive Watch: More Restaurants Offer Wi-Fi to Draw Customers

COLUMBUS, Ohio -- Wi-Fi has become an expected free amenity at restaurants and coffee shops, as companies that want to keep customers are providing the service, The Columbus Dispatch reported.

McDonald's Corp. is one of the biggest foodservice companies to offer free Wi-Fi, a policy it announced in January. Starbucks likewise began offering free Wi-Fi in its shops in July. Both chains previously charged for the service, according to the report. Columbus-based Bob Evans and Wendy's also offer free Wi-Fi in some of their restaurants.

For the first time, the number of establishments that offer Wi-Fi for free now surpasses those that charge for the service, according to a new study from JiWire, an advertising firm that looked at 76,000 hot spots nationwide. The study found that 55 percent of establishments offer Wi-Fi for free, compared with 27.6 percent last year.

R.J. Hottovy, a senior stock analyst at Morningstar, said it's all about competition, noting once major chains such as Starbucks and McDonald's offered free Wi-Fi, it's natural that others would follow suit. "We're going to see restaurants offering free Wi-Fi as a more emerging trend over the next few months," he said. "It's something that brings in consumer traffic, and even if there is a significant cost for restaurants, the benefits outweigh the cost. At the end of the day, more consumers are going to base their restaurant picks on which one offers free Wi-Fi."

Columbus-area Wendy's franchisee, Thomas 5 Limited, offers free Wi-Fi in a majority of its 16 local restaurants, and plans to add the popular amenity to all of its 33 Ohio restaurants by the end of the year, said Rick Riebold, who operates the locations for the company.

"Customers need to use their laptops during lunch, and we have the facilities to serve them," Riebold told the newspaper. "It's something they want, and it's helped us gain new customers, and we've noticed a lot more return customers."

Free Wi-Fi is especially important for people who settle in at restaurants for business purposes, noted Judy Ketner-Dollison, spokeswoman for Breads of the World. She said many of Panera's customers use the restaurants as a meeting place for business, particularly those in sales or other industries since they typically don't have regular office space of their own.

"We offer it as a convenience to our customers," Ketner-Dollison said. "We were one of the first large chains to offer Wi-Fi free nationally because it caters to our customers' needs."

There are potential drawbacks for restaurants that offer free Wi-Fi however, according to Bonnie Riggs, a restaurant-industry analyst with NPD Group, a market-research firm. Some consumers might come for the free Wi-Fi and stay for hours without buying anything.

Restaurant operators have to decide if they want an empty restaurant or the appearance of a crowded one, even if patrons aren't buying much, especially as the industry struggles with the lingering effects of the recession, according to Riggs.

"The restaurant industry has gone through a really tough time, with significant traffic declines in the past two years," she said. "And even though things have bottomed out, it will take at least a year and a half for restaurants to get to where they were before the recession hit."

Therefore, restaurant operators have to do what they can to add value to their offerings -- and free Wi-Fi is one option that consumers value.

"It's going to be a real battle for restaurants to gain market share," Riggs said. "Consumers are looking to get the most that they can for their dollar, so anything operators can do to drive traffic counts. Once that guy started offering it, the others have to offer it as well in order to remain competitive. That's what consumers are looking for."

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