It's a Dog-Eat-Dog World Out There

By Linda Lisanti

As cash-strapped consumers continue to cut back on eating out and trade down to less-expensive dining options, restaurant operators are having to scratch and claw to hold their own against competitors, and snatch up every dollar and cent they can get.

Chicago-based foodservice consultancy Technomic Inc. said this year will be the worst for the foodservice industry since it began tracking performance in 1972. Because of further contraction in the economy, a continuing slowdown in consumer spending and accelerating job losses, Technomic revised its 2009 forecast downward and now projects total U.S. foodservice sales to drop 4.7 percent when adjusted for inflation. In September, when the firm released its original outlook, it expected sales to drop 2.7 percent with inflation.

Faced with fierce competition, foodservice operators at every level are looking for ways to win the scuffle. Higher-end restaurants are tweaking their menus to include cheaper food options. Casual-dining chains, including T.G.I. Friday's and Ruby Tuesday, are trying to pump up traffic with special two-for-one entree deals. Meanwhile, fast-feeders such as Burger King and McDonald's are going after the casual-dining segment by launching premium products at a lower price in hopes of wooing new customers.

Now is the perfect time for convenience stores with foodservice offerings to go on the hunt for market share and capitalize on the weakness of the restaurant industry. I recently spoke with several foodservice experts who had the following suggestions:

-- Quick-service restaurants (QSRs) are trying to steal market share away from the c-store segment by focusing on coffee and espresso, breakfast, snacking and portability. Therefore, c-stores need to aggressively respond by developing new products to keep up with these consumer trends, said Dean Dirks of Dirks & Associates. In doing so, c-stores will stay better positioned than QSRs because they also serve as a one-stop shop.

-- Keeping up with the restaurant industry in terms of ingredients is a must, and that means offering crusty French bread, flavored aioli and an assortment of other toppings and condiments, according to Deborah Holand, founder and principal of Food$ense Inc. Ask manufacturer representatives not only about the products they have available for c-stores, but also what's available to their restaurant clients, she urged.

-- C-stores should stick to their strengths, which NPD Group restaurant industry analyst, Bonnie Riggs, said are the morning meal and afternoon/ evening snack occasions. Breakfast wraps are very popular with consumers right now and may be a way to keep growing that morning business. For the p.m. snack occasion, Riggs said consumers are looking for healthier options, particularly portion-control packages.

-- Value is top-of-mind given the current economy, so c-store operators have to beat the QSRs and limited-serve restaurants (LSRs) on price in order to steal market share, Holand said. The best way to win in this area is to look at how to better engineer each menu item so it can be sold at a lower price, yet still make the same profit.

Until the economy bounces back, conditions in the foodservice industry are not expected to improve dramatically for some time. So start devising your plan of attack today.
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