Stealing share from casual dining

Fuelled by a challenging economy, many US diners have opted to patronise fast-casual and QSR restaurants more than casual-themed restaurants. This behaviour has been dubbed “trading down” by pundits and characterised as a recent phenomenon. But generating new sales by stealing share from the price point above is as old as markets them- selves. And that is how new foodservice segments develop.

Businesses acquire new customers through either “fair-share” or “steal- share”. Customer “fair-share” is a passive process: when the economy is good and consumers dine out more often, all the boats rise. This explains why so many new concepts and franchises proliferated and grew in the last decade, in spite of weak systems, brands or leaders.
Customer “steal-share” on the other hand, is pro-active and calculated. Competitive restaurateurs achieve steal-share by positioning themselves as a better choice, either by price point, service, value, menu or marketing. Steal-share is both a vertical and lateral process; you aggressively take market share from the restaurants above, below, and beside you. This is why successful companies don’t “save” their way through a recession, they market their way through.

In the 1970s, during a recessionary period, casual-themed pioneer brands in the US such as Houlihan’s, TGI Friday’s and Steak & Ale aimed at, and carved their market niche from, the fine dining category. White tablecloth establishments suffered dramatic losse and closures as a result. Their diners fled to the more appealing price, value, menu and atmosphere of the new casual-themed segment. As the economy improved, aspirational diners who patronised only QSR began to trade up to casual-themed restaurants, too. So “steal-share” buoyed by fair-share caused the casual-themed segment to boom. Soon a host of casual-themed tableside service restaurants proliferated in every market.

Fast-forward to 2011. We are now witness-ing a similar steal-share consumer migration, this time away from a staid and tired-looking casual-themed segment to a burgeoning and fresh fast-casual segment. History repeat- ing itself? Perhaps, but the challenge now for casual-themed players is not as simple as waiting for the economy to improve, and then watching the sales rebound. Just because the economy recovers does not mean that consumer dining habits are going to stay the same.

In a recent research project for an industry beverage vendor, we tracked how 225 university students use the foodservice industry off campus. We noted preference, frequency, patterns of movement, average spend, and the role marketing played in choosing where to go.

This particular cadre of young diners preferred fast-casual to casual-themed restaurants by a whopping 4-1 margin. They explained the appeal by quoting the usual suspects, such as “fresh”, “bold flavours”, “variety” and “value”. No surprises there. But what we had not expected to hear was the consistent unsolicited perspective that casual-themed restaurants were less appeal- ing not because of menu or price, but because of the time constraints they put on young diners. Nineteen to 24-year-olds do not like to be “trapped” at a table or booth for an hour or more at the mercy of an ordering system and a menu that serves a waiter’s timetable instead of the diner’s. Interesting.

Is this a significant harbinger of things to come? Maybe yes, maybe no, but it cannot be ignored. A company’s future plans should never be predicated solely on past patronage.

The US Baby Boom generation still loves its casual-themed restaurants, but it should be noted that their parents adored cafeterias in the same way. How is that segment faring today? While to- day’s economy and tomorrow’s diner do not necessarily portend certain death for the casual-themed segment, they do illuminate bigger issues that should be addressed beyond price, menu, décor and getting through a recession.
The first issue is leadership. Strong and insightful leaders, adept at managing and directing dynamic change in this segment, are needed now and needed fast. The truth is that some current leaders simply will not cut it in the New Order.

It is one thing to successfully steer the growth of a company in “fair-share” good times, but how many of the same leaders can aggressively grow and successfully transform their company through a more challenging “steal-share” economy? We will have to watch together, and keep a keen eye out for which company’s leaders are playing to win, and which are playing not to lose.

To paraphrase Darwin, it is not the smartest or the strongest of the species that survive, but the ones most adaptive to change.

You can follow Jim Sullivan on Twitter @Sullivision and get his product catalogue of training tools and resources at www.sullivision.com