Happy Hour, Happier Regulars
Legend has it that happy hours originated in the days of Prohibition. Today's happy hour, though, is nothing like those that packed the speakeasies of yesteryear.
With ever-stiffening competition, more restaurants, including quick serves, have identified happy hours as a must-do. Most find the discounts offered on beer, wine, cocktails, and specialty beverages and food well worth the payoff of increased traffic during the traditionally slow late afternoon and early evening hours.
But, like everything else in the business, happy hours are evolving. With more attention on the dangers of over serving, restaurants and bars are making their specially priced food offerings just as enticing as drink deals. And happy hours have moved beyond just the after-work hours with some creeping into late-night specials.
The happy hour logic is simple: it fills a void and helps attract new customers.
“It tends to build frequency. It tends to build loyalty,” says Chris Elliott, CEO of FSC Franchise Company, which operates The Brass Tap and Beef ‘O’ Brady’s. “And the real risk of not doing it is that somebody else is going to be doing it. And for people who are looking for drink specials [and] food specials, and people who are looking for events — trivia, karaoke — they're going to go somewhere else.”
To stay competitive, most Brass Tap and Beef 'O' Brady's stores offer some type of happy hour promotion, which now includes food specials like $2 tacos or half-priced flatbreads, alongside drink specials like $1.50 off drafts. Elliott says restaurants choose food and beverages with enough profit margins to ensure a payoff.
“While it does impact your margins a little bit, if you're doing more sales on the whole, you're better off financially,” he says.
Nationally, alcohol sales by volume are sliding, says Donna Hood Crecca, a senior director at the Chicago research and consultancy firm Technomic. On-premise alcohol sales—which includes bars, restaurants, hotels, and stadiums—were down 1.3 percent in 2013. Yet alcohol sales in whole dollars were up 1.6 percent to $99 billion: consumers are progressively ditching cheaper products like domestic beers for high-quality cocktails, wines, and craft brews.
“The consumer today is more knowledgeable about adult beverages and more interested in adult beverages than, say, 10 years ago, [and] Millennials in particular,” she says. “They're looking for an interesting beverage experience.”
Like any other promotion, there must be a thoughtful strategy in place. “A lot of operators say, 'we have to have a happy hour,’ and I say, why?” Hood Crecca says.
She explains restaurants need an operational aim, such as building traffic, enticing a new set of customers that doesn’t normally visit, or increasing revenue, to defend hosting a happy hour.
An April Technomic survey found one-third of all consumers attend a happy hour promotion at least once a year. And 20 percent drop in on a happy hour more than once a month. Value is a growing driver. Six of 10 happy hour customers identified good food and drink prices as a key reason to patronize happy hour. Compare that to 2012, when fewer than 50 percent of consumers named food and drink prices as their reason.
Those numbers have made happy hour a near-universal offering at alcohol-serving restaurants.
Casual dining mainstays like Applebee's and Chili's compete hard for the after-work crowd. In May, LongHorn Steakhouse announced the debut of its happy hour program, which includes drinks and food from $3 to $5. Even upscale chains, like Fleming's Prime Steakhouse and Wine Bar, are getting in on the game. Fleming's offers $6 wines, cocktails, and appetizers until 7 p.m.
“I think it's become so widespread that it’s almost an afterthought. It's just assumed that restaurants will have a happy hour if they sell alcoholic beverages,” says Stephen Catanese, vice president of operations at the Cincinnati-based Buffalo Wings & Rings.
The chain of 45 sports restaurants offers happy hours at all locations where it’s allowed. Specials range from half-price domestic draws to $1 off well drinks. Generally, a happy hour's success reflects overall unit economics and stores in downtown areas do better than those in residential settings.
Regardless, there is money to be made.
“We never take a loss on it,” Catanese says. “If a drink is going to cost you $1, you're not going to sell it for less than say $3.50 or $4.50. So if you discount it from $4.50 down to $3.50, you're still making money.”
While it's become a mainstay offering, Catanese says happy hours are nothing like they used to be. He remembers extensive happy hours with buffets lined with chicken wings, cheese, and crackers to lure in the after-work crowd. But with so much attention on responsible drinking, he says, fewer people are coming in for happy hour, even if more places are promoting it.
Happy hour certainly isn't for everybody. Several states, Illinois and Massachusetts included, ban happy hour-type drink specials. Aside from the staffing, legal, and economic constraints that can accompany a drink discount program, some restaurants don't see a need for discounted drinks between lunch and dinner. Del Frisco's Grille, Olive Garden, and Seasons 52 have abstained from happy hour.
Since opening Tatsu's French Restaurant in suburban Kansas City, Kansas, in 1980, chef/owner Tatsu Arai has never offered a happy hour. The classic French restaurant sits in a residential area, not a bustling urban scene. Most customers have been coming for years, if not decades. And 90 percent of the tables are filled by reservations, not walk-ins.
“We have zero customers just walking or driving by and deciding to come eat here,” Arai says.
Tatsu's has a bar, but it's no hip destination. The clientele is aging and alcohol sales are dipping. Tatsu himself plans to retire within a few years, and happy hour just doesn't make sense for him or his customers.
By Kevin Hardy