Expense-Account Diners Bring Deeper Pockets
Robby Kukler’s first restaurant job came the way of a Best Western in Flint, Michigan, where taking care of weary travelers was the name of the game. Now, years later, Kukler is a partner at Fifth Group Restaurants, which operates seven restaurants and a full-service events company in Atlanta. Though the average diner may spend up to $50 at some of the company’s restaurants, Kukler says he’s still relying on lessons he learned back at the Best Western.
“A restaurant is a community business,” he says. “And if your community happens to be surrounded by hotels and offices, then those are the people you need to connect to and take care of.”
Hotel guests, specifically business travelers, remain vital for Fifth Group. On any given night at its Midtown Atlanta restaurant locations, Kukler says half the guests come from out of state, often in town for conferences, conventions, or other types of business travel. The company has consistently gone out of its way to cultivate sales from this valuable stripe of diner by ensuring its restaurants are on the radar of nearby hotel staff. Fifth Group employees maintain close ties with concierges and other hotel employees. Kukler says team members at the Southern-inspired South City Kitchen go so far as to walk down to the nearby Four Seasons, handing out baked goods to the doormen. “It’s common sense. And it’s relationship building,” he says.
Aside from the guerrilla marketing, Fifth Group is a member of Dinova, a sort of frequent flier program for companies whose employees dine among its network of some 13,000 restaurants. The program provides a rebate to companies whose employees spend at certain restaurants, incentivizing them to funnel their business expenses to restaurants and chains within the network. The restaurants fund the rebate, but also benefit from an incremental bump in sales from coveted business diners.
At Fifth Group’s restaurants, Dinova customers usually spend about 15 percent more per check than the average diner. “If it wasn’t worth it, I wouldn’t be doing it,” Kukler notes.
In fact, Dinova reports strong growth in business dining sales last year, growth the company expects will continue. Business spending in restaurants far outpaced overall restaurant growth, increasing by 7.1 percent in 2015. And the company projects a 5.5 to 8.5 percent bump in expense-account spending in restaurants for 2016. The Global Business Travel Association expects the entire American business-travel spending category to grow at just above 3 percent over the next two years—a trend driven largely by prices, not transaction increases.
Dinova founder and CEO Vic Macchio says business customers offer several advantages for restaurateurs. And increasing such dining occasions—whether from the out-of-state traveler or the business lunch in a hometown market—can help cushion operators against swings in the wider economy. While times of economic uncertainty can spell disaster for restaurants when diners limit personal spending, Maccchio says historical trends show corporations are less reactive.
“Business dining activity is not nearly as extreme in its fluctuation to macroeconomic trends as the consumer space is. The highs aren’t as high and the lows aren’t nearly as low,” he says. “The overall economy can go down, but there’s still a certain amount of business travel that must be done, sales that must be made, customers and facilities that must be visited. That drives people on the road. And people have to eat whether the economy is good or not.”
Macchio says customers who are charging meals to corporate expense accounts are more likely to choose an upgraded bottle of wine or add an appetizer. And these benefits aren’t reserved to white-tablecloth establishments. Dinova’s network includes quick-service and casual-dining chains as well as fine-dining options, all of which are frequented by business customers. While business travel tends to concentrate around the nation’s big metropolitan areas, Macchio says corporate dining happens just about everywhere, as evidenced by the habits of Dinova members.
“In almost every chain, there is at least some activity in every location,” he says. “So if there’s an Outback Steakhouse in Missoula, Montana, they will get some action from a Dinova client.”
Stephen Loftis, vice president of marketing for Firebirds Wood Fired Grill, says business travelers are extremely valuable. When expense accounts tightened in the wake of the Great Recession, he says, it cut down on the amount of wining and dining at $100-per-person steakhouses. By comparison, the average dinner check at Firebirds is $28 to $32 per person. “Since Firebirds lives in the polished-casual niche and offers great value, that traveler began to dine with us more frequently and recognized that they could enjoy an upscale experience at a great value,” Loftis says. “When the economy rebounded, those guests continued to frequent Firebirds.”
Now, it’s a vital piece of Firebirds’ customer base. “The business traveler is an integral part of our business: On Monday, when they get to town, they may eat by themselves,” Loftis says, “but on Wednesday they bring in a party of eight people after a long day of meetings.”