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Despite negative forecasts, there is still plenty of money to be made in the restaurant industry.

Restaurants are Actually (Very) Optimistic About the Future

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It's not all doom and gloom after all.
By Danny Klein April 2017 Finance

Gloomy forecasts aren’t hard to find these days. But don’t tell that to the restaurateurs on the front lines.

Toast Restaurant POS released its “Restaurant Success in 2017 Industry Report,” a study that compiled data from 450 operators representing all segments of the industry, and came away with a unique take in today’s foodservice world: a sense of optimism.

Of those surveyed, a whopping 92 percent of restaurant owners are optimistic about their sales in 2017 (34 percent very optimistic and 58 percent optimistic). This comes on the flipside of five consecutive quarters of negative same-store sales declines across the industry, something that hasn’t happened since 2009—10, when the nation was climbing out of a recession. But while traffic counts are down—3.4 percent in March alone—that doesn’t mean there isn’t money to be made. The National Restaurant Association said it expects sales of around $799 billion in 2017, an increase of 4.3 percent over last year’s estimated sales of $766 billion.

Some of this optimism, Toast’s study shows, could be due to the rise of technology and the benefits that come along with it. For example, to the question, “Overall, do you think the success of your restaurant is in your control or out of your control?” 87 percent said that yes, they are confident that they have the power to directly influence their restaurant’s success, or failure.

That is one of the unique characteristics of this industry. As Jon Taffer once said, “There’s no such thing as a failing restaurant with a winning owner.” More often than in other workplaces, a restaurant reflects its structure and the personality of its founder. Owners recognize that dynamic.

Of the fast casual restaurants polled, a segment that hovered near the bottom of restaurant growth in 2016, only 6 percent indicated any level of pessimism about their success in 2017. Twelve percent of fine dining restaurants are pessimistic—more than any other type of restaurant.

Toast points out that this fact aligns with data from NPD, which expects quick-service growth to outpace the rest of the industry. Even so, bars and pizzerias came ahead as the most optimistic concepts in the Toast report. Forty-three percent of respondents in both categories reported being “very optimistic” for their sales in 2017.

The social experiment

Toast also delved into the effect of social media on the industry. Despite the rise of new channels, Facebook remained the most-used networking site by restaurants, dominating the list at 74 percent. Instagram was far behind at 18 percent. And of the polled restaurants, zero picked Snapchat at their preferred social media method. YouTube received two votes—both from fast casual operators.

More than half said they don’t use Snapchat, LinkedIn or YouTube, and have no intention of starting. Ninety-two percent use Facebook, 69 percent Instagram, 59 percent Twitter, nearly 33 percent LinkedIn, 20 percent YouTube, and only 16 percent test out Snapchat. Bars are heavier users of social media than other concepts as well.

Toast’s report points to YouTube as the channel with the most growth potential in the industry. Twenty-eight percent of restaurants polled said they plan to start using the platform in 2017. As Toast notes, “YouTube can be used to upload training content for new hires. McDonald’s is starting to use Snapchat as a tool for recruiting new employees. Don’t be afraid to use these resources!”

Only 40 percent intend to join Snapcat by the end of 2017. “Pain points include difficulty getting discovered on the platform and not knowing how to monetize efforts. If issues like these are resolved in the next year, perhaps restaurateurs’ outlook on Snapchat will be different moving forward,” the report says.

It’s adding up

Despite the reality that social media can be deemed free advertising, restaurants still believe in dedicating money to marketing. Which of these advertising methods has your restaurant ever invested money in?

Community/event/charity sponsorship: 66 percent

Social media ads: 63 percent

Newspaper/magazine ads: 60 percent

Only 16 percent of respondents said they advertised on TV. Only 7.5 percent of pizzerias said they would in 2017, despite 20 percent having done so at one time.

Toast also showed a trend toward digital marketing, with social media ads seeing an increase of 20 percent and search engine ads a jump of 36 percent. Direct mail (6 percent) and TV (34 percent) appear in line for a drop.

Eighty-four percent of restaurants said they plan on spending the same or more on advertising as the prior year.

Slowing Down for Speed Bumps

Of course, there are still plenty of challenges ahead, but in this case, the classic issues remain prevalent. “Hiring, Training, and Retaining Staff,” just like when Toast did a Restaurant Technology Industry Report in 2015, remained the top concern for operators at 36 percent.

With restaurant job growth year-over-year now in the red, this isn’t exactly stunning.

Attracting and Retaining Customers was the second biggest issue at 19.6 percent. Twenty-five percent of cafes, bakeries, and delis picked this issue as their No. 1 concern. Fine-dining restaurants turned to high food and operating costs, while understanding metrics was a challenge to pizzeria owners, and 47 percent of bars choose staffing concerns.

The technology trend

Operators are warming up to the possibilities. Of those polled, 88 percent said they have a website and 82 percent offer gift cards; 64 percent have an email database for their customers, and 47 percent offer a rewards program of some kind.

“The results show a disconnect between restaurant owners’ and restaurant goers’ outlook towards newer restaurant technology. Restaurateurs bridging this disconnect are positioning themselves to gain a steady advantage over those who are slower to adopt these features,” the report says.

Some points:

  • 41 percent of restaurants have (or will soon have) server handheld tablets, while
  • 68 percent of diners agree they improve their experience.
  • 19 percent of restaurants have (or will soon have) tabletop tablets, while 52 percent of diners agree they improve their experience.
  • 13 have (or will soon have) self-order kiosks, while 65 percent of diners will use them sometimes or every time they are available.

Diners, the study shows, are looking to add the most technology in 2017. Fine-dining is actually the most tech-savvy sector. Those restaurants are the most likely to have a website, accept gift cards, leverage an email database, and take online reservations.

Bars lead the way with innovative technology, including tabletop tablets, server handheld tablets, and kiosks.