Impact Report April 3, 2020

The current COVID-19 pandemic has quickly and dramatically redefined the food and beverage industry landscape.

All of us are being forced to write a new playbook, hour by hour, day by day. To help, we’ve launched a resource site with up-to-date information on what our clients and others in the industry are doing to adjust, along with expert advice and trends at the macro and local level.

Although circumstances are changing by the day (if not faster), we have collected the following information on pricing, industry strategy and general outlook, for your consideration as of Friday, April 3: 

Outlook

When recovery begins, there will likely be higher-than-normal inflation, as brands take higher price increases to offset the loss in traffic. Though this may create more opportunity to price competitively, RMS would still recommend a tactical approach, dependent on the overall sensitivity of items/stores, client marking initiatives and economic outlook/impact.

If possible, RMS recommends avoiding taking aggressive price increases in the first few months of the industry beginning to “reopen.” For example, avoid increases over 10% on any given item, or large price-driven average check shifts. The risk here is guest visibility to the changes, as consumers will likely be much more value-conscious with less disposable income. Adjustments of this magnitude can result in lost share, in the best case scenario, or serious customer backlash in the worst case. A more dynamic pricing approach can help achieve the same pricing goals while adjusting for consumer growth and sensitivity.

Pricing Activity

Most restaurant segments, broadly speaking, are deferring price increases to the summer months or beyond. In many cases, this means holding or forgoing spring pricing to core menus at this time.

Current changes have focused on promotions to attract delivery/takeout business, concentrating on discounting. Businesses are relying on social media and apps to communicate these promotions to consumers.

Some restaurants are offering reduced choices on a limited menu to improve operational efficiency and lower costs.

We have not seen brands cutting or reducing prices overall yet.

Industry Strategy

Value Focus

Most brands are focusing on value/deals promotions, especially if they can leverage social media, their apps or their email clubs to promote them.

Many operators are incenting consumers to order through company websites instead of third-party sites by offering free delivery and deeper discounts.

Combo deals, BOGO and free kids’ meals have seen heavy use. Couponing for free items with purchase (desserts/apps) is also prevalent.

Promotional

An emphasis on food safety and cleanliness has emerged. For example, Domino’s and Papa John’s are advertising a “no touch” process, where boxes are sealed after product leaves the oven.

Advertising focus has shifted to delivery boxes and families eating “remotely,” with some messages changed to highlight “comfort food.”

Some of our clients have seen a shift to customers having larger meals so leftovers can be eaten the next day.

Breakfast is a category that seems to suffer

Giving Back

A bright spot is the sense that we’re all in this together, and there are many ways restaurateurs are giving back to each other and the community.

#TheGreatAmericanTakeout on March 24 generated awareness (about 50,000 social media posts according to Nation’s Restaurant News, donations and traffic). On March 31, the industry expanded the effort to a weekly promotion called #TakeoutTuesday.

Starbucks implemented a $3 pay raise for all working employees during the coronavirus crisis.

Chefs have cooked and delivered free meals to kids. Others are using their restaurant kitchens to help feed restaurant employees who have been laid off due to the coronavirus, while others give away excess food to food banks and charities.

For every meal ordered from its ordering website, U.S.-based Just Salad will donate a meal to public school partners who are trying to keep kids fed during this difficult time.

Dig Food Group, with restaurants in New York, Boston and Philadelphia, started a program called Dig Feeds that matches each online delivery order with a meal donated to a local hospital, school or shelter. The initiative donated more than 50,000 pounds of food in its first week.

Menu Strategy

Groups have adjusted menus to:

  • Assure fast and consistent execution of items so they can expedite pick-up and drive-through times
  • Create consistent products with less staff, adjusting for high cost and potential stock limitations
  • Limit/reduce available options to increase operational efficiency
So far, no supply chain shortages have been observed in the U.S.

Some brands are creating menus to be deployed only in highly affected areas, driven by available staff.

Let’s start your recovery strategy

Now, more than ever, RMS is committed to doing all we can to support the restaurant industry. Our team of experts is ready to help put you on a path toward profitability.