A client and owner of a small chain of restaurants in Florida has struggled with the opening of his latest new restaurant. It’s a remodeled historic building in a small town in a rural area of Florida, and he opened it as a full-service restaurant that serves Italian food. His other locations are in areas that have an aging population of retirees who had solid middle-class positions and therefore are more affluent than much of the support population who try to eek out a living in an area that has little to offer for industrial or technological employment. So other than service jobs, the people who live near his latest restaurant are not wealthy beyond a $15 per hour service job.
The problem for my client, and much of the restaurant industry, is the amount of truly discretionary income consumers have now and are likely to have in the future. And what we’re finding with this small chain in Florida is it’s getting harder and harder to attract any customers without a substantial discount attached, primarily because they just don’t have enough extra money to go out to dinner.
As an example, we launched two promotions at the start of the year for this client. One was a $5 gift card that was mailed to general households with incomes of more than $30,000 per year around each restaurant. We had wanted to deliver this incentive to 5,000 households within a few miles of each location. The problem was, in and around the new location, we struggled to find 5,000 households with that much income. In fact, we had to both increase the mailing area by a diameter of five miles and reduce the desired income level to just under $29,000.
The second promotion was run simultaneously, and included a magic purchasing card that allowed the consumer to use the card for nearly a month and get special offers on both pizza and pasta meals that would feed a family of four for under $20. In all of the locations we covered, the $5 gift cards brought in about 20 percent of the area we covered. But in the lower income village, the meal deals brought in about 40 percent of the area we covered and were used on average once per week.
The problem for my client and for me, as a marketer, is that those customers stopped coming the moment the cards expired. And this is during the busiest time of the year for them when all of the snowbird clientele are in the area. So as an inducing-trial promotion, what would have been a terrific promotion in the past has become more of a crutch to keep a steady business. And once the incentive is gone, people stop coming like turning off a light switch.
And an even bigger problem for any restaurant operator today, this is a trend that over time will probably only gets worse and will likely impact the entire foodservice industry.
My restaurant marketing advice to this client is that we focus our energy on building a solid following with his restaurant customers by building promotions around events that reach deeper into the community with mutual interests. So rather than more restaurant coupons, instead we build promotions around charity events, local artists, local celebrities and entertaining subcommunities that meet at the restaurant through special ambassadors who connect groups together.