Restaurants

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With inflation at an all-time high, have consumers shifted their dining behaviors? Cardlytics has the purchase data to uncover the most relevant insights within the Restaurant category and beyond.

Does Third Party Delivery’s continued growth indicate a more permanent post-pandemic prioritization of ease & convenience?

• Fast Casual category has been declining since their pandemic peak
• Upscale Dining is experiencing minimal decline vs. pre-pandemic
• 3rd Party Delivery is the only category with growth

Casual Dining bucks category trend when it comes to in-restaurant dining.

• While in-restaurant Casual Dining hasn't returned to pre-pandemic levels, it is the only category growing YoY (up 2.25 pts since 2021).
• Fast Casual in-person dining continues to fall; 2022 was down 3.4 pts from 2019.
• Online trip share has been growing across categories YoY – but at Fast Casual (+1.76 pts) and, interestingly, Upscale Dining (+1.29 pts) in particular.

Consumer shopping behavior is more unpredictable than ever, but restaurant brands can rely on performance marketing to help drive direct sales both online and in-restaurant. No matter where your customers are eating, Cardlytics can convert sales on behalf of your brand – and we can prove it.

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The past year has seen consumers making up for lost time when it comes to eating out, with the industry experiencing a boom as pubs and restaurants reopened. 

Cardlytics spend data across 24 million UK bank accounts showed that overall spend across the dining sector increased 22% between 2021 and 2022 as people looked to make the most of socialising post-covid. Pubs and bars saw the largest spend increase of 12031% followed by casual dining restaurants (748%), coffee shops (63%) and quick service restaurants (40%).

Despite this general uptick in eating out over the past year, total spend across the sector is still down when compared to pre-pandemic levels. 

In comparison to 2020, Cardlytics data shows that spend in 2022 is still down across casual dining (-15%), pubs and bars (-7%), coffee shops (-5%) and quick service restaurants (-2%). 

As the cost-of-living reaches a crunch point and disposable income shrinks, hospitality is often the first in the firing line. Consumers will be making difficult choices to cut back their spending, meaning brands may face further hurdles in returning to pre-pandemic spend levels. 

Competition for customers is reaching a peak, and as consumers look to prioritise essentials like grocery shopping and energy bills over a meal or drink out, how can dining brands hold their market share? 

Invest in delivery options

Between 2020 and 2021, lockdowns drove an astronomic rise in spend across delivery platforms as customers had to experience their favourite foods from the comfort of home. Cardlytics spend data shows that delivery platforms saw a 110% rise in spend between 2020 and 2021. 

However, as restrictions lifted and customers sought to eat out rather than order in, these brands struggled to live up to their lockdown success leading to a spending decline of 5% between 2021 and 2022.

But the tide is changing. With increasing numbers of customers looking to cut back spending on more ‘expensive’ meals out but still wanting to treat themselves to a ‘cheaper’ takeaway at home. 

Casual dining is already starting to see the impact of the cost-of-living and tighter budgets with Cardlytics spend data showing that total spend fell 2% in the past 6 months compared to the previous 6 months. 

Investing in delivery options will stand dining brands in good stead to capitalise on this shift, as prices creep up and consumers cut back on trips out.

Diversify your offer with cheaper, smaller items

During times of financial difficulty, consumers still want ways to treat themselves but with smaller, less extravagant items. This means people are more likely to turn to coffees and snacks rather than a full three-course meal. 

Brands should look to diversify their offer with smaller items or options, whether that be a lunchtime deal, a discounted menu or takeaway options at reduced prices. This will help to keep customers returning in the short term and show that the brand understands and can meet their new needs. 

Invest in loyalty 

As the cost of living continues to rise, we’re likely to see people shop and spend in savvier ways. Our recent consumer poll of 2000 UK adults shows that 73% of consumers are planning to shop around more for the best deals. We’re already seeing the tangible impact of this at Cardlytics with the number of dining offers activated through banking app reward programmes having grown by a staggering 784% between 2021 and 2022. 

If dining brands want to retain customers in this difficult time, they need to tap into the deal-savvy customer base by offering tailored cashback and discounts to customers to engender more loyalty and spending. 

By utilising banking channels, brands can target customers by frequency and segment and firmly establish themselves as a favourite and the go to option for a treat during these difficult times.

When thinking about dining options, convenience stores don’t automatically come to mind, but industry data shows this might be changing. According to Bluedot, 59% of customers consider purchasing a meal from a convenience store when stopping for fast food. So, we dug into our data to see if our data agreed... and surprise, it did! Here is what we found: 

Convenience is stealing trip share from quick service

Since 2019 convenience share has increased 2 points. We know this increase is due to meal-like food share instead of normal convenience snacking because (1) we excluded all pay at pump transactions and (2) gas stations with more extensive menus (pizza, burgers) have higher walk-in rates than gas stations with “standard” offerings (soda, chips).  

Customers are using convenience mobile ordering channels

Convenience mobile ordering customer penetration has increased, growing from 0.5% in Q1 2019 to 1.1% in Q2 2022. 

Quick service is losing trips to convenience and full service restaurants

Consumer convenience trip share increased 0.05% from July 2021 to July 2022.  During that same period QSR trip share went down 1.2%. FSR was the largest share stealer, shifting 1.2% from QSR.

QSR is losing loyal customers

QSR’s lost trip share comes from loyal and frequent customers. Loyal customers’ QSR trip share went down 2.3% while frequent customers’ share went down 0.4%.  Interestingly, one-timers, light & Infrequent customers altogether grew their QSR trip share by 2.1%. 

What does this mean for you?

Our data tells us that QSR needs to pay close attention to both conventional and non-conventional competitors. Specifically, special attention needs paid to maintaining loyal customers via reducing churn and boosting retention. Luckily Cardlytics can help you do just that!  Sign up to get our insights delivered to your inbox, early, and get ahead of what's happening in the restaurant industry

Key Takeaways:

• The labor shortage is hitting the restaurant industry especially hard. Nearly 7% of the food service workforce quit in November 2021 alone. Wage hikes aren’t enough to retain talented workers when inflation is driving up the cost of living. 
• Labor-saving automation and streamlined processes can have a negative impact on customer experience, and fail to drive new sales at scale. 
• Proven strategies, like restaurant discounts and deals, when combined with new technologies and precise audience targeting can get customers in the door in an on-demand manner that won’t sacrifice profitability or customer and employee experiences.

The restaurant industry was among the hardest hit when the pandemic struck in 2020. Forced closures, costly new mitigation measures, and changing consumer behavior led to the shuttering of over 110,000 restaurants. 

Restaurants are recovering from the worst of the Covid crisis, but the danger is far from over. Once-in-a-generation rates of inflation, intractable supply chain snarls, and an acute labor shortage are all eating away at razor-thin restaurant margins. 

Cardlytics analyzed current market trends and reviewed alongside our purchase insights. Here’s what we learned about the true size and scope of the problem, the effects of the restaurant labor shortage, and what brands can do to grow their margins without sacrificing the customer or employee experience.

The labor shortage and inflation go hand-in-hand

Restaurant employment is down 8% from pre-pandemic levels, a loss of over a million employees, and the Great Resignation is still picking up steam. A record 4.5 million people left their jobs in November 2021, including 6.9% of the food services workforce. 

So how did restaurants respond? By increasing wages. Roughly 60% of employers raised their wages at least twice during 2021. Nearly 30 percent of hospitality brands expect to raise them at least twice in 2022. 

But workers say it’s not enough. Wage gains in 2021 failed to offset the loss of purchasing power caused by record inflation. Even with larger paychecks, monthly budgets keep getting tighter. 

As a result, over half say they expect to find a higher-paying job in 2022, and 25 percent plan to leave the industry for another line of work entirely. It’s clear that restaurant brands are unlikely to solve their labor shortage woes with wage hikes. 

Labor-saving processes and technology may not be enough

With no end to the US labor shortage in sight, restaurant brands are investing in labor-saving technology to bridge the gap. Most major brands have already implemented streamlining solutions, and half of US restaurants plan to invest even more over the next three years. 

These new technologies run the gamut from self-service order terminals to automated smoothie kiosks and even voice-based artificial intelligence for drive-through customers. Soon, technology could even take over simple back-of-house duties like dishwashing. 

Restaurants are also turning to pared-down menus that eliminate labor-intensive entrees. The average menu item count has dropped 23 percent compared to pre-pandemic levels across all restaurant categories. Thanks to the twin pressures of the supply chain crisis and the labor shortage, it’s a trend the National Restaurant Association expects to continue throughout 2022 and beyond. 

Restaurants today are surviving, not thriving

Inflation has been especially brutal for the restaurant industry. Ingredient prices and labor costs have skyrocketed over the past year. To protect their margins, restaurants responded with modest price increases of between 2 percent and 5 percent on average,well below the current rate of inflation. 

Dining out is a luxury and a convenience, two things consumers are quick to shed when budgets get tight. This makes them especially sensitive to price increases. Instead of raising prices, some restaurants are trimming portion sizes or promoting cheaper plant-based proteins as an alternative to scarce and expensive meat. 

But labor-saving processes and price increases often aren’t enough to protect tight margins. By embracing digital promotions and advanced customer targeting, restaurant brands can look beyond brick-and-mortar economies and find innovative ways to generate new revenue. 

Cardlytics can help mitigate the effects of the labor shortage

Our insights suggest that promotional offers can be the determining factor when customers decide whether and where to eat out. Deals and discounts even outweigh recommendations from family and friends when it comes to trying new restaurants. 

What customers say about restaurant deals

• 54% say deals encourage them to try new restaurants
• 51% say deals and discounts are important to them to save money on restaurant visits
• 54% will spend more at a restaurant if they have a discount

Of course, coupons and other discounts are nothing new to the restaurant industry, but mass mailings in the current climate run the risk of over-extending locations already struggling with labor shortages. Success in driving new customers without a throttle can have a disastrous effect on customer and employee experiences, harming your brand in the long run. The other downside with mass mailers is that the people most likely to use them are the ones already coming anyway, and have already been paying full price.

Cardlytics’ customized campaigns let you precisely target customer segments you want, when you want, and for your desired locations. By excluding existing customers, you can focus your promotions on attracting new customers. At the same time, Cardlytics lets you spread the campaign impact over a longer period of time, allowing you to ramp up or down the promotion to ensure your locations aren’t overwhelmed, thus reducing the strain on your staff. As an added bonus, your restaurant stays busy, ensuring a steady stream of tips for your hardworking waitstaff. 

Get in touch today to see how Cardlytics can help you grow your customer base and boost sales with measurable incremental returns on ad spend.

Which industry will take the bulk of consumer spend? 

What used to be considered two separate household budgets, one for groceries and one for dining out, has morphed into one overall food budget, thanks to pandemic-led shifts in how people eat. More dinners are being eaten at home causing restaurants to expand into delivery and take-out options. Meanwhile, grocery stores braced for a surge in traffic as more consumers requested delivery or curbside pick-up. While all industries faced upheaval during the pandemic, there’s no doubt that restaurants and grocery stores were among the most affected, with consumers’ eating habits and routines changing overnight. Both grocery and restaurant industries now face similar challenges in an uncertain marketplace - how to grow revenue and defend wallet share in the face of emerging third-party players.

But instead of working in competition with one another, Cardlytics’ Mike Novosel, industry lead for grocery, gas, and convenience and Matt Drewes, industry lead for restaurant, share how the two industries can peacefully coexist by answering these questions:

• What is your occasion share? Do you know how much you’re losing, gaining, and what you need to defend it?
• How do you want your customers to shop with you?
• What is your biggest opportunity?

In our first ever B2C Marketing Showdown, brands will learn how working with a partner like Cardlytics can help them retain their customers, regain lapsed customers, and perhaps most important to growth, earn customers that shop in-store and online.  

Watch this free webinar to knockout the competition and grow incremental revenue across categories.

https://youtu.be/6dbbXzX4zA4