Navigating the US Restaurant Industry's Perfect Storm

by Richard Oliver on April 18, 2017

Navigating the US Restaurant Industry’s Perfect Storm

The US restaurant scene is claimed to be at a point of bursting. In the article by Kevin Alexander from Thrillist, he cited a number of key indicators that were causing much concern amongst the restaurant community. You can also hear an interview with him on the subject here.

Kevin spent a year researching the restaurant industry in the US, focussing on the ‘casual, fine dining’ concepts that have sprung up over the last 10 years. He highlighted that the industry was at a point of saturation and, ultimately, the bubble will soon burst.

There is a perfect storm of events that are contributing to this phenomenon:

1/Massive oversaturation in the market

As soon as a hot new concept arrives on the scene, such as a new BBQ joint, and starts to make some money, another ten arrive to capitalise on the new venue and dilute its success.

2/The fickleness of the consumer

Because a saturated market provides a wide variety of options, customers rarely develop loyalty to one brand. Customers consume restaurant experiences like collecting memorabilia, and an exceptional level of service is required to warrant a revisit. This is only encouraged by the millennial mind-set.

3/The cost of keeping relevant

With so much competition, any sub-par aspects of your restaurant experience are unlikely to go unnoticed. A key issue is the emphasis on the restaurant experience as a whole, rather than simply the menu and quality of the food. This competitive environment demands a restaurant to provide an enveloping experience at every touch point. However, this can be a costly exercise, as it’s easy to become ‘dated’ quickly in a fast changing market.

4/The lack of talent

Because of the saturation of the market, finding suitable talent to deliver the right level of service is becoming harder and harder. The industry is creaking for lack of the right kind of experience and skill.

5/The rising prices of rent

The cost of renting suitable premises is rising at an unforeseen rate. For example, rent prices in Seattle are increasing faster than anywhere else in the US, rising a staggering 9.7% over the last year

6/The increase in the minimum wage

The rising costs of staffing have had a national effect. The impact on the bottom line to cover the increased costs is significant, and the growth of costs has been exponential in some smaller establishments.

7/Innovation

Delivery services and other such innovations are also shaking up the market and turning it on its head. You now can order the food you love and get it delivered by a company like Uber Eats at a low cost, resulting in lower footfall in restaurants and fewer covers.

These are issues that businesses are likely to face in any market, and are certainly manageable independently of each other, but it’s because they are all occurring simultaneously that this epidemic of closures is happening. It highlights this perfect storm that the industry is facing in the US, which has made it a harsh and demanding environment for restaurants, bars and other eateries to survive in.

In the States, this problem is as diverse as the country is itself. Every state has its own interpretation of this. For the more urban environments, such as Seattle and down the west coast, some of these conditions are more polarised. In Seattle, we are within a culture that is fiercely independent, and as a result, our restaurant industry is typically saturated with more unique propositions. This means it’s an area where big brands find it difficult to gain a foothold in, thereby making it an diverse, adventurous and energetic scene, championed by the likes of Tom Douglas and other fantastically talented chefs, who serve Seattle with extremely high quality products.

 

There are many other factors and this is only scratching the surface, but at Clarity, we would encourage you to remember there is little that you as a restaurateur can actually do when approaching these industry wide challenges. Issues like rent or minimum wage, and trends like delivery and the millennial mind-set are out of your control. But as restaurants are closing their doors in greater and greater numbers, it has never been more important to truly consider what it actually takes to ensure that you can thrive in this competitive market.

At Clarity, what we consider to be the key components of a well conceived restaurant brand is, and always will be, universal. Our strong suggestion is not to worry about what you can’t change, but to focus on what is within your power to influence. In these pressurised market conditions, it is essential not to react, but rather to have an honest and frank conversation about what your brand stands for. Ask yourself:

“What constitutes the real and authentic value you provide your customer that can’t be replicated?”

The answer to this question needs to be placed at the heart of your thinking and will be the foundation of your success.

The second, equally important issue is then ensuring that you are able to deliver on that experience at every level from your product to your service, the environment and also your communications.

 

It is a tough environment, but brand is, and always will be, the central component needed to create a robust and sustainable business, regardless of your industry. A well conceived, brand aligned restaurant, like any company in its respective market, will always rise to the surface amongst a market of inferior competitors.

If you would like further help in knowing how to discover the answer to this question, help is most definitely at hand. We at Clarity can not only work with you to answer this, but can help you align your entire operation to it, enabling you to stand out within your market and thrive in these complex times.

Richard Oliver

Clarity Seattle.

Author

Richard Oliver

Richard has been building brands for 15 years, primarily for household names in the Hospitality and Leisure sectors. Richard is a big family man, with three young kids. He loves spending time with his wife, reading, travelling and once won a British bronze medal at the Under 16 Olympic weightlifting nationals.

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