Successful restaurant chains are leveraging menus to do more with less

Anytime doing business becomes even more difficult than usual, whether it’s an ordinary recession, a 2008-style financial meltdown, or a global pandemic that disrupts both their customer base, their labor pool and supply chain, surviving restaurants respond by getting leaner and smarter.

Many successful chains have done just that, getting more out of each restaurant, as indicated by the fact that sales growth has far outpaced the unit growth of most of the most successful chains.

Starbucks, for example, opened 113 net locations in 2021, representing 0.7% unit growth, but saw sales increase by nearly $3.56 billion, or 19%. The Seattle-based coffee specialist saw an increase in traffic even as it raised menu prices in October. In fact, the chain’s customers seemed to accept the price increase with ease.

“In terms of elasticity, we haven’t seen any significant impact on customer demand,” Starbucks chief operating officer John Culver told investors on a fiscal 2021 earnings call. “On the contrary, demand from our customers continues to grow. We are coming off a very strong quarter in terms of deal growth at 12% for the US quarter, the highest since pre-pandemic levels, and our ticket is also very strong.”

The same goes for Noodles & Company. The fast-casual chain ended the year with six fewer restaurants than it started – a 1.3% drop – but saw overall sales rise 20%, largely thanks to prices higher: it increased them by 3% in August, followed by a 2% increase later in the year.

“Over the years, we’ve been soft on price increases,” CEO Dave Boennighausen said on an earnings call in October. “As we evolve and improve the concept from a quality and food perspective, we believe the value remains very strong.”

As with Starbucks, Noodles customers seemed fine with these price increases.

“We haven’t seen any resistance over the past few months,” he said.

That sentiment seems to be quite common, according to Brian Warrener, an associate professor at Johnson & Wales University in Providence, RI, who specializes in teaching hospitality and food and beverage management. He told attendees of the recent National Restaurant Association Show in Chicago that many operators he spoke to who raised prices received little or no feedback from their customers, as long as the quality of food and service was maintained.

He cautioned, however, that as the middle class is squeezed by gas and food prices, the majority say they plan to cut back on restaurant spending.

Gunther Plosch, Wendy’s chief financial officer, told investors he was aware of the need to balance raising prices to remain profitable while keeping customer needs in mind.

“We’ll be monitoring value and the perception of value,” he said when reporting on the Quick Service Chain’s 2021 results. “About 30-35% of our consumers make less than $45,000 a year, so we need to make sure we strike the right balance and maintain the perception of value.”

Nonetheless, Wendy’s raised prices 6% in the fourth quarter, which Plosch said was in line with the rate of out-of-home food inflation.

Wendy’s opened a net number of 53 restaurants in 2021, growing its system by 0.9%, while enjoying an 8.6% increase in sales.

Plosch said that in addition to the price increase, a $25 million increase in spending on breakfast ad also helped. This time slot, introduced a few days before the start of the pandemic, represented 8.5% of sales during its 4e quarter cookie promotion.

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Noodles & Company sales also benefited from the rollout of new equipment, particularly steam cookers which have increased both product throughput and consistency, as well as menu innovation in the form of tortelloni, a stuffed pastrywhich had long been one of the main demands of its customers.

In addition to raising prices, investing in marketing, rolling out new equipment and introducing long-requested menu items, some chains have done less with more by cutting their offerings.

Dine Brands Global made use of consumer leniency in the early months of the pandemic by cutting menus at IHOP and Applebee’s by about a third.

Then-CEO Steve Joyce said he had no plans to bring those items back, and in fact last year Applebee’s menu innovation was minimal, with little more as a few monthly drink specials and limited-time summer deals, and new releases of its Irresist-a-Bols budget platform.

IHOP was a bit more ambitious, with the permanent addition of certain fondants and burritosbut menus remain more streamlined than before the pandemic, enabling more efficient kitchens, better profitability and happier customers.

Any brand that has the venerability of our brands has had decades of additions, and we always talk about it, but we can never seem to get rid of the product, because somebody’s selling it to somebody,” Joyce said. in 2020, adding that the pandemic has given them the latitude to do so.

This approach appears to have benefited both chains: Applebee’s system-wide sales increased 34.4% despite unit growth of just 2.2%, and IHOP, which increased its unit count by 1.7%, saw its sales increase by 38.5%.

Contact Bret Thorn at [email protected]

Follow him on Twitter: @foodwriterdiary

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