Restaurant Industry Insights

The State of the Restaurant Industry & Customer Satisfaction

Customer satisfaction is essential to any business’s success. As guests become even more sensitive to price increases, it becomes mission-critical, particularly in the restaurant industry.

Today’s restaurant guests spend up to 10% more than they did two years ago. They’re responding to this increase by going out less or expecting more. Knowing what added value you can give your guests without reducing your profit margins is one of the keys. Unfortunately, the challenges many face across the country are more widespread, with increasing minimum wages and other regulations taking a toll on already reduced profits. 

Let’s take a look at what some operators are experiencing and the actions they’re taking to help them succeed.

Plummeting Profit Margins  

In a recent interview with the Los Angeles Times, Francesco Zimone said his profit margins from four L’Antica Pizzeria da Michele restaurants plummeted from 20% to 2% in 2023. In early 2024, the pressure decreased as the supply chain issues lessened, and he could buy in bulk. This year, he expects up to 5% to 7% profit margins.

Tip: Restaurant operators can often benefit from Group Purchasing Organizations (GPOs). One of the industry leaders in this field is Buyers Edge Platform. Tapping into their 100,000 foodservice members suddenly aligns you with the organizations with hundreds of locations. Leveraging this power reduces your everyday costs, boosting profitability.

Additional Challenges in the Industry

Other concerns affecting the industry include increasing minimum wages and legislation dictating what restaurants can charge. For instance, in California, as of July 1, restaurants can no longer add service charges or other surcharges to their guests’ bills. This includes surcharges that go towards health insurance, employee tips, and other benefits. Restaurants wanting to provide these benefits will have to increase prices amidst an environment and customers with lower tolerance.

Improving the Dining Experience

So, the question becomes, what can restaurants give their customers to improve the experience and add value, making it, in their eyes, worthwhile? 

According to the recent American Customer Satisfaction Index (ACSI) Restaurant and Food Delivery Study, the customer satisfaction of full-service restaurants is up 4%. They also found that households with less than $75,000 yearly earnings are reducing their restaurant visits. 

Forrest Morgeson, Associate Professor of Marketing at Michigan State University and Director of Research Emeritus at the ACSI shared this in a recent press release, “Customers are being forced to make decisions between groceries and restaurants, with full-service restaurant inflation about two times that of groceries in the past year and fast food and fast casual restaurant prices up three times the rate of groceries. With customers seemingly viewing dining out a luxury, restaurants that can differentiate themselves in terms of quality and value will have a competitive advantage.”

The top two restaurants for consumer preferences were LongHorn Steakhouse and Texas Roadhouse. They also noted better performance across the full-service spectrum, particularly in food order accuracy and servers’ courtesy and helpfulness. 

Improving the dining experience can be as easy as making sure guests are greeted promptly and authentically when they walk in the front door. All interactions following the initial touch point should align with that level of service. 

A person in the hospitality industry for many years recently shared an important lesson she’d learned along the way. “If a customer comes within 10 feet of you, you “own” them. It’s up to you to make sure they feel welcome and taken care of and answer any questions they may have.” All of us in the industry would do well to remember that bit of advice.

FAQS

How can the restaurant customer experience be improved?

Suffice it to say food and beverages that are remembered long after your customers leave are critical to the overall experience. Your guests’ experience, however, is centered predominantly around their interactions with your staff. It’s about clear, timely, and caring communications. 

Other essentials are ambiance and music that align with your brand, minimizing wait times, and making your guests feel at home. 

Can guests decline a service charge at a restaurant?

That depends on the restaurant and where it’s located. Some restaurants do not make service charges mandatory. Additionally, a growing number of states are initiating bills addressing these charges. In many states, restaurants are required to disclose the fees or mandatory tips to guests before they place their orders. If performed as required, guests must pay the service charge.



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