Restaurants likely to end steep discounts as economy improves

May 31, 2010, Chicago, IL – Restaurants offered a host of
deals and discounts over the past two years to entice recession-ridden
consumers to visit. With signs that the economy may be improving, restaurants
will be trying to wean customers off of the now-expected deals with different
types of offers, reports The NPD Group, a market
research company.

According to recent NPD foodservice
market research that examines consumer behavior patterns through
past and current recessions, restaurant operators will likely move consumers
away from steep discounting with deals like combo meals and value menus, which
some chains have already begun offering. At the same time, operators are
offering higher-priced product innovations to appeal to customers’ appetites
for something new and offset the cost of discounts.   

In its recent study called Light at the End of the Tunnel . . .
What Can We Expect, NPD reports that during the current
recession, “buy some/get some,” discounted price, coupons and daily specials
largely supported deal traffic the past two years.

“Restaurant traffic has been slipping since January 2009,
and the decline in visits would have been worse had it not been for dealing,”
said Bonnie Riggs, NPD’s restaurant industry analyst and author of the study.
“Visits using a deal now represent about a quarter of restaurant traffic.”

With restaurant traffic still down, dealing continues to be
important, but according to the NPD study, consumers who claimed to have cut
back on restaurant visits indicate that price discounts and other deals are
less important motivators than last year.  As consumer sentiment about the
economy improves, operators could be expected to begin to ease consumers off of
dealing as they’ve done in previous recessions. 

Riggs said that a dual effort of combo meals and value menus
is the strategy historically chosen to ease consumers off of steep discounts,
and there have been combo meal promotions recently announced. From the
standpoint of the operator, these two types of deals are an opportunity to
build a cheque size.    

“We’re also seeing more product introductions on menus
because consumers are always looking for the next new thing, especially
recession-weary consumers,” says Riggs. “Typically, these new products have
higher price points, which help offset the cost of the deals.”