No doubt today’s operating environment remains a pretty complicated one for restaurants.
Higher rent, labor, food and utility costs have forced restaurant prices to increase by 4.1% for the 12-month period ending in June, which is 3 points greater than grocery store price increases, per the U.S. Bureau of Labor Statistics. As a result of higher prices at restaurants and in other parts of their budgets, some consumers started to pull back on their food-away-from-home purchases. In an attempt to bring back these consumers and drive more foot traffic, restaurants have turned to an old friend: the value meal. And the initial results have been good, with McDonald’s and other chains implementing value meals seeing a nice bump in consumer traffic, per Placer.ai data.
While that’s all well and good, I would like to remind all of us that value pertains to more than price. And this applies to all businesses in the foodservice industry, including operators and the individual members of the supply chain. The cost of the product a business offers represents but one part of the value equation. There’s a lot more than price that creates value.
Yes, price is an important part of value. After all, this is what the buyer feels directly because of making a purchase. When my company sends a client a consulting proposal, there’s a good chance that the first thing they do is turn to the fees page. For this reason, we always mention the return on investment the company can expect from the work we do on their behalf. In this instance, the value we often provide is improving unit economics for the concept. When articulating a company’s value, particularly in a business-to-business relationship, I would suggest following a similar approach.
When working with consumers, a value proposition must include what the customer gets for the cost they paid. So, what should they get? They should get a quality product, which includes the accuracy of what they ordered, with - good service in a clean environment.
When I was part of Burger King’s industrial engineering department, we had a program that we called QSCV, where we mystery-shopped hundreds of restaurants (ours and competitors’) and measured these four areas: quality, service, cleanliness, and value. This program provided us an understanding of where we sat in the competitive environment and guided the strategic initiatives we needed to undertake to stay competitive in the marketplace. We even did statistical analysis around the metrics we took.
Companies that are leaders in their fields understand the need to attack value in all cylinders. As this CNBC article on Starbucks notes, the Seattle-based coffee chain is clearly aiming to resolve service and throughput challenges it faces to make sure that the company delivers these value components that contribute to a better customer experience, which ultimately drives sales.
My family and I just returned from a Disney cruise. In some instances, a Disney cruise may cost more than other cruise lines but from my perspective, they deliver very highly on the other aspects of value. Notably, Disney delivers when it comes to service (through experience) and the cleanliness of the ships. In my opinion, they are industry leaders in these areas. I am sure Disney keeps an eye on the cost of the cruises it offers to keep the company’s value in alignment and to drive traffic, but the other aspects that I have mentioned (service and cleanliness) provide relief to the price side of the value.
When I talk to equipment and technology suppliers, the first thing I want to understand is what makes their product different and how this difference adds value for the operator. If you are not able to succinctly state value proposition and what makes you different from your competitors, you can find yourself in a constant race that can impact your sales and profitability. So, make sure that you keep your eyes on your differentiating proposition in the marketplace, your QSCV metrics, to drive growth for your business.
