As inflation sends prices skyrocketing for businesses and consumers alike, restaurants are left in a challenging position. On one hand, holding prices steady requires them to absorb these costs, when many brands already have very narrow margins to begin with. On the other hand, passing the prices on to consumers could take a significant toll on loyalty.
David Bloom, chief development and operating officer of fast-casual sandwich chain Capriotti’s and its subsidiary, Wing Zone, spoke in an interview with PYMNTS about how inflation is impacting business and how the brands intend to manage these going forward. By offering a range of ordering options and menu items, the company intends to meet the demands of as many different kinds of consumers as possible.
“I think we’re probably a little bit early in terms of seeing any significant impacts, but we’re certainly thinking about it and making sure that we’re prepared for whatever may come,” he said. “It goes back to having that omnichannel approach because some consumers are not going to be as impacted by inflation as others, and some are going to change their behavior a little bit… Consumers are not this monolithic group that move in sync with one another. ”
To reach consumers more concerned about costs, the brands are investing in their pickup channels, emphasizing these in their marketing to reach these wary customers.
“That’s still the most quote-unquote ‘cost efficient’ because there’s no delivery fees and those types of things,” he said. “So, we’re making sure that people understand that, and we’re highlighting that to give people a choice.”
According to data from PYMNTS’ new study “The Digital Divide: The Key Factors That Drive Restaurant Choice,” created in collaboration with Paytronix, pickup options are a major factor for diners deciding between restaurants. The study, which drew from a survey of more than 2,600 US adults, found that 47% of consumers cite convenient pickup options as an important factor influencing their choice, and 19% rank these as the single most important factor.
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Additionally, from a technology perspective, pickup features are the most in-demand option driving purchasing. The study found that 23% of consumers say that pickup features are the most important technology when it comes to encouraging them to order from a given restaurant. These features are even ranked above ordering and payment options and loyalty programs.
Bloom argued that, in the face of these challenges, the best course of action is to offer as much flexibility and variety as possible both in terms of food options and in terms of fulfillment channels.
Regarding the former, he said he believes that restaurants need to be “thinking a little bit differently” about their menus, offering “lower-cost-type food items” that they might not otherwise offer.
Research from the Digital Divide report found that 42% of consumers list everyday prices as an important factor influencing their restaurant choice, and 9% cite these as the single most important factor. Notably, only 6% of consumers report that promotions or deals are important in affecting their choice.
As far as fulfillment channels, he contended that “opening up the access points” can help the company appeal to as many consumers as possible regardless of their reaction to cost increases. He noted that some consumers prefer order-ahead, others delivery, others in-restaurant kiosk ordering, and others like to place their face-to-face order.
“Our brands tend to have a pretty wide demographic, so we’ve got to make sure we’re not leaving people behind as we migrate to the new things,” he said.
‘Chest-Deep’ in Innovation
With so much uncertain not only regarding inflation but also regarding the pandemic and other global events whose ripple effects are felt in the industry, Bloom argued that it is strategies important for restaurants to have digital in place for all eventualities. He noted that the company is “always opening and testing on the corporate side or in our own restaurants” different technologies, including artificial intelligence (AI) features, ways to automatically get phone orders into restaurants’ point of sale (POS) systems, order pickup cubbies, back-of-house automation and more.
“We’re chest-deep in all of that,” he said.
However, he cautioned that it takes time to get these technologies “refined and optimized,” such that none of them will make the immediate difference in the short term.
“We don’t really know what’s going to happen,” Bloom said. “We do know commodities are probably not coming down in the short term. I think we’ll find we once again have to quote-unquote ‘pivot’ many times, … but certainly nobody knows. And with everything from inflation to recession to geopolitics being what it is, we just have to have a strategy in place ready to go regardless of what happens.”