The Battle for the Consumer Wallet and Camp Bacon

This edition of MRM’s Daily Bite features AlixPartners, eMarketer, The Middleby Corporation, ShopKeep, Genesis Hospitality, Zingerman’s, Chuck E. Cheese, US Foods, Southern Glazer’s, Mahony and Sons and Reis & Irvy’s. 

Send news items to Barbara Castiglia at bcastiglia@modernrestaurantmanagement.com.

Dining Out in 2018

Restaurants will have to continue to battle for their share of consumers’ wallets this year, with Americans expecting to both dine out less and spend less per meal. That’s according to a survey of more than 1,000 consumers, released by AlixPartners. Overall, consumers said they plan to spend an average of $14.95 per meal this year, down from the $15.20 they said they spent over the past year. Furthermore, 31 percent of respondents in the survey said that “lower price” was “important” or “very important” to them in defining value, vs. 21 percent who said that in a similar AlixPartners survey released in the spring of 2017.

The fast-casual sector may be hardest hit this year in terms of dining occasions, according to the survey, with just 20 percent of Millennials surveyed saying they intend to visit fast-casual establishments twice weekly or more over the next 12 months, compared with 24 percent who said that in the 2017 survey. Meanwhile, according to the survey, fast food has surpassed fast casual for as the preferred spot for lunch, with just 32 percent of diners in this year’s survey picking fast casual as their preferred location for lunch, down from 37 percent in AlixPartners’ survey of a year ago—while fast food was preferred for lunch by 35 percent in this year’s survey, up from 30 percent in AlixPartners’ survey of a year ago.

We’re starting to see a shift in spending patterns among the Millennial generation, and restaurant operators need to be prepared.

For all those surveyed who are planning to dine out less, saving money to re-allocate towards other expenses was the No. 1 reason, chosen by 54 percent of those surveyed, vs. 50 percent in last year’s survey. Meanwhile, among all respondents, travel and retirement were cited as the biggest outside “share-of-wallet” pressures, cited by 38 percent and 33 percent, respectively, as their top pick. And among Millennials, “lifestyle” purchases (e.g., home, car, etc.) was the No. 1 reason, chosen by 43 percent of Millennials, compared with 27 percent in the survey of a year ago.

“We’re starting to see a shift in spending patterns among the Millennial generation, and restaurant operators need to be prepared,” said Adam Werner, global co-head of AlixPartners’ Restaurant, Hospitality and Leisure Practice and a managing director at the firm. “A lot of focus in recent times has been on the buying patterns of this generation, but it’s important to understand that Millennials are now having families and children, and that their spending priorities are beginning to reflect that.”

The AlixPartners survey also suggests that technology’s influence on consumer dining choices may be plateauing.  For instance, the percentage of respondents rating nine major technologies, ranging from digital menus to mobile apps to mobile payments, as a “4” or “5” in terms of influencing restaurant choice (on a scale of 1 to 5) all declined in this year’s survey vs. the one released a year ago. However, when asked about their use of any mobile technologies by restaurant sector, 28 percent said they’ve used them in the fast-food sector (up from 23 percent in last year’s survey) and 23 percent said they have in fast casual (up from 18 percent in last year’s survey), suggesting that limited-service restaurants may be the most fertile ground for mobility.

At the same time, though, 40 percent of all respondents said they have never used any type of mobile technology related to dining, only a slight reduction from 42 percent in last year’s survey. Similarly, only 46 percent in this year’s survey said they are at least somewhat influenced by loyalty programs, the same percentage as in the survey released last year. And only 24 percent in this year’s survey said they follow their favorite restaurant on social media.

“There are two, very disparate consumer groups in this industry today: the technologically-engaged and those who are not—and, in fact, may never be,” said Kurt Schnaubelt a managing director in AlixPartners’ Restaurant, Hospitality and Leisure Practice. “It’s important for operators to fully assess investments they are making in technology and loyalty, to make sure they’re truly geared towards gaining net new market share, and not just wasting money chasing the latest fads.”

Survey results also suggest that ready-to-eat meals from grocery and convenience stores could be becoming a bigger threat to restaurants.

According to the survey, both delivery and take-out are expected to decrease slightly in the year ahead, particularly at fast-food and casual restaurants, with consumers saying they expect their monthly delivery and take-out orders to dip 11 percent (to an average of 3.34 visits this year) and 8 percent (to an average of 1.67 visits), respectively, vs. their number of visits in the past year. Meanwhile, respondents said they have increased interest in delivery and take-out from fast-casual and fine-dining establishments, saying they expect their number of annual visits to increase to an average of 2.06 visits and 1.48 visits, respectively, an increase 6 percent in each segment.

Among respondents who said they order delivery, 47 percent said they prefer delivery directly from the restaurant, vs. only 4 percent preferring to order via a third-party service (services such as Uber Eats, DoorDash, Postmates, etc.).

Meanwhile, meal-kit services (services such as Blue Apron, HelloFresh, Sun Basket, etc.) seem to be slow in gaining consumer adoption, according to the survey, with only 18 percent of respondents having tried such a service. In addition, 68 percent of those who said they haven’t tried a meal-kit service say they don’t plan to try one in the near future.

Survey results also suggest that ready-to-eat meals from grocery and convenience stores could be becoming a bigger threat to restaurants, with 25 percent of respondents citing such meals as a way to reduce restaurant spending, up from 19 percent in the AlixPartners survey released a year ago.

Among the other things also covered in this year’s AlixPartners survey: Consumer sensitivity to food-safety scares may be increasing, as 35 percent of respondents said they will “never” return to a restaurant chain that experienced a foodborne-illness event, regardless of the specific location of the incident. That compares with 28 percent who said that in a third AlixPartners survey, one conducted in the first quarter of 2016. 

The AlixPartners 2018 U.S. Restaurant Outlook was conducted in February 2018. It polled 1,005 U.S consumers and focused on current and planned frequency of dining occasions across convenience stores, restaurants and ready-to-eat grocery. It also looked at expected spending on meals outside of the home, preferred types of restaurants and criteria for consumer preference in restaurant selection. The survey forms the foundation of a report also released by AlixPartners, entitled North American restaurants must target diverse consumers strategically—and continue battling share-of-wallet pressures.

Starbuck App is Most Popular

Starbucks will remain the most popular proximity mobile payment app, staying ahead of Apple Pay and other competitors, according to eMarketer’s latest forecast on U.S. proximity mobile payments.

This year, 23.4 million people ages 14 and over will use the Starbucks app to make a point-of-sale purchase at least once every six months. That puts it slightly ahead of the 22.0 million people who will use Apple Pay. Google Pay (11.1 million users) and Samsung Pay (9.9 million) will round out the top four payment apps. The ranking will remain unchanged through 2022.

“The Starbucks app is one of the bigger success stories in mobile proximity payments,” said eMarketer forecasting analyst Cindy Liu. “It has gained traction thanks to its ability to tie payments to its loyalty rewards program. For users of the app, the value of paying with their smartphone is clear and simple—you can save time and money at the register, all while racking up rewards and special offers.”

Apple Pay has the second-highest adoption rate, having launched before the Google and Samsung apps, and is currently accepted at more than half of US merchants. Google Pay is not as widely accepted, but it benefits from being preinstalled on Android phones. While Samsung Pay has the lowest adoption in terms of users, it is the most widely accepted by merchants. 

Competition is intensifying, however. While each of the top four apps will continue to gain users in the U.S. throughout the forecast period, their share of mobile payment users will continue to drop. That can mainly be attributed to new payment apps entering the market, particularly merchant-branded mobile apps.

“Retailers are increasingly creating their own payment apps, which allow them to capture valuable data about their users. They can also build in rewards and perks to boost customer loyalty,” Liu said.

Overall, the number of US proximity mobile payment users will grow 14.5 percent this year to reach 55.0 million. In 2018, for the first time, more than 25 percent of US smartphone users ages 14 and older will make a proximity mobile payment at least once every six months.

eMarketer’s forecasts and estimates are based on an analysis of quantitative and qualitative data from research firms, government agencies, media firms and public companies, plus interviews with top executives at publishers, ad buyers and agencies. Data is weighted based on methodology and soundness. Each eMarketer forecast fits within the larger matrix of all its forecasts, with the same assumptions and general framework used to project figures in a wide variety of areas. Regular re-evaluation of available data means the forecasts reflect the latest business developments, technology trends and economic changes.

Middleby to Acquire Taylor Company

The Middleby Corporation entered into a definitive agreement to acquire the Taylor Company from UTC Climate, Controls & Security, a unit of United Technologies for $1.0 billion. Taylor is a world leader in beverage solutions, soft serve and ice cream dispensing equipment, frozen drink machines, and automated double‐sided grills. Middleby will finance the all‐cash acquisition under its existing revolving credit facility.

In 2017, Taylor had revenues of approximately $315 million and $65 million of adjusted earnings before interest, taxes and depreciation (“EBITDA”). The transaction has been structured to provide Middleby with a tax step‐up with a net present value of approximately $150 million. The transaction completion is subject to customary closing conditions, including regulatory approvals, with an expected closing early in the third quarter of 2018.

Selim A. Bassoul, Chairman and CEO, stated, “The acquisition of Taylor is highly strategic for Middleby and bolsters Middleby’s overall position as an industry leader in commercial foodservice. Taylor is a unique and premium brand in the commercial foodservice industry with leading positions in beverage, frozen dessert and grilling that are highly complementary to our existing offerings. Taylor products are well represented across the top restaurant chains and have significant presence across all foodservice segments including quick serve, casual dining, retail, convenience stores, and institutional foodservice establishments. The acquisition further deepens our presence in these categories and with existing customers for new offerings in the kitchen.”

“Taylor provides a leading platform to continue to build our portfolio of beverage solutions, complementing our existing brands and technologies in this product category. We believe Taylor is well positioned for growth as customers continue to invest in and expand their beverage offerings. Additionally, there are significant technology synergies amongst Taylor and our existing related businesses, which should further add to the growth opportunities in this category.”

Bassoul continued, “The Taylor automated double‐sided grill expands our cooking lineup with an advanced technology that provides customers with a specialized solution addressing labor savings, food safety and superior cooking performance. This acquisition enhances Middleby’s existing capabilities in automated cooking solutions and adds a critical technology as we further develop our portfolio of automated cooking solutions.”

Bassoul concluded, “We are very excited to have the Taylor management team and employees join the Middleby group of companies. The Taylor leadership team has deep industry experience and is highly respected by customers. This team has guided the company to strong levels of profitability and consistent financial performance over many years. We look forward to having them continue to lead the Taylor business, which will continue to operate from its existing facilities in Rockton, Illinois.”

ShopKeep Launches Register App

ShopKeep launched a version of the ShopKeep register app designed to run on the Android operating system – making ShopKeep’s industry leading software available to run on the wide variety of POS hardware platforms that now leverage Android as their base operating system.

The software will initially be deployed on First Data’s Clover devices. ShopKeep register app for Android launched earlier this month on the Clover Mini device and is slated to be available on the larger Clover Station in Q3 of this year. ShopKeep plans to expand the availability of its Android Register via additional partnerships that will be announced later this year.

The release of ShopKeep for Android is a development for the company, which up to now has deployed its app exclusively on Apple’s iOS platform. 

“Extending ShopKeep to Android-based hardware platforms ensures that both our customers and partners have access to the full range of device options available in the market,” said Michael DeSimone ShopKeep’s CEO. “We are very excited to deploy our solution on the Clover platform as a first step in expanding the availability of ShopKeep in the market, and plan to extend our reach onto several hardware platforms through the back half of 2018.”

ShopKeep first announced an expanded partnership with First Data in February, 2017.

Genesis Hospitality Purchases The Peacock Inn

The Peacock Inn, an iconic Princeton landmark, is now under new ownership. The only boutique hotel and fine dining restaurant in the heart of downtown Princeton was purchased by the Genesis Hospitality Group. The Peacock Inn joins the historic Washington Crossing Inn, located in Washington Crossing, Pennsylvania, as a Genesis Hospitality member.

The Peacock Inn Hotel is a renovated 18th century colonial mansion with a storied history as a gathering place for great minds, including Albert Einstein and F. Scott Fitzgerald. There are 16 individually-designed and lavishly-appointed guest rooms,. Awarded Four Diamonds by AAA in 2017, The Peacock Inn Hotel is a member of Choice Hotels Ascend Collection, a group of upscale, independent hotels providing experiential, individualized travel with a sense of local flavor.  The fine dining restaurant that earned a Zagat rating of 26 for food, ambiance and service and a Wine Spectator Award of Excellence three years in a row will reopen for dinner on Friday, May 25.

The new menus feature what Executive Chef Mark Valenza calls, “American mosaic cooking”, with fresh, seasonal ingredients including locally-farmed produce and aquaculture. Beyond dinner service, The Peacock Inn Restaurant will serve breakfast, lunch, and Sunday brunch beginning Sunday May 26. At The Peacock Inn Bar and Lounge, there is an extensive, well-curated wine list and a sparkling champagne bar. Finally, tea time is coming to Princeton-dedicated Afternoon Tea seatings begin in the fall.

“We are excited to unveil the next chapter in the long, rich history of The Peacock Inn,” says Dr. Eli Mordechai, CEO of Genesis Hospitality.

Ninth Annual Camp Bacon