Restaurateurs plan for higher prices, more marketing in 2011

Filed under Management, News

Daniel Sarkiss of Zaytune Mediterranean Grill

Daniel Sarkiss, owner of Zaytune Mediterranean Grill in Bridgeport

By Hallie Busta

— Fresh off his restaurant’s first year in business, Daniel Sarkiss, owner of Zaytune Mediterranean Grill in Bridgeport, is already planning to hike menu prices this year due to higher commodity costs.

Raising menu prices generally is a last resort, yet 60 percent of 130 restaurant owners surveyed last month by Nation’s Restaurant News said they plan to increase prices this year. More than one-third of those polled identified increased food and energy costs as the primary challenge facing their business.

 “People are still hesitant” to raise prices, said Robin Lee Allen, executive editor of Nation’s Restaurant News.

A brighter future?

But the outlook for 2011 is positive, experts said. Chicago-based consulting firm Technomic is forecasting a 1.7 percent increase in foodservice sales in 2011, according to a Jan. 11 report in Nation’s Restaurant News. But when menu price inflation is taken out, the growth drops to 0.3 percent.  The forecasted 1.7 percent sales increase compares to a sales decline of 3.7 percent in 2009, or a drop of 7 percent in real dollars, Technomic reported. While modest, the growth would be the best since 2008, the firm reported.

Boosting volume can help offset higher costs. DeColores in Pilsen opened last year and grew so rapidly that the restaurant plans to hire three people this year, said Priscilla Reyes, co-owner of the restaurant. For her, the challenge has been managing the growing demand. “You have to be able to hire more people, and that’s pretty much where that money goes,” she said.

 Four in ten respondents to the national restaurant survey said they planned to hire more workers this year, while more than half said they planned to maintain staff levels.

 “The primary message that we’re hearing is that people don’t expect the year not to have challenges, but they do expect the year to be better than the past few have been,” Allen said.

Consumer spending expected to rise

With the economic recovery under way, 45 percent of restaurant survey respondents said they might benefit from increased consumer spending this year, Allen said.

 “People miss going out to restaurants,” Allen said. After cutting back on spending in 2009 and 2010, consumers feel “like they deserve to go out again,” she said.

 To encourage more meals away from home, restaurant owners need to maintain a positive image of the dining-out experience, said Technomic president Ron Paul.

 But consumers also have become accustomed to special promotions. When they do dine out, many are looking for a bargain.  Seven in ten customers who already use coupons to save money on casual dining said they planned to continue to do so as their financial situations improve, according to Technomic’s research.

Social media growing 

Restaurant owners are looking to expand on this by growing their marketing campaigns, the restaurant survey reported. Over 40 percent said they will use social media.

 “[We plan to] utilize Facebook as much as possible and work with Yelp [and] some of the local papers as well,” Sarkiss said. “I’m also going to invest in running some more specialties on a weekly basis.”

 Amy Le, social media manager for GrubHub.com, said the site introduced its iPhone app in 2008.  In 2009, the app accounted for 1 percent of sales, then spiked to 10 percent of sales by the end of 2010. “We project that this is going to be a continuing part of our business going forward,” she said.

 GrubHub aggregates delivery menus and allows customers to order and pay for their food directly from the website. It currently hosts 13,000 restaurants in the Chicago area and saw sales climb 206 percent between October 2007 and October 2010, Le said.

Economic indicators point to growth

The health of the restaurant industry in Illinois is tied to unemployment rates, Paul said. “If people don’t have jobs, they won’t have money to be eating out,” he said.

 Unemployment in the state was 9.6 percent as of November, down from 10.9 percent a year ago, according to the U.S. Bureau of Labor Statistics.

 “Illinois is fairly typical for the U.S.,” Paul said. “It’s neither that much better off or that much worse off.”

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