Restaurants cook up marketing to counter downturn

For U.S. restaurants, this has been the roughest stretch in memory, with two years of declining traffic brought on by Americans being more cautious with their money. Visits to U.S. restaurants overall fell 1 percent in the quarter ending in June for the eighth consecutive quarterly drop, according to The NPD Group. Traffic was weakest at full-service restaurants: Visits to casual dining restaurants were down 2 percent and mid-scale restaurant traffic was down 3 percent. Fast-food restaurants managed to hold their visitor counts steady in the second quarter after five quarters of year-over-year declines, thanks to aggressive promotions of value menus. The market research firm, which has tracked the industry since 1976, says this is the worst downturn for restaurants in that span.

"We've never seen anything like it in the restaurant industry," said NPD analyst Bonnie Riggs. She predicted that it would take another year and a half for the industry to recover to pre-recession levels.

Atlanta provides a unique vantage point to see how restaurants are trying to adjust. It is home to a number of national fast food chains, such as Wendy's/Arby's, Chick-fil-A and Popeyes Louisiana Kitchen. And Atlanta diners visit restaurants more often than people in many other cities.

We eat out at fast-food restaurants 14.2 times a month, compared to the national average of 13 times, according to Sandelman & Associates, a California-based restaurant market research company. We visit casual dining restaurants 8.7 times per month on average, compared to 7.2 times a month for average Americans.

Overall, Atlantans eat out 3.3 times per week, according to Zagat Survey. That put us ahead of Washington, D.C., Boston, Miami, Philadelphia and Chicago, and just behind Los Angeles and Las Vegas.

Competition heats up

To minimize the recession's effects, Atlanta eateries are serving up more creative loyalty programs, special events, themed dinners, affordable specials and the like -- hoping to get attention and pull in diners.

Ron Eyester, chef at Rosebud, said the Morningside restaurant tries a number of concepts, short of the "gimmicky." There are Monday night brunches and musical dinners themed to '80s pop music. Goal: keep the concept interesting.

"Just the way the economy is, every once in a while we offer something different," he said.

Fifth Group Restaurants is using targeted discounting such as Groupon and special events to pull new people into its restaurants. A patio party at Ecco, with a theme of "Beer Meats Grill," sold out of $25 tickets, said Michael Erickson, director of marketing. A Father's Day grilling class at South City Kitchen Vinings also was well-received, he said.

This economy forces restaurateurs to be creative and concentrate on what works, Erickson said. "It takes real focus and real effort. Our guest is not always driven by (discounting). Our guests look for an exciting, interesting night out, and that shouldn't always depend on discounting."

For some, an uncertain economy has meant eating at home more often. At the peak in 2006, Americans spent just under half their food budget on restaurants, but that percentage has dropped to the mid-40s.

Georgia's unemployment rate now stands at 10 percent, higher than the national rate of 9.6 percent. And as unemployment has moved upward, substantial numbers of customers have traded down even from fast food, electing to stay at home. Restaurants "don't take Food Stamps," Stifel Nicolaus analyst Steve West said matter-of-factly.

Still, the dash to attract diners with deep discounts of the kind seen at Applebee's and Chili's -- two entrees and an appetizer for $20, for example -- can be dangerous because they may be training consumers to wait until deals are offered. "They assume you're eventually going to buckle and offer that discount," said Sara Senatore, analyst at Sanford C. Bernstein.

West predicted that the restaurant chains that have avoided drastic prices cuts will be the first to gain market share when the overall economy improves.

The trick in the meantime may be a creative concoction of events, targeted discounts and special menus.

El Taco did Twitter-based promotions, giving free margaritas to guests who repeated a designated catchphrase such as "it's hot as ‘el."

When Pacci Ristorante allowed guests to flip a coin to find out if they had to pay for their brunch, the Midtown restaurant saw an increase in traffic and check average during the month-long promotion.

When RA Sushi promised to give guests a free Hot Mess Roll if the temperature hit 100 degrees, sales of the rolls rose even when the temperatures didn't. Ray's Restaurants added a drink -- beer, wine or soft drink --to the $10 lunch special and saw lunch guest counts rise about 35 percent, with about half of lunchtime guests choosing the $10 option.

Other restaurants have tried special events. BLT Steak in Atlanta extended its Restaurant Week offer -- a three-course prix fixe menu for $35 per person -- for almost a month longer than the other participating restaurants' two weeks. The Deadwood Saloon joined forces with neighboring restaurants and bars to host an ugly bridesmaid dress bar crawl.

JCT Kitchen & Bar raised money for Georgia Organics through the Attack of the Killer Tomato Festival and Farm-to-Table-and-Back guest chef dinners. Atkins Park Tavern and Ormsby's bought tickets to the last regular-season Braves game and rented a bus to take fans and diners to the game, continuing a long tradition of taking customers and staff to Braves, Falcons and Thrashers games.

Vinings Jubilee hosted food bloggers for a tour of local restaurants such as Soho, Burger Club, Garrison's, The Grape, La Paz and Noche. Guests met chefs and sampled small bites and cocktails, and the event got a lot of Twitter traffic.

Meehan's Public House Downtown, an Irish tavern, established the Footie Fan Club, giving members discounts such as 10 percent off their bills during a soccer game. In May, it also offered a $50 five-course meal -- including smoked duck breasts, crab cakes and collards -- paired with Ommegang beers.

Special events are "the way to go," NPD analyst Riggs said. Consumers "want to be rewarded for their loyalty."

Lean days may be ending

Tony Lavely, chief marketing officer at Atlanta-based Church's Chicken, said the last couple of years have been an uphill battle, with stressed-out consumers feeling the full weight of a nasty economy.

Church's is trying to hold down prices to fend off larger competitors such as KFC. It recently launched new advertising, sweet tea and crispy chicken tacos. Increasing the number of transactions is "the ultimate reality check," Lavely said.

Casual dining restaurants, a category that includes Applebee's and Chili's, are trying to reverse a long-term slide. The category has suffered declining traffic since 2004, West said, with overbuilding and declining demand putting the segment in a double squeeze.

The numbers suggest the industry may be quietly stabilizing. The rate of decline in restaurant visits overall slowed in the second quarter, with an upswing in select segments. Analysts see encouraging signs in the resilience of chains such as Chipotle, Panera, Starbucks and McDonald's.

Some high-end restaurants appear to be bouncing back, armed with cheaper Sunday brunches and bar menus with lower prices and smaller portions. Easy comparisons may also help. In recent periods, some pricier restaurants encountered such steep sales declines that their recoveries looked more dramatic, Senatore said.

Riggs said the turnaround may have already begun. Americans have grown recession-weary, tired of being told they have to pinch pennies. Now, they want to indulge themselves a bit. "When we start to see consumer confidence pick up," she said, "you'll see a lot of improvement."