Grocery Sales Help Restaurants Keep the Lights On
As traffic trickles in, many restaurants are looking to bridge the sales pit with novel offerings and help customers get the most out of their trip. One of the most popular moves is to bring grocery-like functionality to the restaurant.
Brands from Panera to Subway to KFC, Dickey's and Mooyah have taken on some sort of grocery operations to cover the dismal sales declines. When COVID-19 hit, grocery was the one part of the broader foodservice world that improved, and not just a little. According to analytics firm Sense360, grocery sales surged by 24 percent as the country shut down. As more hotspots developed and areas made their own restrictions, that number rose again. It’s clear that a huge portion of meals that were serviced by restaurants before the pandemic were going to grocery.
That, it seemed, was an opportunity to increase ticket sizes and give customers a reason to stop in for food and some household necessities. It’s also a way to stand apart from other restaurants as everyone seeks to keep socially distanced.
At Dickey’s, it was an idea that came from operators who had seen the surge in grocery and were looking for new ways to keep the lights on.
“They’re operators but also exactly where our prime guest profile is. So, they asked what do I want if this is one of my one or two trips, how do I make one of those to Dickey’s. We have toilet paper, we have gloves, we have some of those items and we can add them to an order,” said CEO Laura Rea Dickey. “We took those four or five key items and just did a relief pack so folks could just add that on. And we let operators choose if that was right and if they could handle the additional inventory.”
She said urban locations are doing the most volume, but the program also pairs with trends toward longer-term restaurant purchase behavior. Instead of running out for a lunch, people are getting enough to feed a family or feed themselves for a few days. She said the company’s whole-meat business has tripled and the company has rolled out a larger size for sides. Sales are down by about 30 percent, but ticket sizes are up by $2, said Dickey.
That ticket uptick is the driving force behind a new KFC promotion that encourages people to get two buckets of chicken, one for tonight’s family dinner and another bucket of chicken tenders for the next day. The second bucket also includes reheating instructions for the tenders. All it required of franchisees was to get some recipe cards so they could get in on the grocery game without any additional inventory.
At Panera, customers can tack on all sorts of produce and pantry items, from milk to apples along with retail bread.
“From limited choices on grocery shelves to the growing need to limit the number of trips outside of the home, it is an incredibly stressful time when it comes to putting wholesome food on the table, and we knew Panera could help,” said Panera CEO Niren Chaudhary. “With this new service we can help deliver good food and fresh ingredients from our pantry to yours, helping provide better access to essential items that are increasingly harder to come by.”
But it’s not cheap. According to Food On Demand Editor Tom Kaiser, a few key items added up to $27, twice what it would cost to pick up at a grocery store.
At Beef ‘O' Brady’s, the decision to sell groceries was an opportunity, but also a community service.
“Franchise owners were looking for any way to build revenue and serve their community. Several franchise owners took it upon themselves to start selling groceries out of their locations and it worked. Seeing this success, we decided to develop a menu template that a franchise owner could adapt to their situation. This initiative has helped our owners and their community,” said CEO Chris Elliott. “There has been a lot of great feedback from our customers. The grocery initiative shows creative thinking, adaptability and entrepreneurial spirit. Our owners responded to an opportunity and a need. We expect this initiative to create stronger community ties and loyalty to the Beef 'O' Brady’s brand.”
The company is selling essentially its own inventory, with a few extras thrown in. And that’s another opportunity with grocery, avoiding costly food waste. Subway added its own cheese and meats to a grocery program.
That was the tactic at Mooyah, which is selling burger buns, sacks of potatoes that would typically go to making fries and 2-pound packs of ground beef. Unloading inventory is something to consider because every item sold even at cost is one less brick of cheese in the garbage. The company said it was a nice additional benefit when grocery stores were running low on these key items, but now that things have stabalized, grocery sales have fallen off significantly. The company plans to end the program at the end of April as it no longer makes business sense.
It should be noted that none of these programs are making much revenue. Andy Wang, a journalist at Food & Wine, put it well on Twitter, as seen below.
Gonna say this in the most gentle way I can: If you think all these restaurants selling takeout and groceries are making bank, you are an idiot and I hate you— Andy Wang (@andywangnyla) April 23, 2020
Andre Verner, a founding partner at Dog Haus, echoed that sentiment, saying that franchisees are looking to franchisors for innovation to fill the “sales bucket” little by little. Few think they can hit 100 percent with tactics like this, but a few percent here and a few dollars there may keep the lights on and get a location through the crisis. And it’s helping key distribution partners, too.
“We get items half off what a grocery store gets it for. So, we we’re able to sell it to customers for grocery store pricing to make money and be a true partner to our distributor,” said Verner. “So that was a win-win there. But restaurants are all open to serve their community. I don’t know too many people rolling in dough right now.”