Worried About Slow Restaurant Sales? Here’s What To Do.

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Worried About Slow Restaurant Sales? Here’s What To Do.

June 05, 2024

“Let me be clear from the beginning. Our performance this quarter was disappointing and did not meet our expectations."

That’s how Laxman Narasimhan — CEO & Director of Starbucks Corp. — started the brand’s Q2 2024 earnings call last month.

When the world’s most valuable restaurant brand starts reporting disappointing, expectation-missing sales, it’s easy to wonder if something’s up.

Or rather, if something’s down.

Like the last quarter of restaurant sales has been.

Since the beginning of 2024, restaurant sales have been going through a “soft patch.” For the past four months, restaurants have reported lower sales volumes than last year, with February 2024 marking the “worst-performing” sales month since February 2021.

So…what’s going on?

Why are restaurant sales so slow?

And what are you supposed to be doing about it?

Those are all good questions — and I promise we’ll go through them later.

But first, we need to talk about something else:

The economy.

How the Economy is Impacting Restaurant Sales

Currently, the state of the U.S. economy is – to put it simply – not super great.

Consumers aren’t able to spend as freely as they have before, resulting in the careful spending style that restaurant operators have noticed more and more this year.

So, with our less-than-awesome economic situation in mind, here are a few reasons why consumers are spending more cautiously than ever before.

(Fair warning – none of it’s sunshine and rainbows.)

1. The cost of basically everything has increased

From April 2023 to April 2024, these price indexes have increased:
- Shelter: +5.5%
- Gasoline: +1.2%
- Electricity: +5.1%

From April 2023 to April 2024, these food-specific price indexes have increased:
- Fruits and vegetables: +1.7%
- Meats, poultry, fish, eggs: +1.0%
- Cereals and bakery products: +0.6%

2. Wages haven’t been adjusted for price increases

The federal minimum wage in the U.S. is $7.25/hour (and has been since 2009)
- Economics call this wage amount “woefully inadequate and unjust”
If a minimum-wage employee works 40 hours a week, 52 weeks a year (which nobody wants to do), they’ll take home $15,080
- This is below the 2024 poverty line for a lot of families!

3. People are struggling to make ends meet (and end up with debt)

In 2023, a Forbes Advisor survey revealed that 40% of Americans were living paycheck to paycheck
- Of that 40%, almost half said high monthly bills were the cause (i.e. rent, mortgage, insurance, utilities)
The same survey also revealed that:
- 29% of people had expenses that exceeded their income
- 85% of people used credit cards to cover their expenses
The average American owes $104,215 in debts, from mortgage and auto loans to student loans and credit card debt

4. People can’t justify eating out (even though they want to)

44% of adults aren’t going out to restaurants as often as they’d like
38% of adults aren’t ordering takeout/delivery as often as they’d like
Price is hugely important to conscious spenders
- 18% of diners are intentionally choosing less expensive restaurants
- 63% of households say price is the key factor in choosing a restaurant
Deals/savings are enticing to conscious spenders
- 80% of adults would use dining discounts during slow days/off-peak times
- 72% of consumers value loyalty programs that save them money

“The economy” is a nebulous, jargon-filled term that doesn’t mean much to most people.

(And, since I’m not an economist, I’ll gladly leave definitions and explanations to Investopedia.)

But, as a restaurant owner, the economy should mean a lot to you.

Because it’s part of why restaurant sales are softer than a peach right now.

And it’s something you need to get ahead of if you want your restaurant sales to survive.

Economy Meme

Mini Case Study: Potbelly

So, you know that restaurant sales are slow… but what can you do about it?

If you ask the team at Potbelly, they’d tell you to keep up the digital momentum.

During the company’s Q1 2024 sales call, Potbelly’s President and CEO Robert Wright shared lower-than-expected quarterly results.

“[Industry] trends were marginally softer than we were anticipating, leading our results to be below our expectations and slightly below Q1 2023 comps by 0.2%,” said Wright. “[We] saw some slight declines in transactions from our more infrequent customers.”

But Wright didn’t dwell on restaurant sales that missed the mark. Instead, he launched right into, sharing how they’ll get those sales back:

Amplifying their digital offerings to nurture existing customers, and attract new ones, too.

"When customers utilize our digital platforms it not only ensures a better experience, but also allows us to more effectively communicate with and market to them,” Wright explained. “We maintain an extensive app of digital enhancements aimed [at] continually improving our Potbelly digital experience to best suit customers’ needs [and] expectations [while reducing friction and] driving Potbelly brand awareness, customer engagement, and business results."

Digital Engagement in Restaurants

Encouraged by a history of digital success, Wright has identified three focus areas for Potbelly in Q2 2024:

Menu innovation
Loyalty expansion
Digital-first value adds

And, while each focus area is distinct in its goals, they’re each underscored by two Potbelly principles: customers crave value and digital helps deliver it.

“[The] very best Potbelly experience, includes access to and the use of our digital assets,” said Wright. “[We] plan to continue to push growth in Perks member acquisition as a way to expose our newer customers to the best experience and value Potbelly has to offer.”

So, what does relieving budget pressures look like considering Potbelly’s three focus areas?

Simple: a lot more digital-first value.

1. Menu innovation

The solution:

Building better everyday value through menu expansions and digital upgrades

Wright’s explanation:

“It’s clear that less frequent customers are looking for everyday value options to support their pressured wallets. We have the tools and strategies to support this customer group by building on everyday value already in our core menu, Meal Deal and Pick-Your-Pair and options, and look forward to expanding on these offerings throughout the year.”

The proof in the Potbelly pudding:

As part of their commitment to improved everyday value, Potbelly reintroduced their Underground Menu in Q2 2023, an app-only “secret” menu that’s back and better than ever.

2. Loyalty expansion

The solution:

Upgrading Potbelly Perks for faster rewards and expanded redemption offers

Wright’s explanation:

“The upgraded Perks program celebrates what our customers love the most about Potbelly, great food. Perks members can earn rewards faster than ever before and have more of our menu items available for reward redemptions by using a broader range of coins to do so. We’re so proud to say that we’re seeing the expected customer behavior under the new program and we consider the transition to be a big success.”

The proof in the Potbelly pudding:

In Q1 2024, Potbelly revealed a range of loyalty changes, including redemption tiers as low as 200 Coins (compared to 1000 Coins previously) and more menu options outside of entrées.

3. Digital-first value adds

The solution:

Digital ordering/app improvements that better meet customer needs and wants

Wright’s explanation:

“As we’ve said in recent quarters, we continue to see a shift in our digital business away from third-party channels and towards Potbelly’s owned app, web and Perks originated orders. We continue to view this as a positive shift. We saw strong growth in our Perks sales, orders and active users during the quarter. In fact, Perks’ active members were 36% year-over-year.”

The proof in the Potbelly pudding:

Potbelly not only added brand new items to their app-exclusive Underground Menu, but they also boosted reward earnings on Underground purchases (so you can get free stuff faster).

Restaurant-apps-1

A Better Digital Experience (and Better Restaurant Sales) with Craver

If you want to tackle slow restaurant sales in the same digital-savvy way as Potbelly, then you need a stronger digital experience.

Lucky for you, creating strong digital experiences is what Craver does best.

There are three ways you can push back against soft sales with Craver:

1. Personalized App Offers and Rewards

Give your customers the savings they want (and need) with Craver’s customized, in-app offers. Then, using Craver’s built-in rewards program, you can say “thanks!” to your most loyal customers without any extra lift.

2. Easy Digital Upsells/Add-Ons

With the ease of Craver’s upsell options, it’s easier than ever to make a single transaction go farther. From recommended add-ons to dynamic pricing deals, Craver’s options for personalized perks (and a higher AOV) are endless!

3. Membership/Subscription Program

Whether you’re offering bottomless bevvies or members-only discounts, our Membership/Subscription program is 100% customizable. With Craver, you get to reward your members, your way!

Book a demo today to see Craver's apps in action!