Although the economic woes are subsiding for some South African consumers, many are still watching their spending. One would expect that this means less eating out and takeaways, yet the restaurant industry says this isn’t the case.
Tyrone Herdman-Grant, MD of of the Spur Group says South Africans are most definitely starting to eat out more as a result of the current economy. He explains: “I believe that our customers are still scared of committing to buying assets like houses and cars and are still fearful of a second recession. This has resulted in more disposable income which they spend on food and entertainment.” Sean Holmes, marketing and operations,
Primi Piatti, believes people find comfort in food and as a result when they have some form of disposable income they choose to spoil themselves by eating out.
Michael Terespolsky, director, Col’Cacchio pizzeria, confirms that there has been a growth in the number of South Africans eating out over the last year. He adds: “That being said, the economic climate is still tough, and people aren’t willing to part with their hard-earned money for an average dining experience.
Customers demand a high standard of food quality and service at an affordable price. Customer perception of value is the most important thing to bear in mind!”
Opt for a franchise
Herdman-Grant believes franchised restaurant brands have a stronger future in the sector than independently-owned outlets. He says: “Independents usually cut their marketing budget when times are tough, while top brands increase their marketing spend.
The strength of a good brand cannot be valued enough – especially if the franchisor provides the franchisee with ongoing support and guidance to improve and streamline their business, but never at the expense of the customer.” Herdman-Grant says good franchises offer a proven business formula – they have learnt most of the lessons that need to be learnt.
Holmes says franchise businesses have proven themselves internationally. He adds: “A franchise offers less risk and stands a greater chance of success and survival than independent start-up businesses. They say a franchise business has 80% more chance of succeeding than an independent start-up.”
However, Terespolsky is of the opinion that a franchise does not necessarily have a stronger future in the restaurant sector than an independent. “It depends on the strength of the franchise and its ability to be responsive and appealing to the market.
Nothing comes without hard work though and the restaurants that are the most successful (franchised or independent) are the ones that are owner run and managed.”
He says that if restaurant franchises can offer consistently high quality and service and the brand name is held high then they’ll be likely to succeed.
The advantages of franchised restaurant brands such as strong brand awareness, cost advantages through economies of scale and constant support means that the likelihood of success with a franchise brand should be greater than with an independent.
Terespolsky says a franchise offers a “tested and proven” method which mitigates the risk of your offerings not being accepted in the market.
“Ease in financing is also a benefit of investing in a restaurant franchise. Traditional lending sources like banks are familiar with restaurant- related costs which may ease the challenge of obtaining start-up financing,” he concludes.
Andries Strydom of Wiesenhoff highlights some of the advantages of choosing to invest in a franchise, including bulk negotiating influence, sharing of information between franchisees and being able to offer the consumer peace of mind with a familiar brand.
He adds: “Many people in the brand focus on different segments necessary for growth. Independent operators have too much to think about and focus on. Franchisees focus on running their stores while franchisors focus on running the brand.”
Herdman-Grant says that restaurants can remain competitive by improving the value proposition and investing in the people who run their businesses. Other measures include upgrading sites and continually staying ahead of the game in a constantly changing market.
For Holmes, remaining competitive requires the business to evolve continuously and stay closely connected to customers’ wants and needs.
“We remain competitive through the use of well-planned strategies. Being a competitor in the food and hospitality industry requires constant monitoring of your situation and the events that are taking place around you. To remain profitable, you need to have strategies available to stay competitive in the marketplace,” says Terespolsky.
He adds that restaurants need to remain abreast of current trends in the industry and look for ways to innovate and stand out. “If there’s nothing special or unique about your offering, customers are bound to feel the same way.
Making meaningful connections with customers through well-managed and engaging websites and social media pages is also a competitive advantage at this point in time.”
The weather factor
Some franchises are more successful in the summer months when consumers are more active and upbeat, but restaurants aren’t negatively affected by the cold winter period.
“South Africa is a very sport-orientated country and when the weather is good, South Africans prefer being outdoors and braaiing. When the weather is bad, we definitely see an increase in the number of customers who support our restaurants,” says Herdman-Grant.
Holmes advises that during quieter months, restaurants need to look at their overhead structure and trim in line with winter sales trends. “The introduction of specials or ‘value adds’ will also help entice customers out of their homes to wine and dine,” he says.
This is echoed by Terespolsky who says for some restaurants there is a drop off in sales. He says: “Store owners need to work hard to ensure they keep foot traffic through their doors with a great product and service offering. Increased marketing initiatives and special value adds are introduced during the winter months to encourage more customer visits.”
According to Herdman-Grant, customers are now voting with their feet and chosing where to spend their hard earned money.
The independents and the brands that offer the best-quality service in a wholesome environment will be the ones that survive. “The trend is definitely leaning towards quality and good service;you are only as good as the last meal you serve,” he adds.
“A ‘value for money’ offering is definitely popular in the current economic climate,” says Terespolsky. He says consumers seek good quality food and great service at an affordable price.
“The SA market is becoming increasingly sensitive to growing health issues and as a result people are looking to make more healthy food choices. Restaurants that cater for all dietary requirements and offer healthy, freshly prepared food at a competitive price will flourish. “
Holmes says a popular dining experience at the moment is where there is transparency between the food being served and consumed and the original source.
Making it work
According to Herdman-Grant, restaurants that offer the best customer experience and continually reinvest in their business by upgrading and improving the quality of their product and service, will survive.
He says that some of the biggest challenges restaurant owners currently face include the increase in labour and energy costs, as well as “unrealistic rentals expected by some landlords.”
To retain customers, Holmes says restaurant owners need to stay connected. “Service and quality is a must and expected, it’s the connectivity and relationship built between the restaurant operator and their customer that will ensure a long-term loyal customer.”
Some of the challenges he highlights include maintaining the dedication and motivation to efficiently operate the business, controlling costs and in turn motivating staff to do the same.
“Keeping a keen focus on customer service is key,” says Terespolsky. He explains that if customers are continually delighted by the dining experience they’ll be more likely to remain loyal to your brand and tell their friends and family about it.
“Invest in training and the up-skilling of staff as they are the closest touch point to your customers. Warm, sincere staff will make customers feel welcome and comfortable. Customer relationship marketing should be well managed to keep up the contact and value offer to returning customers,” he advises.
“There are a number of challenges that affect all restaurant owners such as growing food, electricity and rental costs. Those who are successful will be the store owners who learn to utilise space and manpower the best.”
Strydom says to remain competitive, restaurants need to be unique, offer great service, quality products, great staff, good training and have a suitable location. Some of the challenges, he says, include staff retention, quality of staff, supply chain and food inflation, but he adds that the advantages of a restaurant franchise are ROI that outweighs that of other businesses, and daily cash flow.
What it takes
Michael Terespolsky, director of Col’Cacchio pizzeria says that in the current market the greatest challenges are finding suitable franchisees who have the financial means to buy into the brand.
In order to be a Col’Cacchio pizzeria franchise owner you should possess:
- An entrepreneurial spirit and a desire to own your own business
- A great work ethic and the willingness to spend time in your business
- The ability to deal with pressure
- A ‘don’t quit’ attitude
- Leadership and management skills
- Business acumen
- Customer service orientation
- The same kind of passion as the rest of the Col’Cacchio pizzeria team.