According to a new survey from market research and global
information company The NPD Group, the effectiveness of deals in
driving traffic to restaurants has declined considerably. NPD's
foodservice market research says that compared to a year earlier,
restaurants visits using a "meal deal" had declined by 3% in
Some examples of deals which are currently on offer include the
$1 menu from
) and the $10 dinner box from Pizza Hut, which is part of
Yum! Brands, Inc.
). Also, two-medium, two-topping pizzas are being offered by
Domino's Pizza, Inc.
) for $5.99 each. One example from sit-down casual dining is Red
Lobster, owned by
Darden Restaurants, Inc.
), which offers a $7.99 lunch special.
Traditionally the most frequently used types of restaurant deals
-- combo meals and value menu item offers -- were primarily
responsible for the decline in traffic. However, visits based on
coupons, "buy one, get one free" and discounted prices have
These figures were captured by NPD's CREST from more than
4,000,000 consumer restaurant visits every year. That said, this
data in no way undermines the importance of deals in the
restaurant business. Deals were the force driving visits during
the peak of the recession when restaurant traffic had otherwise
declined. Non-deal traffic had fallen by 1% while deal traffic
gained 5% in 2008.
In comparison, deal traffic had increased by 3% in 2009 whereas
non-deal traffic had declined by 4%. Deal traffic was nearly flat
in 2010, non-deal traffic had declined by 1%. Both deal and
non-deal traffic were unchanged in 2011.
By 2012, the picture had changed completely. Non-deal traffic had
gone up by 2% whereas restaurant visits on deals had fallen by
3%. This is particularly significant because the trend had
changed even though deal traffic made up 23% of all traffic. Of
course, by this time many of the deals that were offered first
during the recession had been in place for quite a few
On the other hand, deal checks have gone up since the recession.
In 2012, the average deal meal could be purchased at $5.97
compared to $7.04 for non-deal meals. Therefore, the price
differential between deal and non-deal meals has declined
sharply, reducing their draw significantly.
But the major issue is that of the comparative value of the deal
itself, even if the price is significantly lower. NPD is of the
view that if a deal remains in place for too long then customers
believe that the deal price is the regular price of those items.
For instance, "two for $20" lunch deals have been offered at
casual dining restaurants for quite some time now. This is
applicable in every case, particularly for combo meals and value
menu items as shown by the study.
Harry Balzar, chief industry analyst at NPD, is of the view that
there is a need to get creative and make sweeping changes to the
way these offers are conceived. Restaurants, retailers and food
service departments should all alter these deals to attract
One of the major issues to be highlighted by the report is the
behavior of younger customers. As far as this group is concerned,
deal visits have clearly declined, almost drastically in the case
of deals related to combo meals and value menus. This trend has
been particularly strong over the last few years.
NPD's restaurant industry analyst believes that deals must
reflect the tastes and needs of this younger segment. Relying on
existing value items and bundled meals may no longer be a choice.
This is significant across customer segments given the prevailing
customer sentiment and economization. Clearly, deals have to
undergo radical retooling to drive traffic for the industry in
DOMINOS PIZZA (DPZ): Free Stock Analysis
DARDEN RESTRNT (DRI): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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