What's Edging In On Restaurant Market Share?

According to the NRN, "experts participating in the MUFSO panel Stealth Competition: Who's After Your Share of the Market? cautioned attendees...that this new wave of competition is employing lessons learned from restaurant operators themselves and using them to lure away potential customers." So who are these nontraditional competitors, and what are their strategies?

The top three business types that are vying for restaurant market share are grocery stores, convenience stores, and retail drug stores. And here's why: "Home-meal replacement has faded away in the restaurant side of the business," according to Steve Johnson, the MUFSO panel moderator. "But in grocery stores, convenience stores, and retail drug stores, it never faded away. It was studied and tested, and implemented."

Here are some thought-provoking statistics, as reported by the NRN:

• Baby boomers buy prepared food from such nontraditional outlets 9 times per month.
• 34 - 54 year-old consumers buy food from them 4 times per month.
• 18 - 34 year-old consumers buy food there at least 8 times per month.
• All consumers shop at these nontraditional competitors at least 3 times per month.

So what is a consumer's motivating factor for frequenting these establishments instead of dining out? Convenience. According to Louie Sheetz, executive vice president of the expansive convenience store chain, Sheetz, "We're strategically placed when the customer is out for the day. And we're an opportunity for today's multitasking consumer to do more than one thing with that stop."

Savvy competitors continually strive to provide what the mobile, multi-tasking consumer wants - they're branching out with healthier food options, freshly-made sandwiches and soups, fresh fruits and vegetables, heat-and-eat dishes, and even niche items like sushi. Competitors like Sheetz are focusing not only on what they serve, but how they serve it. Sheetz has adapted its made-to-order (MTO) sandwich and salad line to become even more convenient for consumers. Says Louie Sheetz, "We've taken the line and moved it to MTGo. It's sandwiches, wraps and salads for when you're in a hurry and don't have time to access the touch screen order pad and wait for us to prepare your food for you. That line has seen incredible growth in the last four years."

Of course, restaurateurs do not have to allow this competition to bully them from expansion. Chain restaurants in particular are finding ways to drive their own growth in alternative marketplaces such as retailers, convenience stores, and travel centers.

For example, Checkers restaurant opened two slimmed-down units in 2012, both inside Walmart stores. Big-box retailers such as Target and Walmart have already embraced franchised units of large chain restaurants like McDonald's, Subway, and Starbucks within their stores. Caribou Coffee has signed  a mulilocation deal with Jewel-Osco (the largest chain of grocery stores in Chicago), and Huddle House, an enormous chain of family-dining restaurants, is partnering with Pilot Flying J travel centers.

In the words of Fazoli's vice president of franchise development, Craig Sherwood, convenience store operators constantly tell him that they need popular restaurant brands in their buildings because the C-store industry is so competitive. "If gas prices are the same as the guy across the street, what differentiates C-stores are the offerings inside."

A final example of thinking outside the traditional box for restaurant growth is that of the chain Pita Pit, which has recently opened units in a mobile trailer on a Navy base and in a Colorado convenience store. Says Corey Bowman, vice president of franchise development for Pita Pita USA, "the advantage of doing mobile units ... is that we wouldn't have to wait for space to open up." Pita Pit has already found residence on several college campuses, and would like to open units in airports and sports stadiums.

Moral of the story: Competition is fierce - especially in the restaurant industry. Be in the know, be creative, and be flexible. And if expansion isn't for you, be the type of restaurant that diners want to return to time and time again, by providing excellent customer service, superb food at a fair price, and an atmosphere that one simply couldn't get at a grocery store, retail drug store, convenience store, travel center, mobile unit, airport, or sports arena. Think about what sets you apart and capitalize on that.