Industry observers will have noted that restaurant organizations worldwide are facing a more crowded market space. With it comes a plethora of old and new challenges. Those that restaurant entrepreneurs and larger corporations have struggled with for decades, and that will continue to be “hot topics” going forward, include, for example, skill shortage, succession planning and retention as well as fierce competition from the “new kids on the block” (i.e. the up-and-coming and sexy start-up brands). “How do we keep our staff?” and “Who is the person best equipped to handle the expansion plans of our business?” are questions discussed at most senior management meetings.
The challenges which have arisen as of late are first and foremost related to the significant changes in both consumer behaviour and the market dynamics. London 15 years ago, for example, could not have been described as a food mecca – and look at it today! The same holds true for other markets across the globe (has anyone been to Dubai recently?). Food markets, along the lines of a traditional Hawker House (e.g. Street Feast / London) are booming, worldwide. Fast food, casual and fast casual are continuing to enjoy strong momentum. Entrepreneurs, at times backed by significant private equity money, are behind the creation of new and exciting brands. Supported by the rise of social media, and the urge of today’s younger generation to keep everyone up-to-date on, and share with everyone, their whereabouts and what they are eating, those new restaurant concepts are encountering fertile ground to rapidly grow and expand. Third party delivery companies (think Just Eat which floated in 2014 with a valuation of GBP £1.4 billion) are doing their part to help consumers experience a multitude of new dining options – but they have also become a competitor to restaurants in their own right.
On the back of all this, AETHOS had the chance to sit down with Daniel del Olmo, President, International, for DineEquity – an operator of two iconic brands, Applebee’s Neighbourhood Grill & Bar and IHOP. Daniel has always been a thoughtful, strategic hospitality executive, so we were eager to get his insights as to what he has witnessed the last few years. Topics of discussion: the state of the industry, new technologies and market challenges as well as growth and brand evolution.
Technology, a new wave of consumers and globalization have all played key roles in moulding the global restaurant landscape into what it is today. How do you feel about the overall state of the restaurant industry on a global scale? What have been the major trends you have witnessed over the last year or so?
We live in very interesting times. In the last few years, the restaurant industry has been going through an important consumer-led evolution, driven by increased choices and continuous pressure on consumers’ wallets and schedules.
Coupled with the advent of much-improved home entertainment options and streaming services such as Netflix and Amazon Prime, third-party delivery companies now provide a growing assortment of quality choices for dining in, while grocery chains offer prepared meals to-go or as a compelling add-on convenience to shoppers.
We are no longer only facing competition from other restaurants and brands (regardless of category), but ever more from dine-in occasions (for every day part), including weekday lunch. Why leave the office if you can be more productive eating at your desk or leave the comforts of home, if you can watch your favourite series on Netflix and order in? Convenience is the new king.
Furthermore, consumer expectations for restaurants are quickly evolving as digital brands condition consumers to expect frictionless, personalized experiences at the click of a button. At Applebee’s, for instance, we have had tablets on every table in our U.S. restaurants to give our guests the ability to order and pay whenever they want, not when the server comes around.
We believe that we will need to play an ever-important role in creating personalized, relevant and authentic experiences for our guests around the world. As casual dining brands, I believe we are in the experience business, versus merely in the restaurant business. To that end, we are investing significantly this year to strengthen both of our brands through strategic growth initiatives, including occasion expansions, online ordering and delivery, among many other pointed efforts more closely tied to consistently delivering on the basics while improving our value proposition for our target audiences.
When you joined DineEquity, you conducted the largest international consumer feedback survey in the company’s history, resulting in DineEquity’s 360-degree brand evolution. How is the initiative going and how are you and your franchise community continuing to connect with your customer base to measure the success of this endeavour?
Our research, which spanned across six countries and more than 2,200 consumers, reinforced the lack of an emotional connection and memorable experience, and led us to evolve our brands’ positioning and creating a 360-degree experience, allowing us to execute a holistic, integrated plan that covers everything from new restaurant design and ambiance, to food offerings and plating, to a new service culture and uniforms, to renewed creative marketing campaigns designed to establish a strong emotional connection with our guests.
With more than 80% of our international franchise partners highly engaged through remodels or new restaurant development, I believe our 360-degree brand evolution has been quite successful. We just completed our third year in a row of record international growth in terms of new restaurant openings and have added nearly 100 new restaurants since we launched the International division early 2014.
Over those same three years we’ve nearly tripled our international pipeline to more than 200 restaurant obligations, and publicly stated last year our intention to double our international presence by 2021.
Both our brand ambassadors – that’s what we call our franchisees’ team members – and our guests are clearly noticing the changes we’re implementing, and they are rewarding us with greater loyalty.
We live in a high-touch, technologically advanced world. How is DineEquity and its franchisees leveraging technology to stay connected and close to its customer base?
The restaurant industry has not always been an early adopter of new technology; however, I see this changing quite rapidly. For IHOP and Applebee’s, we believe technology should enhance the customer experience and not detract from it. The best technology, in my opinion, is the one you don’t notice.
Our current initiatives – beyond our on-line ordering and delivery efforts – include:
- Incorporating guest feedback into management reporting to allow for meaningful and continuous improvements of our restaurant operations;
- New technologies, such as tablets and kitchen monitors, that improve order accuracy and speed of service for our guests;
- New ways to communicate with our guests and deepen our relationships, aiming to deliver a personalized guest experience for every guest, both on- and off-premise.
Fast-casual has been “hot” in the restaurant space; how has DineEquity’s Fast-Casual brand IHOP Fresh & Go been resonating with consumers and what separates it from the competition?
I believe our international growth over the past few years confirms the love guests have for iconic American brands such as IHOP and Applebee’s. At the same time, guests have different needs depending on various occasions. We created IHOP Fresh & Go based on consumer demand in International markets for freshly made IHOP food on the go, and based on our franchise partners’ desire for smaller formats, which would allow us to grow in high-traffic locations such as transportation hubs and malls. To date, we have opened four IHOP Fresh & Go locations as an alpha-test in Mexico, Panama and the Philippines. We are quite pleased with the initial results, and are already incorporating operator and guest feedback for future locations.
Finally, keeping the global consumer in mind, what do you think is the one thing the restaurant industry needs to pay attention to over the next 12 to 15 months?
The restaurant industry, and companies like ours, will need to consistently deliver on the basics, and find ways to deliver relevant and meaningful personalized experiences. We have to become even more nimble, anticipate our customers’ needs and embrace innovation that will make the competition, both within the industry and beyond, irrelevant.
Where some rightfully may see challenges — given that last year was the toughest year for the industry in a decade — the team and I at DineEquity see exciting opportunities ahead.