Independents vs chains: How to Thrive in 2020

Christine Bailey, CMO at Valitor outlines the changing face of hospitality. 2019 was a testing year across the industry, with the closure of 22 of Jamie Oliver’s restaurants making national headlines. Given the current industry landscape, it’s now more important than ever for restaurants to make sure they are retaining loyal customers whilst remaining a top choice for new ones. 

The problem – though hardly surprising – is that gaining and retaining customers remains a challenge across the industry, from small, local Independent restaurants to the largest chains. However, this doesn’t have to be the case. By understanding the specific reasons that customers seek out chains and independents, restaurants can actually lower their customer acquisition cost (CAC) and insulate themselves from challenging trading conditions. 

Cooking up something special

For both chains and independents the first step is to understand what it is that attracts customers. Highlighted in Valitor’s ‘Understanding Your Customers’ Behaviour in the UK Hospitality Sector’ report, it’s clear that independents and chains have very different offerings that attract customers for specific reasons. Price, for instance, is a major differentiator between chains and independents.  Operating on a smaller, more bespoke scale small, local independent restaurants, may offer a local and personable service, but are also seen as more expensive. This arrangement is often very appealing to older customers like baby boomers and Gen X’ers who are less put off by price and more attracted to the quality of  service provided. Chains on the other hand typically feature lower prices, deals and discounts which are favoured by younger customers, especially those with young families. By focusing on these areas and ones like them, chains and independents can better market themselves to the customers most attracted to them.

Marketing itself is another area where it helps to understand the sort of customers that can be attracted. Knowing what areas to promote is one thing, but chains and independents also need to think about the communications channels they use as well. Whilst word of mouth and traditional advertising avenues like print and online work with baby boomers and Gen X consumers, those looking to target Gen Y and Z need to embrace social media too. In fact, such is the power of social media, that for Gen Y and Z it is used 41% and 39% of the time respectively to find new places to eat. This number is almost halved to 21% for baby boomers, highlighting a significant shift in habits between the generations. Having a presence on social media also allows a restaurant to showcase more than just its venue and food, but the whole ethos and story behind the business. A visual platform, such as Instagram, is particularly enticing for pulling in new customers. For chains and independents looking to attract younger customers it is vital to ensure they have a social media presence and processes in place. 

A word of caution for those looking to attract younger customers though. Whilst young people are more likely to use online review sites, the reviews they leave are often more negative than positive. Aware of the power of online reviews, they often turn to review sites to vent anger over a poor experience. With nine in ten young customers reading online reviews before choosing a restaurant, it is not an area that can be ignored or overlooked. Having a process in place that reduces negative write-ups and promotes positive ones will keep restaurants front of mind for the right reasons with young customers. 

Serving up a great experience – independents vs chains

However, it’s not just with social media and review sites that customers increasingly have high expectations. The payment process has evolved beyond the simple transaction. Looking at the research again, a simple win for independents is to ensure they are able to accept card payments. With four in five customers preferring to pay by card, simply having a card payment facility will go a long way to improving the customer experience during the all-important payment phase. 

Another quick win for independents is the introduction of loyalty programmes. While these types of programmes are in regular use with chain restaurants, it is seen by customers as an untapped opportunity for independents. By implementing a simple card stamp system, independents can offer a feature customers are clamouring out for overnight. Adding this to a payments system means they can use loyalty schemes to collect data on trends and customer preferences and deliver higher levels of engagement.  

On the flip side, for chain restaurants, a number of customer service wins can be found via the introduction of a mobile app. Already beginning to appear in certain branches, apps are shifting expectations and improving customer service for franchises. For instance, Gourmet Burger Kitchen (GBK) has been quick to jump on this trend and retain their young customers with a mobile app. With two-thirds of Gen Z wanting to pay via one, GBK has put itself in prime position to acquire and retain this important customer demographic. Offering the ability to self-service and pay, book tables, order food, redeem rewards and split bills, customers can manage their own experience whilst allowing staff to focus on delivering an all-round exceptional customer experience. 

2020: The Restaurant Revival 

Independent and chain restaurants that get the mix of customer insight, strategy and technology right will ensure they not only survive but thrive in 2020. The good news for both is that small changes and adjustments in marketing and customer experience can reduce the cost of customer acquisition and retention. The restaurant revival starts here.