The Art of the Deal

Discounted price, dollar menus and other promotions are driving customer traffic and keeping the restaurant industry in the black, according to The NPD Group. NPD reports total restaurant industry traffic is up 1% for the quarter ending August 2008, and the modest gain is driven entirely by deals.

As consumers look for ways to moderate their overall food budget without cooking more, restaurant operators have been offering more deals -- including value menus, coupons, discounted prices and buy-one-get-one-free promotions -- to increase traffic, according to new data from NPD's CREST service, which tracks restaurant usage.

"More so than we've seen in many years, consumers are looking for savings and ways to stretch their dollar," says Bonnie Riggs, restaurant industry analyst at NPD. "Restaurant operators are responding to economic concerns with enticing value offers and deals."

In the quarter ending August 2008, 23% of all visits to restaurants were prompted by consumer-perceived deals, which represented an increase of 9% compared to the same quarter a year ago. Non-deal restaurant traffic was down by 1%.

The quick-service segment accounts for 78% of all restaurant visits and is largely driving deal activity. Quick-service deal traffic is up by 10% and is being driven by hamburger and other sandwich restaurants, according to NPD. Some 30% of all visits to these outlets were prompted by deals, an increase of 20% over a year ago. Value menus and discounted price offers found the most favor with consumers.

Overall, while deal traffic is up at breakfast and dinner, consumers use deals most often at lunch. The latest NPD CREST data finds that 38% of all deal visits to quick-service restaurants occurred at lunch. Dollar or value menus tend to drive lunch traffic; coupons are used most at dinner, and discounted prices are used at both lunch and dinner.

"Deal offers are complex and risky for restaurant operators, and this is at the same time they are faced with rising food costs," says Riggs, who recently authored a report on restaurant promotions, entitled "Working Magic...The Art of The Deal." "But operators understand that in order to get the customers in the door, they need to make them an offer they simply can't refuse."

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The NPD Group Inc.
Kim McLynn
847-692-1781
kim_mclynn@npd.com