If you’ve been noticing a lot of restaurant promotional deals recently, you aren’t imagining things—it’s a real phenomenon. The restaurant business falls off a cliff when Labor Day hits, the summer ends, and kids go back to school. That’s why all those companies have to start offering deals to fill the gap. That all-you-can-eatNever Ending Pasta Pass from Olive Garden (DRI) isn’t a gimmick: It’s part of a real business strategy backed by hard data.
Look at the chart below: The amount the average customer spends at casual dining establishments is worse now than at any other time of the year.
Matt Drewes, senior vice president for national restaurant partnerships atCardlytics, says that with the start of the school year, “families are dining at home more and not going out as much,” in part to save money for new clothes and school supplies. “Restaurants take the hit from everybody else who makes money in back-to-school [time],” he says.
In the past decade, Labor Day has signaled a significant drop in the frequency of visits to restaurants. On the whole, the bigger chains have been able to combat that by offering promotions aimed at luring customers back—even if that means lower average prices. Their deals are designed to last only through those few weeks of softness. Notice the Endless Shrimp deal at Red Lobster goes from Labor Day until Nov. 2. And that Never Ending Pasta Pass only lasts seven weeks—Sept. 22 through Nov. 9. You can expect to see all-you-can-eat ribs, all-you-can-eat pancakes, 2-for-$20 deals, and other fixed-price promotions. “The bigger chains want to advertise an attractive price point and highlight in their commercials how families and larger groups of people should come out,” Drewes says. “They have created promotional events to fill the gap of fewer customers.”
Drewes estimates that 20 percent to 30 percent of guests are taking advantage of promotions. Most retailers are OK with that, making the tradeoff for lower average sales figures in order to get higher traffic.
As public companies, the major restaurant chains need to consistently drive up third-quarter earnings every year. That’s why they keep testing and tweaking new strategies to get people in the door. It’s very possible the $100, seven-week Never Ending Pasta Pass promotion at Olive Garden is just a test to see how people behave. Will customers come to the restaurant more than 10 times in the seven weeks, turning the promotion into a loss for the company? Should it have been a seven-week deal, compared with six or eight? These are the questions management is constantly working through. “It can’t be a big national campaign until they figure it out,” says Drewes. “Are we going to make money on this? That’s the question they always want to know.”
In the chart, you’ll see the rest of the year highlighted by peaks—such as Thanksgiving and the Christmas holiday season. Valentine’s Day is big, too—but the whole week gets the benefit as some people go a few days before or after Feb. 14 to avoid the massive crowds. Mother’s Day Sunday is particularly huge, and June features the benefit of school graduations and Father’s Day. But the next few weeks are a dead zone for restaurants—no holidays or special occasions to eat out. Unless you really like pasta.
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