The good news is independent restaurant sales improved from 2023 to 2024. At least according to the 54-percent of respondents to an independent operator survey conducted by the James Beard Foundation (JBF) and consulting firm Deloitte.

The report on their findings rated 2024 independent restaurant performance as “good to excellent”. It might be a sign that independent operators are adapting to the challenges of food and labor inflation in their cost control and pricing.

However, here is the disconnect - more than 70 percent of survey respondents said they had the same or fewer customers in 2024 than in 2023. Rather than dine out frequently, such as with a weekly visit to a favorite local restaurant, diners are cutting back on how often they go out to eat. When customers do decide to dine out, many are trying different concepts rather than returning to their favorite haunts.

The Association of National Advertisers defines relationship marketing as a strategy that emphasizes customer retention, satisfaction, and lifetime customer value. Its purpose is to market to current customers versus new customer acquisition through sales and advertising. It is critical to restaurant success. You cannot build a business on one-off patrons.

Izzy Kharasch, president of Chicago-based consulting company Hospitality Works, Inc., thinks many cities have seen a shift in the local restaurant market since the pandemic. With burgeoning post-Covid restaurant competition, diners have access to new and different options. Out of curiosity, they are spending money in what Kharasch says is a “shotgun way,” sampling all the new eats and neglecting some old favorites in the process.

More diners are also choosing moderation with waning consumer sentiment. Younger guests are eschewing alcohol, and beer, booze, and wine have long been important sources of sales and profits. Others take GLP-1 weight loss medications that curb appetites and promote satiety, a feeling of fullness. According to the Kaiser Family Foundation (KFF), approximately 12% of adults in the United States have taken a glucagon-like peptide-1 (GLP-1) medication at some point. Because those diners do not feel hungry, they naturally go out to eat less often and may order smaller meals when they do.

More than 75% of the JBF/Deloitte survey respondents said they used social media marketing to drive repeat patronage. However, when a regular patron returns to your concept, you have no idea whether it was inspired by your latest post or they had planned to visit anyway – unless you ask them. Without the ability to directly attribute visits to social media, it is easy to fall into the trap of believing social posts to be more effective than they actually are.

Kharasch’s clients use social media, most frequently Facebook and Instagram. He finds clients that see the most engagement with social media posts have live music. “People comment on the bands and it sparks conversation,” he says. However, Kharasch says his clients are increasingly finding their posts are shared less widely than they were in the past. If his clients want people to see their posts, they often need to pay to boost them. “We allocated about $1,500 a month to boosting everything we’re doing, and we’ve seen results,” he says.

He believes the best approach is two-pronged. First, restaurant operators need digital marketing strategies, including social media, to remind their customer base they exist and to promote the exciting new offerings and unique experiences that relationship marketing is built upon. Second, they also need relationship marketing within the four walls to delight guests, cultivate loyalty, and encourage repeat patronage.

Four Walls Data

Online marketers lean on digitally captured data that can be used to drive traffic and inform marketing tactics. And there is plenty of digital data to be captured during their visit. This information is perhaps the most valuable, as it reflects their experience in real time and could indicate the likelihood they will return.

Kharasch recommends all of his clients offer Wi-Fi on-premises with a pop-up that asks customers to provide their email and cell phone number to access the network. “That way we can track where people are coming from and how often they visit,” Kharasch says. This data is an entry point into understanding customer behavior, meeting needs, and leveraging targeted offers to drive loyalty.

Kharasch recommends clients take a similar approach with wait lists, asking for a phone number to text when the table is ready so they can gain access to that guest data for loyalty and marketing purposes. Restaurant operators can add captured email addresses to their newsletter list, sending out promotions to guests. They can save phone numbers for SMS (short message service, otherwise known as “texting”) campaigns.

Big chains, including Starbucks and Sweetgreen, rely on free Wi-Fi sign-ins and other tools, like apps, to gather data about their customers. This data not only tells them how often someone visits, but when they visit. Knowing which day and time a guest is likely to come in is helpful for marketing purposes.

For example, you would not promote a special exclusive dinner on the weekend to a guest who only visits for lunch Monday through Friday. Their behavior indicates they are unlikely to visit. A discount offer that is only valid during lunch service on weekdays, on the other hand, could be of high interest to that guest because it’s directly based on their preferences.

Concepts that do not offer Wi-Fi can look for similar ways to get customer data. Reservation systems and third-party delivery services collect data on their customers and offer limited insights to operators. Customer review sites, such as Google and Yelp, contain valuable personal insights along with subjective opinions.

Then there is the survey option, a favorite of quick-service chains including McDonald’s and Chick-fil-A, which include links to surveys diners can enter for a chance to win a free meal on every guest receipt. Lastly, loyalty programs offer another chance to give customers something they value in exchange for data you can use to better understand their behavior and ultimately meet their needs.

Good Service is Always On-Trend

“The most important customer is the one sitting in the seat, not the one you’re trying to get,” says Kharasch, reminding restaurant owners of the importance of fundamentals. In his opinion, restaurants are losing business in large part because of the service skills gap. Skilled, well-trained workers left the industry in the pandemic and did not return.

While restaurants have been able to fill empty roles, the newer generation of staff are not adequately trained. “They’re not giving good service,” Kharasch says. “People will not come back to a place where they spend money and don’t feel appreciated.”

He gives an example of taking an employee out to lunch while visiting St. Louis, MO. The restaurant had come recommended by a client. Kharasch entered the restaurant and was greeted not by a friendly host but by a sign that read “Seat Yourself”. “We sat for at least 10 minutes. Another table came in after 10 minutes, they sat down, and a server went over immediately and started taking their order. The server came over to us, I ordered iced tea, and she brought me a Coke. I asked for chicken on my salad. She brought me a salad with no chicken. I asked for one check, she brought two,” he says.

Kharasch thinks operators can spend too much time and money on the wrong things in an attempt to delight customers. A sleek, thoughtfully designed restaurant interior makes a sharp impression when a guest walks in the door, but in the end, exciting design does not matter if the food and the service fall short. “I’m going to be in St. Louis every couple of weeks for a few months. Even though that restaurant is very close to where we are, it’s not one we’re going to go back to,” Kharasch says. “There’s too many other places to go.”

Staying in Touch

While it seems our email inboxes are flooded daily, email marketing is an important part of relationship marketing. Almost all adults have email and the vast majority of them check it every day. A survey conducted by credit card processing and management software company Square found that 60 percent of respondents indicated that email is their preferred way to hear from brands they love.

The trick is to stay in touch often enough to enjoy top-of-mind awareness and repeat business, but not so frequently that customers become annoyed and unsubscribe. And unlike social media, email engagement is not dictated by algorithms. Kharasch recommends restaurant operators take a look at their email list size, or the number of people subscribed to their email newsletter, and set a goal of multiplying that by four.

Do not overdo it, however. Kharasch recommends sending no more than one email a week. “Do it at 11 a.m. or 1 p.m.,” says Kharasch. Tuesday is his favorite day to send. On Monday, people are busy clearing out their inboxes after a weekend offline. By Tuesday, they are thinking ahead to the upcoming weekend.

They may be making plans. If you wait to send that email until later in the week, there is a risk that customers will already have made their weekend plans, and your restaurant will not be part of them. Kharasch also advises keeping email post content fun and upbeat. Mention any specials planned for Thursday, Friday, or Saturday night. If your restaurant has live music, mention which bands will be playing.

SMS marketing is more effective when it is closer to the weekend, say to advertise an exciting event or musician who is playing at your restaurant. In terms of frequency, Kharasch recommends once every two weeks as a baseline. Again, with both email and SMS marketing, less is more. When Kharasch’s clients email their customers more than once a month, they get fewer positive results.

Rewarding Experiences

Exclusive offers, discounts, and deals all let restaurants reward loyal guests in ways that increase connection. While there are many new approaches to try, do not overlook old favorites that still work, including the tried-and-true happy hour.

While alcohol sales are down at many concepts, happy hour incentives are still effective, whether they focus on drinks or include small plates, too. The rise of remote work offers greater flexibility around happy hour scheduling, which Kharasch believes can boost sales.

“Happy hour used to be from 4 to 6 p.m. and it was to get people from work while you waited out traffic. That doesn’t work anymore. I’ve seen places doing happy hour from 7 to 9 pm or 9 to 11 pm, trying to pull people in in a different way,” says Kharasch.

Loyalty programs are a staple of relationship marketing for chains and independents alike. While the traditional punch-card style approach may still work for chains, it is not as effective for independents as it used to be, says Kharasch. He wonders whether part of the demand is that fewer servers are mentioning loyalty programs to dine-in guests. “I’ve been out a lot in the last year and I haven’t heard one person in any restaurant talk to me about their loyalty program, which tells me how the restaurant operators feel about it,” he says.

Max Shak, founder of Zapiy.com, an AI conversation and chat automation tool used by many clients, including restaurants, agrees. Shak has helped many independent restaurant owners streamline their relationship marketing. In his experience, what works now combines personalized loyalty programs with social media that uses geotargeting to reach a hyper local audience. “Restaurants leveraging SMS and email-based rewards programs are seeing repeat visits increase by 20 to 30 percent,” he says.

Effective reward programs tend to be customized and personal, offering items the guest tends to order. Surprise discounts are also effective because they can feel like a treat. POS systems, including Square and Toast, let you set up a loyalty program that relies on SMS or email, which means you can get this started without needing to invest in or learn new software.

Kristen Corral, a co-founder of the California and Nevada-based plant-based taco shop Tacotarian, uses a loyalty program that allows her to build a “white-labeled app”, a pre-built, customizable mobile application that businesses can rebrand and resell under their own name. “There’s a huge gap for companies that provide reasonably priced services for small chains and individual restaurants. There’s nothing great out there for small players.” Corral says.

Members get a free taco for joining Tacotarian’s loyalty program, a signup bonus that incentivizes joining. Members earn points, which can be redeemed for chips and salsa, chips and guacamole, branded t-shirts and other bonuses. The most popular reward is the ability to order a Mexican pizza, their most popular special, any time of year. Otherwise, the Mexican pizza is only sold two months of the year as part of their community partnership program. Corral says members track their rewards carefully. If someone does not get their points, they will let the concept know about it.

Checking All the Boxes

A number of industry leaders participated in the JBF/Deloitte survey. They indicated that these relationship marketing practices proved most effective. You might ask if your relationship marketing efforts “check the boxes”:

• Partnering with local businesses on community events
• Offering personalized experiences to loyal guests, such as cooking classes
• Offering unique services guests cannot get at similar restaurants, including live music that turns dinner into an event
• Creating insider events like themed menu nights, special tastings
• Having VIP perks in the loyalty program beyond the standard “get one free”

In any event, at the heart of effective restaurant relationship marketing is an understanding of their customers’ habits, interests, needs, and wants. Whether they are communicating online or when the guests are seated at their table, the most successful operators and their crews consistently remind customers what makes the concept unique and stand out from competitors.

In short, their underlying message is “we are special and you are special. We get you.” This creates a sense of exclusivity that fosters loyalty by making customers feel like insiders and VIPs, not just walking credit cards.

Source: Lindsey Danis, RestaurantOwner.com