Higher Customer Restaurant Retention and Purchases through Customer Focus

The million dollar questions in the restaurant industry are, “how to encourage more patrons to frequent my establishment and spend more while they are there?” New research helps to identify and establish important factors for restaurant owners to consider when operating their businesses. Understanding which factors relate to consumer decision making is important for adjusting restaurant operations to highlight particular benefits and capitalize on the potential rewards.

The restaurant and service industry is growing faster than any other major industry in the country. When compared to other industries in the sluggish economy the food service arena has maintained sales increases (National Restaurant Association, 2009). This makes the restaurant business one of the best investments during tough times as volume continues to increase. To maintain that volume and profit level requires a focus on core business offerings.

Most of us know that improving customer satisfaction can increase patron retention. The process involves understanding customer’s needs and expectations better than the competition in order to enhance them for maximum benefit (Yang, Cheng, Sung & Withiam, 2009). Those establishments that are customer driven and customer focused have higher levels of market advantage. Yet it is hard to know precisely what increases the purchase and frequency rates.

Foodservice products can be seen from a particular perspective. They can be broken down into categorize of core benefits, tangible benefits, and intangible benefits (Kotler, 1998). Core benefits are the product/service, tangible benefits are the servicescape, and intangible benefits are the customer experience/interaction. Understanding each of these helps to see how they influence each other without damaging core business focus. No one should take their eye off of the ball in their search to develop higher levels of service experience.

As manager focus on understanding the pieces that answer the fundamental questions of frequency and increased spending they sometimes forget these core business principles. The type of restaurant and the demographic they serve are important aspects of understanding the context of other service enhancements. Each customer chooses their restaurants based upon personal preference and want to ensure that their expectations are being met.

Research conducted by Parsa, Gregory, Self & Dutta (2013)) attempted to determine precisely what are the most important factors in consumer decision making processes. In other words, when customers were making a choice what type of process did they engage? In order to test this concept the researchers focused on scenario bases experimentation where they used a high-end and low-end restaurant to assess client’s intentions to patronize and return to the establishment. They settled on eight possible combinations for two levels of restaurant attributes. A total of 190 cases were analyzed from each of the restaurant types.

Results:

-Customers were willing to spend more if the high-end restaurants focused on food quality while the low-end restaurants focused on speed.

-In the high-end category customers were willing to pay an extra $23.59 if the food was of exceptional quality while customers in the low-end category when services was fasters $2.47.

-Customers from high-end restaurants with high quality food and low-end restaurants with the quickest speed indicated a higher expectation to return.

Business Analysis:

Understanding the core strengths of a restaurant helps managers understand where to place their focus in developing higher levels of customer satisfaction. Through all of the possible combinations high-end restaurants that offered expensive food should focus on quality while low-end restaurants that focused on cheaper food should focus on speed. Other service factors didn’t matter as much as these two polarities. As customers pay more for their food they expect a higher level of taste and benefit. When customers pay less, customers want the service to be quick. Putting too much emphasis in the wrong places without realizing their secondary benefits will be a waste of money, time, and effort. This may be one of the reasons why establishments such as McDonalds focuses on processes and restaurants such as Andiamos focuses on the quality of the chef and food offerings.

Kotler, P. (1998) ‘Marketing Management: Analysis, Planning, Implementation, And Control’, Englewood Cliffs, NJ: Prentice-Hall, Inc.

National Restaurant Association (2009) online http://www.restaurant .org 

Yang, C., Cheng, L., Sung, D., and Withiam, G. (2009) Strategic pricing policy based on analysis of service attributes. Cornell Hospitality Quarterly, 50 (4).

Parsa, H., Gregory, A., Self J. & Dutta, K. (2013). Consumer behavior in restaurants: assessing the importance of restaurant attributes in consumer patronage and willingness to pay. Journal of Service Research, 12 (2).

NLRB and Arbitration Analysis in the Hospitality Industry

The hospitality industry has drawn new interest due to the economies dynamic shift into a service society. Such industries employee a large percentage of employees and have become ripe for unionization. With attempts to unionize hospitality workers employers are seeking methods of avoiding such practices. Once unionization has occurred both the employer and the employees, become bound to the collective bargaining agreements (CBA). Research by LaVan and & Katz helps to understand some of the strategic considerations employers may ponder when involved in contract interpretation disputes.

The hospitality industry is growing at a rapid rate and has drawn additional interest from research. Since 2002, the hospitality industry has been expanding at appropriately 12% a year while other sectors of the economy were on the decline (Bureau of Labor Statistics, 2012). The food and beverage industry is also expected to grow at this same rate until at least 2020. 

With such growth, the hospitality industry is a prime target for unionization. The Unite-Here union being one of the largest unions seeking representation in bars, restaurants, resorts, casinos, fast food and many other similar type of companies. Because of this growing interest in unionization within this industry, employers have been actively seeking ways to avoid having third party entities negotiate on behalf of their employees. 

Of course, unionization becomes more likely when there are poor management viewpoints that create a lack of trust between the employer and the employee. Strong unionization avoidance advice may include, “… good employers who do right by their employees don’t need a third party in their relationships” (Smith, 2011). Unionization then becomes a symptom of these poor relationships versus any inherent need of employees to negotiate on their behalf. 

When possible a truer economic relationship between the individual and the organization can foster through this creation of trust. However, these relationships can only exist to the extent that management listens to, engages with, and views employees as valuable contributors to the organization. A higher level of personal connection, transactional justice and mutual self-interest fosters the belief in the management and employer reducing the likelihood that employees will seek outside representation. 

When disputes between the employee (and union representation) and the organization does occur a grievance procedure and possible arbitration agreement comes into play. The grievance procedure attempts to allow for a mutual discussion and potential solution. When this conversation fails an arbitration or NLRB case may ensue. Since 90% of collective bargaining agreements contain arbitration clauses (Gould, 2006) this becomes a common method of dispute resolution.

LaVan and & Katz conducted an analysis of 66 NLRB cases and 104 arbitration cases and came to some interesting conclusions (2012). All of the cases were from the hospitality industry and published between 2001 and 2010. Sources for the information came from the databases of the Bureau of National Affairs, American Arbitration Association and IntelliConnect. 

Results:

-NLRB cases mostly included discipline, work rule violations, disorderly conduct, poor performance and employee theft.

-NLRB cases included hotels 35, restaurants 14, casinos 10, food services 10, and resorts 9.

-NLRB issues revolved around group issues rather than individual ones. Most of cases involved contract interpretation. 18 discharges, 4 suspensions and 2 disciplines.

-In arbitration cases, the employer prevailed most often while in NLRB cases the employee prevailed most often.

-In arbitration cases 61 involved changes to the grievance process, 23 involved management rights and 21 cases involved computation of wages.

In arbitration cases, the employer prevailed in 78% of all cases, 67% of benefits, 63% of grievance, and 50% in wage and overtime. 

Analysis and Business Application:

The research helps to highlight the concept that when given a choice between arbitration and NLRB it is much more advantageous to seek arbitration as rulings are predominately in favor of the employer. On the other hand, unions may be more open to NLRB cases as their highest chances of success are in this venue. The research also helped to provide a stronger theoretical basis for understanding unionization and contractual interpretations in the hospitality industry. NLRB filings are more focused on perceived group injustices as such cases are more expensive than arbitration cases. When the issues deal with particular employee grievances arbitration offers a more affordable choice.

Bureau of Labor Statistics (2012): Food and beverage serving and related workers. Retrieved May 5th, 2013, from http://www.bls.gov/ooh/foodpreparation-and-serving/food-and-beverage-serving-and-relatedworkers.

Lavan, H. & Katz, M. (2012). Current state of management/union relations in the hospitality sector. FIU Hospitality Review, 30 (2).

Smith, D. (2011). Union leaders aren't giving up on your crew. QSR Magazine Retrieved May 5^th, 2013 from http://www.qsrmagazine.com/store/union-leaders-arent-givingyour-crew.