The Balance Of Power Between Limited And Full Service Shifts Yet Again

Our good friend Scott Hume ran a very interesting item in the Sept. 5 issue of his Burger Business e-newsletter. He reported that customer satisfaction with limited-service restaurants in the United Kingdom reached parity for the first time in satisfaction with full-service concepts, according to research from the National Customer Satisfaction Index. The research group is a U.K. division of the U.S.-based American Customer Satisfaction Index.

Both limited and full service scored 78 in the most recent NCSI study. The group’s satisfaction index runs from 1 to 100, with 100 being complete satisfaction. Limited-service restaurants improved their score 2.6%, while full-service concepts’ score fell 2.5%. Improvements in satisfaction at McDonald’s, bakery concept Greggs and Yum! Brands’ Pizza Hut and KFC helped push limited service higher, while a slide in satisfaction at Gondola Holdings concepts such as Pizza Express, Zizzi Ristorante and the Byron burger concept hurt full service.

ACSI founder and Chairman Claes Fornell said the parity likely will have a negative impact on full-service restaurants’ ability to maintain premium pricing. He called the new data “bad news for full-service restaurants,” according to Hume’s post.

While this data applies only to foodservice in the U.K., very similar trends have been apparent in the U.S. market for years. As the Great Foodservice Recession undercut consumers’ disposable income, traditional quick-service concepts upgraded menus and ambience, while fast-casual concepts, with even higher-levels of product quality, service and ambience, exploded in unit penetration. Diners could thus trade down in menu price without losing too much in quality and dining comfort.

The mass-customization operational concepts many fast-casuals employ also undercut a traditional strength of full-service concepts. The victims of this changing restaurant and economic landscape have been casual and family dining full-service concepts, which according to The NPD Group’s CREST data, have seen traffic counts fall consistently for nearly six years.

And, as Fornell noted about full-service restaurants in the U.K. market, the shifting balance also has undercut full-service concepts’ pricing power, leading to meal deals, heavy couponing and other techniques to maintain customer counts.

Full-service restaurants, especially full-service chain concepts, thus face one of their most difficult strategic challenges in decades. Even local independent establishments, which maintain an edge in personalized service, menu flexibility and the like, are seeing their pricing power diminished. It will be interesting to see how it all plays out.

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