Late Night Offerings.

Operators are coping with the economic downturn and the resulting stall in samestore
sales by seeking out new ways to squeeze all possible profit opportunities
out of their fixed investment. More often than not, this means taking a look at
extended daypart opportunities. For many operators, the hours between
10 p.m. and 5 a.m. are the new frontier.

In the Night Kitchen
Late-night dining is a growing trend. Technomic/American Express polls show that once a-week usage of restaurants between 10 p.m. and 5 a.m. nearly doubled between 2007 and 2008—from 13% of respondents to 25%—and the proportion of diners who said they rarely or never visited restaurants late at night decreased by 14%. The more recent poll showed that almost half of consumers (45%) were “night hawks” at least once a month.

How Restaurants Lure Night Hawks
A demographic breakdown of the 2008 data provides further clues:
> Late-night diners are mostly young: 64% of those under age 35 reported dining
out or getting takeout after 10 p.m. several times a month, versus just 22% of
those 35 and older.

> Late-night diners are disproportionately male: 53% of males, versus just 39% of
females, reported that they eat out or get takeout between 10 p.m. and 5 p.m. at
least once a month, and 42% of males, versus 33% of females, said they dine late
or pick up late-night takeout several times a month.

Meals or Snacks?
Late-night dining is closely tied to snacking. In a Technomic report on consumer snacking Trends:

48% of consumers reported that they customarily eat mid-evening snacks

39% said they have a habit of late-night snacking

44% of those polled for a 2009 Technomic consumer report on appetizers said they would like restaurants to offer more late-night appetizer and snack menus.

It’s clear that late night is a growing opportunity for restaurateurs, with a “twenty-something” customer base at the core. These late night consumers may extend a night out at a bar or nightclub to include a meal afterward, or get hungry late at night and team up with a group of friends for a late meal. The trend to late-night snacking also matches up well with culinary trends toward small plates, samplers to share, and global street foods.

Although all age groups and both genders are interested in seeing more late-night snacks in restaurants, young consumers find them particularly appealing; 52% of those aged 18–24 would like to see more late-night appetizer options. Research conducted for Technomic’s dinner occasion report found that consumers in the 18–24 age bracket were also more likely to eat dinner later in the evening, but that begs the question of what the word “dinner” means to these consumers, who have largely abandoned the practice of consuming three protein and- sides meals a day at set times in favor of spontaneous grazing.

Up Late and Ahead of the Pack: Best Practices
Restaurant and foodservice operators have stepped up with new menus, new marketing ideas and more flexible service formats to meet changing late-night demands. Operations leading the way include:

Taco Bell- took early ownership of the late-night segment by inventing a word—“Fourthmeal.” Within a few months of the 2006 launch of the “Fourthmeal” promotion, units were reporting overall increases in check averages during late-night hours, which extend up to 4 a.m. at some units. “Fourthmeal” has always been defined by a cultural affinity for the young and hip—and their music—rather than by special menu
items. Initially, the company chose four emerging rock bands to display the Taco Bell logo and other promo material on their vans or instruments in exchange for a month of free late-night meals. In its most recent annual “Feed the Beat” contest last fall, Taco Bell chose 100 bands from across the nation and provided them with $500 in Taco Bell Bucks for free Fourthmeals after shows. The bands’ music was played on Taco Bell’s microsite, www.feedthebeat.com, where customers could vote for their favorite. The three favorite bands each won a recording session to produce a music single, with the three songs promoted this spring on Taco Bell’s website.

Wendy’s caters heavily to younger consumers with its Dollar Menu and drive-thrus open until at least 2 a.m. (promoted with the tagline “Eat Great, Even Late”). Wendy’s has zeroed in on the late-night daypart at the expense of breakfast, which has been temporarily discontinued at many units.

> Denny’s pairs its Allnighter Menu, which emphases shareable offerings, with a late-night vibe far different from its daytime image: restaurants play alternative rock music and servers wear casual attire. In May, Denny’s launched a new “Creature Comforts” ad campaign to showcase the Allnighter menu, with late-night TV ads depicting four “creature” buddies enjoying a late-night Denny’s experience. Webisodes of the four characters are also posted on the DennysAllnighter.com microsite, each character has a profile page on Facebook, Twitter and MySpace, and each is featured in an interactive iPhone game application. Denny’s expanded the Allnighter menu this spring with snack-sized value options priced from $2.99, including Pancake Puppies, Nachitos and Half Moons Over My Hammy.

Tips for Building Late-Night Traffic
Late-night dining, however, is not merely an opportunity for major chains with the resources for multimedia marketing campaigns. In fact, it can be a perfect market niche for a neighborhood independent restaurant with a loyal clientele. But—like anything else in the restaurant game—it’s far from a sure thing, especially in the current economy. Here are some suggestions for success:

1-Realize that late hours aren’t right for everyone. Just ask the unhappy Burger King franchisees who have sued the chain, complaining that extended hours aren’t profitable for them and also raise safety concerns.

2-Before expanding hours, introducing special menu items or launching an expensive marketing campaign,
carefully evaluate your existing and desired customer base and weigh the prospects for incremental business against incremental costs, including additional labor. 2.

3-Define your market. Who will use your restaurant during the wee hours? College students? Factory workers getting off the late shift? Theater-goers stopping by for a bite after the show? What would appeal to them and bring you a profit: dine-in service, takeout or both? Your decisions on menu offerings, ambiance
and marketing depend on the answers.

4-Make sure menu items are fresh, interesting and craveable. If you are going to offer or promote certain menu items for late night, they will probably encompass appetizers, finger foods and platters to share. The younger consumers who are the most frequent late-night diners are also the most appreciative of bold
and ethnic flavors, so trendy global street foods (such as satay skewers, taquitos or churros) or craveable American finger foods (mini-burgers, mini-hot dogs, wings with a variety of flavors and sauces, mini-donuts) are likely to be the best bets.

5-Don’t forget the primacy of value. While menu innovation and craveability are important, moderate price points are central to the value equation as seen by the mostly youthful base of latenight diners, particularly in today’s recessionary economy.

6-Convenience is essential. Convenience is important to all diners, but particularly the young who have “places to go and things to do” and expect to see up-to-date technology in restaurants. Convenience-enhancing technology is particularly important for takeout and delivery. Operations that offer online and mobile phone ordering are likely to see far more late-night traffic than those that don’t.

7-Encourage young consumers to become late-night regulars. Younger consumers, with perhaps fewer long-term financial plans affected by the recent economic turmoil, may be the last to give up dining on restaurant food as well as the first to return when things begin to improve. If your operation is a hit with
the younger crowd, consider offering late-night frequent diner programs or employing other marketing tactics that are geared to retaining a steady stream of business from these young consumers. And don’t forget to mix things up with frequent menu introductions.