Restaurant chains have been gushing for years about the marketing upheaval that will come from mining the customer data captured by new technology. Now the First Watch breakfast-and-lunch chain is putting the potential to a test.
Several tests, actually, according to executives. In detailing third-quarter financial results to Wall Street analysts this morning, the officials revealed they’re trying different ways of using the chain’s amassed trove of customer data to give demand a jolt amid flagging a.m. traffic for the industry as a whole.
They identified that heightened reliance on guest data and the ability it affords for highly customized marketing as a key way First Watch will try to stimulate breakfast traffic.
They were mum on the specifics, but said the experiments are already lifting the brand’s per-person check average. The typical spend showed “small” improvement at the tail end of the third quarter, according to CFO Mel Hope.
Traffic for the quarter fell overall by 4.4%, but dining-room guest counts inched above the prior year’s tally during the final week, pulling same-store sales into positive territory as well.
Sales at restaurants open for at least a year slumped 1.9% overall for the quarter. The executives said the major drag was a downturn in sales generated through third-party delivery services. That business stabilized during the last week of the period, they revealed, declining analysts’ requests for the absolute figures.
What they did not see, the execs stressed, was even a trace of “check management,” or guests trading down to less-expensive menu items or simply ordering less.
They rebutted an analyst’s suggestion that First Watch consider mixing more lower-priced items into its menu to snag bargain hunters. CEO Chris Tomasso noted that consumers who chose their breakfasts solely on the basis of price are not typically patrons of First Watch.
The better way to pull consumers out of their home kitchens for a First Watch morning meal is through laser-focused marketing, asserted Tomasso—“more timely messages delivered to the right consumer at the right time.
“We now have the tools and data that enable us to do that,” he continued.
The enabler has been the technology First Watch has quietly deployed in recent years, said the CEO, who rose to the post through marketing.
Digital ordering channels and more sophisticated POS systems collect reams of data about guests, their preferences and their spending patterns. First Watch is hardly alone in reaping that intelligence and trying to distill it into more effective marketing than the industry has previously seen. But few others have said they’ll be as dependent on that strategy as fully as First Watch said it intends to be.
Tomasso also cited the service and labor benefits First Watch is reaping from being more aggressive in embracing technology than most observers realize.
Back-of-house advances like the installation of a kitchen display system has shortened the time dine-in customers wait for their food by 15%, to under 10 minutes, he revealed. More sophisticated management tools have also enabled units to schedule more effectively.
Even with traffic and sales improving in November, First Watch expects its same-store sales for the full year to be down about 1%, and for traffic to be off by 4% to 4.5%.
It finished the quarter with 547 restaurants, or nine more than it had at the end of the third quarter.
Overall, the company reported a net income of $2.1 million, down 61% from the same period of a year ago, on revenues of $251.6 million, up 14.8%. No explanation was offered during the analysts’ conference call for the drop in profits.
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