We continue the Liquid Insights Tour by going beyond wine and spirits trends and sharing other beverage program strategies designed to boost on premise business. Let’s start with the tried and true happy hour. Happy hour promotions have been a mainstay of the bar and restaurant industry for decades. However, they have evolved from a deep discount on lowest-cost drinks and food during off-peak hours to complex marketing strategies aimed at attracting younger guests who are more engaged with beverage alcohol. In this blog, I’ll share some insights into the importance of happy hour promotions, their effectiveness, the most popular offers, and the economics behind them.
Importance of Happy Hour Promotions
Happy hour promotions are essential in today's bar and restaurant environment because they deliver on guests’ needs. According to Technomic, consumer demand for deals and promotions amid growing economic uncertainty and higher inflation is increasing, with one in five consumers noticing rising drink prices and seeking out more specials and deals. Offering a solid happy hour gives guests what they are looking for while helping operators regain traffic and sales, in many cases still below 2019. This is a particular opportunity with younger guests who report visiting happy hour 9% more than before COVID. Why is now the time? Because 46% of guests report going to happy hour because it allows them to enjoy all that’s special about going out for food and drink while still saving money – essentially helping operators regain what may have been a lost visit.
Effectiveness of Happy Hour Promotions
Guests generally want it all, so consumers from a survey from Datassential say happy hour promotions are relevant all week long, with guests even saying they’d prefer them most on Friday (70%) and Saturday (51%). However, restaurants don’t typically need to incentivize Saturday traffic when they’re already at or near capacity. But, given how popular Friday would seem to be – and because it’s the end of many guests’ work week, there’s an opportunity to offer happy hour Monday-Friday vs. Monday-Thursday as is commonly done. Or, if not offering a happy hour already, maybe start on Friday to kick off the weekend and add on days from there. Guests’ preferred timeframes for happy hour are 5-7 p.m., followed by 4-6 p.m. From my experience of working with franchisees with strong happy hour promotions in the past, the key learnings are that restaurants have to work hard to spread the word, be patient since business can build slowly, and keep it simple by not creating complicated offers and changing them all the time. Implementing “Reverse Happy Hours,” generally 9-11 p.m., is also a unique tactic with guests finding this offering even more relevant on the weekend vs. during the week. This provides another way to source traffic from guests looking to have dinner later or gather with friends after a movie or entertainment, when many restaurants are already putting up their chairs after dinner peak ends.
Most Popular Offers
To appeal to the broadest range of guests, happy hour promotions should offer deals on select food and beer, mixed drinks, cocktails, and wine. Per Datassential, the most-preferred drink and food offer is a menu with a range of price options, such as a $3 / $4 / $5 menu. The most popular food consumed at happy hour is appetizers, snacks, and side dishes, followed by lighter items like sandwiches and burgers. Also, guests are willing to pay more for name brands than for well spirits and house wine, with 73% saying name brands are very important or slightly important at happy hour.
Economics Behind Happy Hour Promotions
Even at a discount, drinks generally still deliver higher profit margins than food. Appetizers, in particular fried items, are easy and fast to prepare and can be served in smaller portions, essentially “engineering” a lower price to guests. A popular strategy is to offer select cocktails at a discount, but still use branded ingredients. Or, businesses can discount two or three great wines from the current wine list versus relying on the lowest cost options. Guests arguably more than ever are more informed and will shop around for not just the lowest price, but the “best value.” Finally, guests who attend happy hour promotions have a high likelihood of staying past happy hour time, offering operators an opportunity to convert them into food and drinks at full price/margin and helping make those guests regulars for dinner too.
So, if you’re looking to source traffic at a time when people still want to go out, but they are not able to as often, happy hour promotions are a highly relevant opportunity for the bar and restaurant industry. To be effective, operators should work to offer good value – not just lowest price – that appeals to a broad range of guests, is simple and consistent to remember and spreads by word of mouth and traditional and social media, while being patient as it takes time for guests to build new habits or change behavior.
For more on this topic, check out my webinar conversation with El Restaurante magazine here.