Legend has it that happy hours originated in the days of Prohibition. Today's happy hour, though, is nothing like those that packed the speakeasies of yesteryear.
With ever-stiffening competition, more restaurants, including quick serves, have identified happy hours as a must-do. Most find the discounts offered on beer, wine, cocktails, and specialty beverages and food well worth the payoff of increased traffic during the traditionally slow late afternoon and early evening hours.
But, like everything else in the business, happy hours are evolving. With more attention on the dangers of over serving, restaurants and bars are making their specially priced food offerings just as enticing as drink deals. And happy hours have moved beyond just the after-work hours with some creeping into late-night specials.
The happy hour logic is simple: it fills a void and helps attract new customers.
“It tends to build frequency. It tends to build loyalty,” says Chris Elliott, CEO of FSC Franchise Company, which operates The Brass Tap and Beef ‘O’ Brady’s. “And the real risk of not doing it is that somebody else is going to be doing it. And for people who are looking for drink specials [and] food specials, and people who are looking for events — trivia, karaoke — they're going to go somewhere else.”
To stay competitive, most Brass Tap and Beef 'O' Brady's stores offer some type of happy hour promotion, which now includes food specials like $2 tacos or half-priced flatbreads, alongside drink specials like $1.50 off drafts. Elliott says restaurants choose food and beverages with enough profit margins to ensure a payoff.
“While it does impact your margins a little bit, if you're doing more sales on the whole, you're better off financially,” he says.
Nationally, alcohol sales by volume are sliding, says Donna Hood Crecca, a senior director at the Chicago research and consultancy firm Technomic. On-premise alcohol sales—which includes bars, restaurants, hotels, and stadiums—were down 1.3 percent in 2013. Yet alcohol sales in whole dollars were up 1.6 percent to $99 billion: consumers are progressively ditching cheaper products like domestic beers for high-quality cocktails, wines, and craft brews.
“The consumer today is more knowledgeable about adult beverages and more interested in adult beverages than, say, 10 years ago, [and] Millennials in particular,” she says. “They're looking for an interesting beverage experience.”
Like any other promotion, there must be a thoughtful strategy in place. “A lot of operators say, 'we have to have a happy hour,’ and I say, why?” Hood Crecca says.
She explains restaurants need an operational aim, such as building traffic, enticing a new set of customers that doesn’t normally visit, or increasing revenue, to defend hosting a happy hour.
An April Technomic survey found one-third of all consumers attend a happy hour promotion at least once a year. And 20 percent drop in on a happy hour more than once a month. Value is a growing driver. Six of 10 happy hour customers identified good food and drink prices as a key reason to patronize happy hour. Compare that to 2012, when fewer than 50 percent of consumers named food and drink prices as their reason.