- Kroger's first stand-alone restaurant, Kitchen 1883, located in Union, KY, has had a successful first month, according to Supermarket News.
- A spokesperson for Kroger wouldn’t discuss specific sales volumes, but did say the location gets repeat business and regularly fills its 94-seat dining room. The comfort food restaurant has also received positive reviews from customers, and often experienced wait times of up to an hour.
- Kroger officials say additional locations are possible, but declined to discuss specific plans. The company spokesperson did say future locations will be adapted to local consumer demands. Kitchen 1883, for example, has popular regional meat-and-grain sausage called ‘goetta’ on its menu.
No one ever said it was easy to make it in the restaurant business, but Kroger appears to be off to a great start with its inaugural stand-alone eatery.
Named in honor of Kroger’s founding year, Kitchen 1883 is a separate entity from its grocery owner, complete with its own management staff, including Jay Denham, a 16-year restaurant veteran who started the award winning Red Hog in nearby Louisville. Located adjacent to a Kroger Marketplace store, Kitchen 1883 also has its own separate entrance.
Even though it has smartly handed over the day-to-day operation of Kitchen 1883 to experienced pros, operating restaurants poses a fair share of challenges for grocers. Promoting locations can be challenging, as can setting financial goals and key performance indicators. In addition, not all consumers may be as enthusiastic as those in Northern Kentucky that they’ll get a good meal from the same company that sells them paper towels and string cheese.
Still, the opportunity to expand into a new revenue stream must be attractive to the grocer that has seen its stock price tumble nearly 40% this year. Considering that consumers now spend more on food at bars and restaurants than they do on groceries, Kroger is understandably eager to expand its reach into what CEO Rodney McMullen has called "share of stomach."
Kroger joins a host of other retailers that have recently become restaurateurs, including Hy-Vee, Whole Foods and H-E-B. Hy-Vee operates 115 Market Grilles, while Whole Foods opened its first standalone restaurant, a Brazilian fast-casual concept called The Roast, in Atlanta this past June. H-E-B has taken advantage of this trend with its True Texas BBQ restaurants, which operate in several stores throughout the Lone Star state.
The proliferation of grocery-owned restaurants is a reflection of changing consumer-eating preferences. According to a study by Bankrate.com, 54% of Millennials say they eat out three or more times each week. If Kroger is losing their business at the checkout lane, they want to make up for it with the bill at the end of a meal.
The possibility of expansion comes at a time when Kroger is kick starting a new growth strategy called the "Restock Kroger Plan.” It combines cost cutting and strategic investments in data, digital innovation, store updates and pricing. It will be interesting to see if Kroger decides to launch more restaurants as it makes cuts elsewhere in its budget.
Kroger could take a few lessons from competitor Hy-Vee, which has taken the lead with restaurants. Chief among these is to really understand what consumers want from a grocery-affiliated eatery. The Midwestern chain's Market Grille locations have become community hangouts, and have succeeded in drawing customers for lunch, dinner and times in between.