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How Today’s Trends Shape Tomorrow’s Restaurant

February 28, 2020   NetSuite
gettyimages 1179573068 How Today’s Trends Shape Tomorrow’s Restaurant

Posted by Kevin Lentz, NetSuite Product Manager, Restaurant & Hospitality

Last year closed with restaurant sales hovering at just about $ 800 billion in the US, and even though year-over-year growth has slowed somewhat, the outlook remains positive. According to the National Restaurant Association (NRA), restaurant sales are projected to reach $ 1.2 trillion by 2030.

Such massive growth signals substantial opportunity, but to thrive, savvy restaurateurs will require a more nuanced understanding of the underlying market forces, which include:

  1. Shifting diner preferences
  2. Employee-centered labor market

Central to that understanding is determining whether to invest in the front-of-house guest experience or optimize for delivery. Successful leaders will ask difficult questions like “What experiences are tomorrow’s diners expecting, and what should my investment timeline be to operationally deliver those experiences?” The breakdown of that investment will be a combination of brand considerations and the requirements of the local market.

Let’s dig into a few of the trends impacting future decision making a bit more closely.

Off-premises dining is increasing

Over the last several years, US consumers have increasingly chosen to dine at home. As the growth numbers suggest, consumers are still ordering from restaurants in large numbers, they’re just not eating at restaurants as frequently. Check out these stats:

Restaurant foot traffic is decreasing

The fact that off-premises orders are increasing points to another big change: the decline of foot traffic in restaurants. Businesses most heavily impacted are those that optimized for dine-in or those with significant investment (aka entrenchment) in real estate.

The labor market has drastically changed

The restaurant industry has always faced high turnover, but with some businesses reporting hourly staff turnover as high as 140%, it is clear that employees are becoming increasingly unsettled. U.S. unemployment is at an all-time low of 3.5%, and minimum wage increases have been legislated at the federal and state levels.

As of July 1, 2019, 30 U.S. states had instituted a minimum wage higher than the federal requirement of $ 7.25 per hour. Washington, D.C., has the current highest minimum wage at $ 14/hour, and six states (including D.C.) plan to raise their minimum wage to $ 15/hour in the next five years.

For restaurants, these changes to the labor market have created a perfect storm. Due to low unemployment, workers are more difficult to find, trickier to satisfy and more expensive than they used to be. Couple these factors with the cost of high turnover, and it’s easy to see why restaurants will continue to keep a laser focus on reducing costs across the entire employee lifecycle.

So how do these changes impact tomorrow’s restaurants? The increase in off-premises dining and resulting decrease in restaurant foot traffic is driving major innovation in how (and where) restaurants prepare food.

Restaurants are shifting their focus to delivery.

Brands have been forced to rethink think their business model in light of delivery, and some concepts have chosen to double-down on their existing physical footprint. Chipotle, for example, has added a second ‘digital-only’ make line whose sole purpose is to fulfill online and mobile delivery or takeout orders. They are betting on sufficient volume to keep these staffers busy, while they extract every cent of value from the operational overhead of existing locations.

Other brands are experimenting with food preparation outside their standard outlets, launching or partnering with ghost kitchens. Virtual, or ghost, kitchens are offsite locations optimized for delivery only, often serving several concepts from a single location as a means to economize overhead. McDonald’s opened its first ghost kitchen in London in partnership with Uber Eats, the company’s current delivery partner. It’s an important investment for the company, as delivery orders make up 10% of McDonald’s U.K. sales, according to the company’s Q3 2019 earnings call.

Wendy’s is planning to include ghost or dark kitchens in the company’s expansion plans, and restaurant chains like Halal Guys, Sweetgreen, and Chick-fil-A are dipping their toes in by partnering with Kitchen United, a ghost-kitchen brand that enables delivery out of shared commercial kitchens. Chick-fil-a’s plans include opening new outlets without dining rooms or drive-thrus. These locations will focus specifically on catering orders and on-demand delivery.

Delivery platforms are getting in on the action as well. Together with Lettuce Entertain You, Grubhub now offers the first Whole30-branded restaurant for delivery only. Uber Eats partnered with Rachael Ray to launch short-term virtual kitchens with recipes from her new cookbook.

Automation takes over for humans – where it makes sense

Given the shift from on-premises to off-premises dining and ever-rising costs for labor, food and real estate, restaurants are doubling down on automation. That means leveraging machines for straightforward, manual labor and saving human interactions for customer touchpoints that add value.

San Francisco-based Creator uses robots to create its signature burgers. Machines grind beef, toast buns, put on condiments and even put the burgers together, all for $ 6 per burger.

Wilkinson Bread Company uses its Breadbot to bake bread; Chowbotics is a souped-up vending machine that prepares salads and grain bowls.

You can find the Briggo automated coffee robot serving up hot drinks in the Austin airport. And on a larger scale, fast casual chains like Fazoli’s now offer kiosks for ordering. Applebee’s began offering self-order technology at tables back in 2014.

Behind this move to automation are the companies that supply the supporting technology. And sometimes, innovation starts in restaurants themselves and gets shared across the industry.

Former fast casual restaurant Eatsa has closed and rebranded as Brightloom, taking the technology developed in-house for in-store and mobile ordering and selling it to restaurants. In a partnership with Starbucks, Brightloom will license a version of Starbucks’ mobile ordering and rewards platform to other food companies.

Restaurants are investing more in mission-critical staff.

With the shift to delivery and automation, more is happening behind the scenes. However, customer interactions are still a critical way to drive retention. Restaurants are spending their money and efforts to invest in employees who enhance the customer experience.

McDonald’s has introduced a branded app called Archway to Careers that supports its workers as they look for educational opportunities and make career plans. KFC’s Kentucky Fried Wishes aim to help restaurant employees in meaningful, necessary ways – like paying for dental work, buying a new car or assisting with debt relief.

Shake Shack is offering new benefits like $ 10,000 equity awards to general managers and a test program that includes a four-day work week at a few key locations. With the company revealing that it costs $ 14,000 every time they lose a general manager, it makes sense to aggressively amp up their benefits.

The innovations of tomorrow’s restaurants will be invisible to patrons

Restaurants will continue to invest heavily in strategies that drive increased sales. However, much of the work they’re planning is “behind the curtain,” where guests won’t necessarily be looking. Lower-cost ways to deliver quality food off-premises, automation of all processes where people aren’t adding value and the drive to retain their most necessary employees will dominate the restaurant industry.

Learn about NetSuite’s software for restaurants.

Posted on Thu, February 27, 2020
by NetSuite filed under

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