2023 Outlook: Trends and Challenges Restaurants Will See, Part Two

Modern Restaurant Management (MRM) magazine asked experts for their thoughts on trends and challenges that will affect the restaurant industry in 2023. For part one, click here. 

• In terms of trends, it is clear that in 2023 technology will continue to shape and enhance the restaurant industry and we will see operators adopting new technologies to create an even more seamless and frictionless experience for guests, while still maintaining unique and engaging dining experiences.
• We will continue to evaluate tech solutions and find what best enhances the Fogo experience for both our guests and employees.
• In 2023, we can anticipate businesses really focusing in on value and doing what they can to attract and retain both employees and guests. At Fogo, we will continue to add value to the everyday guest experience in 2023 with premium cuts, all day happy hour, and more. 

– Barry McGowan, CEO, Fogo de Chão 

• Restaurants will continue to embrace digital on-premise, including mobile ordering and payment at the table, to streamline operations and improve the guest experience.

Restaurants will continue to embrace digital on-premise, including mobile ordering and payment at the table, to streamline operations and improve the guest experience.

• As brands place emphasis on creating a meaningful guest experience, robotics companies offering tools such as tech-enabled order taking or serving, should stop calling themselves ‘robotics’ as it will likely steer some operators, consumers and investors away. Instead, as these solutions advance, companies should refer to their technology as “Smart Carts,” or something in the same vein, to give a more accurate representation of what they provide and come off as warm and welcoming tools designed to elevate hospitality.
• The modern Kitchen Display System (KDS) will be more interactive to increase operational efficiencies and improve quality of food for the chefs and their teams. To reduce friction and allow multitasking, a KDS should speak to the chef rather than display information on its screen.

– Tim McLaughlin, Founder & CEO, GoTab

"We think 2023 is shaping up to be the year of the kiosk. Some of the world’s largest brands are already using kiosks (McDonalds, Panera). Meanwhile, as we support planning for QSR brands, we field daily requests about the channel due to the plus-side benefits.

The most obvious use of the kiosk is to gain more efficient labor utilization. But brands with smart upsell strategies are also realizing larger checks and higher margins."

– John Oakes, Revenue Management Solutions CEO

• Spirit-based, ready-to-drink beverages will continue show vast white space, and bourbon should continue to thrive.
• Despite the state of the economy, brands that can create momentum while competing the in the premium and ultra-premium tier will maintain higher than average valuations. As history would tell us, there will likely be a decent amount of merger and acquisition activity with consideration to bolt on needs from larger suppliers.
• The technology space is still the “wild west” in the spirits realm, and it is likely that technology will continue to innovate, and inevitably consolidate, the playing field.  

– Richard Patrick, Co-Founder of Cathead Distillery

• Review menu items and strip away the slow movers. Slow movers tie up inventory -and the cash needed to by that inventory. 
• Typically 25 percent of line items produce 90 percent of revenue. Bottom 50 percent of line items produce 3 percent of revenue.
• Reduce portion sizes slightly to maintain menu prices but account for increased costs.
• Don’t be afraid to increase price. Typically smaller but more frequent increases, especially on the big movers, will produce better, more sustainable results. 

Don’t be afraid to increase price. Typically smaller but more frequent increases, especially on the big movers, will produce better, more sustainable results. 

• Do a budget and work on predicting cash needs the next 60-90 days. Your CPA can help with this. 
• Talk to your bank — be proactive in communications and provide timely, accurate financial information if trying to secure or increase a line of credit.
• Invest in technology and help where you do not have expertise.”

– Bob Patterson, founder and president of Patterson & Company Certified Public Accountants

Rethink the Value Category: Inflation continues to impact consumer spending, making it imperative for restaurants to continue innovating in the value category to demonstrate that value doesn’t have to come at the cost of quality. For example, rather than giving heavy discounts on items they’re already seeing margin hits from, restaurants can incentivize customers to purchase other items that provide better returns.

Explore Higher-Margin Offerings: Related, next year, restaurants can look to new ways to offset pressures on margins by leaning more into higher-margin offerings like catering and delivery direct through owned channels vs. third party delivery.

Expand Customer Loyalty: This year, many restaurants didn’t necessarily see a drop in topline sales, but instead suffered drops in visit frequency. However, this sales growth wasn’t a function of selling more food, it was a function of selling the same amount (or less) food at higher costs. In 2023, companies should lean into growing brand loyalty and engaging more deeply with existing customers even more as they look to offset drops in visit frequency in the category.

– Phil Quackenboss, VP of Restaurants & Growth at Fetch

Sober-Friendly Beverage Programs: Restaurants are starting to leverage the availability of reduced-alcohol sprits, beer and wine products to offer guests the opportunity to moderate and control their alcohol consumption with their meals. 

Expanding Plant-Based Options: I believe plant-based menu selections will start to appeal more to both the health-focused diner as well as those guests who are concerned with the environmental impact of the traditional center-of-the-plate proteins. 

World Dining: We are seeing that the interest in new, diverse and intriguing cooking styles and ingredients continues to grow, and in 2023, I expect to see more muti-cultural influences and creative fusions in restaurant menus.

Guest Experience: As we continue to see staff shortages and high turnover rates in the post-pandemic era, the food and beverage industry will have to focus efforts and resources on creative staff training as well as the fast and effective onboarding of new employees to guarantee a satisfactory guest experience.

Healthy/Clean eating focus: I believe diners will seek out opportunities for well-prepared, light and healthy options across all sectors of dining in 2023.

– Matt Rinehart, HRI Hospitality’s Vice President of F&B

The Convenience Store of the Future is Food and Beverage: Convenience stores like 7-Eleven have provided communities with everyday items such as coffee, groceries, lottery tickets, over-the-counter drugs, toiletries, and much more for decades, but like many industries since the start of the pandemic, convenience stores are evolving. With consumer expectations at an all-time high, award winning architecture and design firm, CRTKL, is working with 7-Eleven to re-imagine its stores and to attract consumers. To do this CRTKL is featuring the follow:

• High quality pre-made food pick up location. With domestic road trips increasing post pandemic, consumers are looking to receive food and continue on their travels as quickly as possible. In addition to pre-made food, having pick-up locations for fresh orders that are placed online is also essential as some customers look to limit their time in the actual store. 
• The traditional cult-following product. We’ve all walked into a 7-eleven and made a bee-line to the slushie machine. Stores should play into these cult-following areas and design them to be convenient and easy for customers to enjoy. 
• Partnerships with local brands and stores to reflect the local flavors and cultures (wineries, breweries, tacos, craft-made snacks, etc). As an example, CRTKL recently designed a 7-Eleven in Texas that includes a Texas themed mural and is home to a Ladero Taco, a local restaurant. Additionally, the store has a section dedicated to wine called “The Cellar.”

– Carlie Russell, CRTKL

Establishing F&B Spaces as Amenities : F&B spaces provide the perfect venue to bring communities together, whether it’s over a quick bite to-go, or a full meal with friends. This is why designers are increasingly integrating F&B programs into multifamily developments––establishing a sense of connection and camaraderie among residents. The team at Pininfarina recently included the concept in their design for Light Towers, a development in Mexico. The project will feature three types of bars, which can be seen as three types of experiences for the residents. One is designed for late-day cocktails, another one is a sports bar, and the third will serve fresh-made juices and teas, to boost energy and contribute to a healthy wellbeing while establishing a gathering space for community members. In addition there is also a poolside bar.  What is important to keep in mind for Pininfarina designers is that the shared spaces will host different types of consumers/residents, after all Light Tower will be a multifamily with more than 120 apartments, in which there will be different generations and different lifestyles all part of the same community.

– Samuele Sordi, Pininfarina

"In 2023, restaurants will adjust to the fact that the labor shortage is here to stay and that unionization will only continue to increase. As a result, businesses will need to find ways to optimize and engage the staff they have, while providing them with a more positive work experience and gig-like flexibility. In this case, delivering a superior hourly employee experience will continue to be a major focus in labor optimization efforts. 

Given everything that’s happened over the last few years, restaurants have come to a greater understanding that labor costs include the cost of replacing workers which will lead to an increased focus on employee retainment. We’ll see more restaurants offering their employees gig-like schedule flexibility and instant access to earned wages.

We’ll also see restaurants increasing their usage of automation to improve labor efficiency and the employee experience. Restaurants will embrace intelligent automation powered by modern workforce management solutions to precisely predict demand across locations and channels and instantly create optimal schedules that automatically match business needs with employee skills and preferences."

– Legion's Chief Customer Officer, Michael Spataro

"Balancing expectations for hybrid experiences are here to stay. Digital and mobile ordering isn’t going anywhere, but with the world’s full return-to-normalcy in 2022, we can expect to see consumer behaviors continue to the ease of online ordering with in-store pick-up and visitation. Restaurants will be expected to provide consistent consumer experiences from in-store to curbside in order to appeal to new consumer preferences.

Reward-based loyalty programs remain one of the best ways to deepen those customer relationships and create an opportunity to increase order frequency among their most valuable consumer sets, so we can expect to see continued incentive programs to draw in repeat visitors. 

Competition is fierce as brands fight for consumer loyalty– QSRs will be looking to capture loyalty among key spenders in Gen-Z and Millennial age demographics. Reward-based loyalty programs remain one of the best ways to deepen those customer relationships and create an opportunity to increase order frequency among their most valuable consumer sets, so we can expect to see continued incentive programs to draw in repeat visitors. 

Automation and smart technology – New adaptations of smart technology within fast-serve restaurants will grow with the use of  kiosks, online ordering, and even food preparation as restaurants continue to combat rising labor costs among a shortage of restaurant workers.

Sustainability – Gone are the days when consumers didn’t know where their food came from (or where it’s going). Sustainability in supply chains is of increasing importance to consumers, especially Gen-Z, and we expect to see fast-serve restaurants join the focus on sourcing more local goods to attract new audiences and make positive strides toward reducing food waste."

– Jocelyn Taylor, Director of Client Partnerships – Restaurants, VDX.tv 

"In 2023, we’ll see AI becoming more widely integrated into restaurant operations spanning front and back of house. The labor shortage has plagued the industry for some time now, and the pressure of the holidays will convince more and more restaurants to adopt automation to mitigate this ongoing issue. In response, AI will be leveraged significantly – not to take jobs and replace humans, but rather contribute to a more positive employee experience and take over more stressful or unpleasant tasks like taking orders over the phone or text. Customers will in turn become more accustomed to conversing with AI in these situations, creating a win-win situation. We’ll also see AI being used to handle everything from text marketing campaigns, managing inventory to counting orders, tracking customers in real-time, and monitoring the number of people at dining tables. Restaurants are eager to rebound from many of the issues that still plague them post-pandemic, and automation will become the natural solution to these challenges.

Not only will restaurants tap into AI to increase operational and order efficiencies, but they will also need to evaluate their tech stacks and customer service capabilities as a whole.

Not only will restaurants tap into AI to increase operational and order efficiencies, but they will also need to evaluate their tech stacks and customer service capabilities as a whole. Especially for the QSR and fast casual markets in which customization drives value for customers, standard POS systems won’t be able to keep up with heightened demand. Pizza restaurants are ahead of the curve in implementing SaaS solutions that can handle highly customized, complex orders. But other cuisine types like sandwich joints, Mexican restaurants and coffee cafes are following closely behind, and operators in these spaces will need to invest in technology to ensure they’re equipped for the year ahead."

– Olivier Thierry, Chief Revenue Officer, HungerRush

Flexible, Accessible, Choose-Your-Own Seating Styles: F&B spaces are continuing to give guests even greater control over their visit, while maintaining the intended brand experience; one key component is the integration of a variety of unique seating options for patrons to select from. Whether it's a communal table in the center of the space, cozy banquettes with dim lighting in the back of the restaurant, or high tops with bar stools on an outdoor terrace overlooking the city, an eclectic mix of accommodations diversifies the dining environment, allowing restaurants to simultaneously cater to larger group celebrations and intimate date nights. Offering a selection of seating options demonstrates an F&B brand's commitment to accommodating unique experiences for customers, a key design consideration that can drive a brand into the future, keeping their business alive and competitive in the market.

– David Tracz, Partner at //3877

“In 2023, restaurants will have a significant opportunity to capitalize on the growing TikTok generation and the role video plays in helping consumers find new places to eat and drink. People are posting more videos and less photos, so leverage your current loyal customer base to help spread the word through videos they’ve taken. You don't need to have a big presence on social channels – simply encourage your customer base to capture and post their experience on their preferred social channels and tag your business, and then share what they have posted. You can also incentivize your front-of-house staff to encourage customers they see having a great time to capture a short video of their experience and share it.” 

– Eugene Varricchio, CEO, franki 

"2023 will see a continued movement from restaurants in streamlining their hiring process with technology. In particular, AI-driven software will be more widely adopted but with higher expectations of personalization. Candidates don’t want to be talking to a bot, and restaurants don’t want canned responses representing their brand. Quality will also be a resurging theme in two key ways. Restaurants will have higher expectations of candidate quality, while candidates will also place greater emphasis over an employer’s brand. The importance of restaurants to elevate their brands by showcasing employee welfare will only increase. As candidates are met with more job opportunities, they’ll gravitate towards the employers that prioritize their team members first."

– Vivian Wang, Landed Founder & CEO

“Worries of an economic slowdown will likely, at least initially, be a net benefit to restaurants, because restaurant input-cost inflation will slow quicker than menu price decreases, enabling restaurants to recoup a majority of the margin declines they saw in 2022.  In fact,  since May 2022, the industry’s Cost-of-Goods-Sold (COGS) inflation has been running up only about +1 percent and labor only about +four percent – which is far lower than the average rate of inflation of around eight percent seen since the start of 2021.  

The risk and challenge for 2023 will depend on the health of the restaurant consumer, especially since restaurant sales have tended to slow up to a year prior to the beginning of past US recessions.

The risk and challenge for 2023 will depend on the health of the restaurant consumer, especially since restaurant sales have tended to slow up to a year prior to the beginning of past US recessions. The key question is whether or not dining-out traffic will hold up long enough for restaurants to recover the profits they lost in 2022. We believe it will, because overall industry traffic is not yet overheated; it's still down about 5 percent from pre-pandemic levels, which hints that restaurant demand may hold steadier for longer despite headwinds.”

– Paul Westra, managing director of restaurant investment research at Capital One

"When it comes to restaurant customer satisfaction, Yumpingo found that speed of service – including the perception of extended wait times to get food or drinks, as well as the speed and attentiveness of servers – was one of the main factors that negatively impacted guest sentiment in 2022. The company’s data, which factors in feedback from hundreds of thousands of guests across operators and channels in both the U.S. and the U.K., also showed that guest sentiment around ordering processes has improved since mid-year, and while the cost of a meal remains top of mind for diners, fewer guests felt dining out was ‘too expensive’ in the back half of the year. Yumpingo anticipates all of these topics will remain priorities for operators and guests in 2023."

 – George Wetz, COO and Cofounder Yumpingo 

“The macroeconomic issues defining 2023 will be inflation and recession. There’s no question that we are going to be in a recession, the only question is the magnitude of the recession. It will be interesting to see how companies react to this. 

Throughout the pandemic recession, the companies that invested in self-ordering technology were the winners, and many of those that didn’t went extinct. However, when the pandemic hit people were less sensitive to prices. This time, consumers will be more sensitive to price due to inflation and limited wallet share. While restaurants have been able to pass these inflationary prices on to consumers in the past, they will no longer be able to do so in this new recessionary environment. 

Restaurants will have to find new ways to innovate and become more efficient, which will exacerbate their need for solutions. The path towards self-ordering technology will become accelerated, and restaurants will realize that they must invest in technology to become more efficient both from a digital marketing perspective and from an operations perspective. The restaurants that are the most efficient will be the ones that win the wallet share of consumers. 

Restaurants will have to find new ways to innovate and become more efficient, which will exacerbate their need for solutions.

It has been interesting to see the premiums that restaurants have been able to pass on to consumers as a result of commissioning third-party delivery services. Apps like Grub Hub, Uber Eats, and Door Dash charge restaurants exorbitant fees to use their services, fees that restaurants have been passing on to consumers. However, in 2023’s tight inflation/recession environment, restaurants will no longer be able to do this and will in fact have to fight for consumers, who more and more will begin to pick up their food themselves or dine in to avoid these fees. 

Restaurants can’t control food, rent, or utility costs. The only two other variables that they can control are payroll/labor costs and marketing costs. As such, restaurants have to become more efficient in their digital marketing and get smarter to be able to bring in their clients. Restaurants will invest more heavily in loyalty programs to develop a better understanding of their customers and how to highly target them, this way they can find more similar customers in a cost-effective, digital manner. The goal of restaurants is to retain and attract customers, and the more information that you know about these customers, the higher likelihood you will continue to keep and add to them. 

In QSRs and fast casual restaurants, the low-hanging fruit is self-ordering technology, especially as a solution to labor challenges. Self-ordering technology, such as kiosks and online ordering, reduce or eliminate the need for front-of-house employees, which is especially timely given that labor is increasingly expensive and hard to come by. By adding kiosks, restaurants can increase average ticket and generate more revenue per client which helps go to the bottom line. 

In full-service restaurants, the ability to have waitstaff with mobile POS systems or virtual kiosks in a handheld fashion will allow restaurants to handle 50-100 percent more customers and shorten table turns. This is because self-ordering technology eliminates the back and forth; orders will go into the kitchen faster, and payment will be made at the time of purchase. The combination of these two things will allow restaurants to run more efficiently and service more customers. 

A lot of companies will come out with solutions because the need for kiosks and related technology will increase, but restaurants need to be careful because 90 percent of these solutions won't work. Restaurants need to be able to jump into pilots and validate that the technology works and handles everything before they pull the trigger on implementing and utilizing these solutions. It is important to test this technology prior to implementation because there is a lot of customization related to the process flow of the establishment and its existing infrastructure. Many restaurants are too quick to implement technology; they do it wrong and think that the technology doesn't work when in reality it was improperly implemented and rolled out.”

–  Sam Zietz, CEO of GRUBBR