MRM Research Roundup: Mid-Year 2024

This edition of Modern Restaurant Management (MRM) magazine's Research Roundup features news on the impact of California's minimum wage, customer satisfaction,  AI use in restaurants, popular cocktails and bathroom readiness. 

Early Impact of California's Minimum Wage

A new edition of The Anchor from Placer.ai, written by R.J. Hottovy, the company’s Head of Analytical Research, digs into the changes at California restaurants wrought by increases to its minimum wage laws. The main takeaway: It’s led to higher prices and lower foot traffic at many of the state’s dining establishments.

“As a result of the minimum wage increase, most chains have raised prices in the region  anywhere from the mid-single digits to the midteens,” writes Hottovy. Foot traffic at California QSR restaurants was trending above national levels, but “this abruptly shifted when the minimum wage increase went into effect.”

At McDonald’s locations in California, visits were roughly on par with national averages in February and March. The law changed on April 1. In April and May, California visits were around 2.5 percent lower than the national average. 

“Our data indicates that QSR burger chains have generally been the hardest hit by the California increase in minimum wage and subsequent increase in menu prices,” writes Hottovy. Chains affected include McDonald’s (visits down ~2.5 percent, as noted), Burger King (-3.86 percent), Wendy’s (-3.24 percent), Jack in the Box (-0.8 percent), and In-N-Out Burger (-2.59 percent).

Customer Satisfaction Survey

Although customer satisfaction with fast food restaurants is up 1 percent to a score of 79 (out of 100) and up four percent to 84 for full-service restaurants, according to the American Customer Satisfaction Index (ACSIÒ) Restaurant and Food Delivery Study 2024, households earning less than $75,000 a year are reducing their restaurant visits because of rising prices.

“Both full-service and fast food restaurant customers are skewing a bit more toward higher income levels and college graduates,” says Forrest Morgeson, Associate Professor of Marketing at Michigan State University and Director of Research Emeritus at the ACSI. “Customers are being forced to make decisions between groceries and restaurants, with full-service restaurant inflation about two times that of groceries in the past year and fast food and fast casual restaurants prices up three times the rate of groceries. With customers seemingly viewing dining out a luxury, restaurants that can differentiate themselves in terms of quality and value will have a competitive advantage.”

ACSI results again show consumer preferences for steaks as LongHorn Steakhouse and Texas Roadhouse both climb four percent to 85, tying for the top spot among full-service restaurants (and restaurants overall).

The former shows its commitment to customer satisfaction by running counter to the “shrinkflation” trend and providing more bang for the customer’s buck, while striving to maintain a cultured dedicated to quality. Meanwhile, despite inflation, Texas Roadhouse is keen on keeping prices low and investing heavily in staffing.

Olive Garden is next among major chains, up four percent to 83. Chili’s also improves 4 percent to 80. The chain benefits from a combination of high perceived value through its “3 for Me” menu and service strength through employee retention.

Last year’s category leader, Outback Steakhouse, slips four percent to 80. Outback appears to be challenged by a slowdown in spending by lower-income consumers consistent with ACSI findings regarding their customers’ price sensitivity. Meanwhile, IHOP soars 8 percent to 78. Customers are responding favorably to menu changes that offer more variety.

Customers indicate better performance across most aspects of the full-service restaurant experience — with food order accuracy (92) and waitstaff courtesy and helpfulness (90) leading the way — appreciating restaurants’ efforts to satisfy customers despite inflation. Providing an outstanding customer experience will be even more critical for consumers feeling pressured to cut back on discretionary spending.

Chick-fil-A drops two percent to an ACSI score of 83 but still leads among individual fast food chains for the tenth consecutive year. This long-term success is reflected in revenue, as the chain’s non-mall locations averaged $9.4 million in revenue in 2023 (more than double that of McDonald’s while being open one day less per week).

KFC finishes second at 81 (unchanged), appearing to hold on to highly loyal customers as competitors cut into its domestic market share. There is a four-way tie for third place at 80 between ACSI newcomer Culver’s, Panera Bread (up 5 percent), Arby’s (up 4 percent), and Starbucks (up 3 percent). Culver’s continues to open locations at a consistent rate while also growing revenue per location.

Despite being well behind the leaders, Sonic makes the biggest leap in the industry, surging 6 percent to an ACSI score of 76, same as Wendy’s, up 3 percent.

After slumping one percent and three percent, respectively, Jack in the Box and Popeyes fall toward the bottom at 72. Meanwhile, McDonald’s remains in last place even after improving 3 percent to an ACSI score of 71.

Order accuracy (86), mobile quality (86), and mobile reliability (85) receive high scores as improving technology may be increasing accuracy in filling customer orders. In fact, mobile quality for fast food restaurants tops that of full-service chains. Fast food restaurants also receive high benchmarks for staff courtesy and both food and beverage quality (all 84), although sit-down chains outperform fast food on these measures.

The food delivery industry debuts in the ACSI with a score of 73 — significantly lower than both full-service restaurants and fast food restaurants.

The group of smaller food delivery services outpaces major competitors with a score of 79. Uber Eats, at 74, edges out the other reported brands, DoorDash (73) and Grubhub (71).

Customers give the highest ratings to the mobile apps (82) and websites (81) used to place orders. The cost of food delivery is a concern in terms of the fairness of food prices (69) and pre-tip taxes and service fees (69).

The ACSI Restaurant and Food Delivery Study 2024 is based on 14,604 completed surveys. Customers were chosen at random and contacted via email between April 2023 and March 2024 for the restaurant industries and between November 2023 and March 2024 for food delivery. 

The State of AI in Restaurants

Raydiant released its inaugural "The State of AI in Restaurants" report. The study, based on a survey of 175 restaurant technology leaders, explores the adoption, benefits, and challenges of AI in the restaurant industry, focusing on its potential to drive competitive advantages, streamline operations, and enhance customer experiences.

Key Insights from the Report:

AI as a Competitive Advantage: 62 percent of restaurant leaders believe that AI offers a significant competitive advantage to restaurants that adopt it, with 67 percent feeling well-positioned to leverage AI for market differentiation.

Enhancing Operations and Customer Experience: The top benefits of AI in restaurants include effective staff scheduling (38 percent), increased sales and revenue (37 percent), personalized marketing and promotions (36 percent), and efficient inventory management (34 percent).

Diverse AI Applications: Restaurants are experimenting with various AI use cases, such as chatbots for customer service (41 percent), customer preference analysis for tailored experiences (39 percent), inventory management (38 percent), predictive analytics for demand forecasting (33 percent tie), and food waste reduction (33 percent tie).

Overcoming Hurdles: Restaurants face challenges in AI adoption, including staff training and adoption (23 percent), finding the right AI solution (22 percent), cost (17 percent), and customer acceptance (14 percent). These obstacles highlight the need for strategic planning, education, and investment to successfully integrate AI into restaurant operations.

Growing AI Engagement: 54 percent of restaurant leaders expect to increase their engagement with AI projects over the next year, recognizing its potential to revolutionize various aspects of their business.

Keys to Success: To successfully implement AI, restaurants need a better understanding of AI capabilities, access to superior AI technologies, stronger leadership buy-in, and increased budget allocation.

Food Delivery Ordering Habits

HungerRush released results for a national consumer survey on food delivery ordering habits. The study uncovers the opportunity for restaurants to leverage food delivery trends to maximize profits.

With rising operational, labor, and food costs, it's now more important than ever for restaurant operators to find strategic ways to grow their business. The study identifies two clear areas for growth opportunity; Online ordering and in-house delivery.

Third-party food apps provide additional revenue for restaurants, but they come with high fees that cut into profit margins. The good news is that although 66 percent of consumers report that they use food ordering apps monthly, more than half (56 percent) say they are likely or somewhat likely to order directly from a restaurant instead of a third-party food app, depending on the user experience.

What factors into a consumer’s choice between ordering delivery directly from a restaurant vs. a food delivery app?

• 51 percent say coupons and promotions
• 23 percent say increased delivery tracking abilities
• 16 percent say enhanced user experience on the website or app

Do fees deter consumers from using third-party food ordering apps? 

67 percent of consumers are at least sometimes deterred from using third-party apps because of the fees associated with using them (of which 35 percent are definitely deterred).

These results reveal a large opportunity for restaurants to win more in-house delivery business when they provide a good user experience on their own online ordering and delivery platforms. Based on these results, choosing restaurant technology that can handle online orders, coupon and loyalty management, and delivery tracking is key in order to accomplish this.

While this study suggests it’s a good strategy to maximize online and in-house delivery orders, it’s also clear that third-party food apps are here to stay. 29 percent of respondents reported that their third-party app usage has increased since last year.

How many times a month do consumers order from food apps, excluding grocery delivery?
54 percent order one to four times a month and 12 percent order five or more times a month.

What are the most popular food-ordering apps?
50 percent of diners opt to use DoorDash, making it the most popular third-party food delivery app, followed by Uber Eats with 39 percent.

What age group orders from food delivery apps the most?
62 percent of Baby Boomers reported that they do not use third-party delivery apps. 71 percent of Gen-Z reported that they use apps up to four times a month (36 percent one to two times and 35 percent are using apps three-to-four times a month).

The Age of Gen Z

Deliverect revealed Gen Z dining habits in "The Age of Gen Z." 

The survey of more than 3,000 Gen Z consumers across the UK and US, which was commissioned by Deliverect and conducted by Censuswide, explores generational dining habits, including how and why consumers prioritize food from restaurants as part of their budgets.

Top Insights:

• 73 percent of Gen Z consumers consider themselves as foodies, yet only half (50 percent) would return to a restaurant or takeout spot solely based on food taste
• Nearly all (93 percent) of Gen Z value food recommendations from friends and family over social media influencers
• 42 percent of all respondents prefer to order takeout rather than go out to eat on a Friday night

Online or Offline – Trust is Key

Gen Z trusts friends and family the most for food recommendations, with 93% valuing their opinions. Despite being digital natives, social media influencers are less trusted overall but still play a significant role.

With that said, social media is slightly more influential for discovering new places to eat (48 vs. 44 percent for friends/family), yet is less effective in persuading repeat visits. TikTok is particularly notable, with 70 percent of Gen Z considering it the most valuable source for recommendations, followed by Instagram (65 percent) and YouTube (41 percent).

This indicates that trust is an incredibly valuable metric for Gen Z; they want to feel confident in the advice they receive, whether from friends, family or their favorite food-influencer. 

Despite Cost-Conscious Mindset, Gen Z Prioritize Eating Out 

Gen Z is becoming increasingly financially savvy and is embracing the TikTok ‘loud budgeting’ trend. For Gen Z, cost is a critical factor in their dining choices and is cited as the next top reason for returning to a restaurant (42 percent) – with that number increasing to 44% when it comes to takeout restaurants. Cost consistently comes before other important factors such as service, location, cuisine type and more, for both dining in and when ordering takeout.  

The study also found that eating out is a top spending priority (outside of rent/mortgage and household bills) for one-in-five Gen Z (21 percent). That’s in line with other top spending priorities including:

• Groceries (38 percent) 
• Car payments (e.g., car finance, fuel, insurance, etc.) (22 percent)
• Clothes shopping (26 percent).
• Social activities (e.g., concert tickets, activities with friends, etc.) (19 percent) 
• Skincare (18 percent)

 It’s a Lifestyle: Dining Out and Ordering In 

The results demonstrate that Gen Z's food purchasing decisions are not influenced by their personal circumstance. 

Whether eating out or ordering takeout, Gen Z returned to a restaurant mainly due to the taste of the food (50%). Specifically, when asked what influences their choice to eat out or get takeout the most, responses showed uniformity across different personal circumstances. 

Regardless of their situation in life, many Gen Z are homebodies at heart, with 42% of respondents preferring to order in takeout rather than go out to eat on a Friday night (and 39% in the US) – a potential habit learned from the pandemic.

Dining Out Trends

With dining costs on the rise, Americans are getting creative to save a few bucks when eating out, according to the latest research from Lightspeed Commerce Inc.  

Lightspeed surveyed more than 7,500 dining consumers globally, with 1,500 respondents in the U.S. to better understand how dining trends have evolved in the past year. Some good news for restaurants on the horizon: 51 percent of respondents said they will either continue to dine out at the same rate, or increase going out in the next six months. That being said, consumers are certainly looking at how best to stretch their dollar, as seven in ten (69 percent) diners report higher meal prices, and four in ten (39 percent) notice their favorite dishes are shrinking in size—a phenomenon commonly referred to as 'shrinkflation.'

Dining Out on a Budget

With 81 percent of respondents dining out at least once a month, and 39 percent dining out once a week or more, Americans are looking for ways to continue to keep dining fun and affordable, and pulling out all the stops. A savvy 43 percent are hunting for deals with coupons, 39 percent are choosing value meals, and 36 percent are making the most of happy hour specials.

Doggy bags are back in vogue! Nearly half (45 percent) of respondents are not shy about asking to box up their food to stretch their dining dollars. Interestingly, 53 percent of women compared to 38 percent of men are more likely to enjoy a second meal with the leftovers. Older Americans, particularly those aged 55 or older, are similarly inclined, with 53 percent taking doggy bags home. Diners in Los Angeles appear more conscious about food waste, with 51 percent requesting leftovers to go.

The Tipping Point

Tipping continues to be a hot topic in the quest to save money when dining out. A whopping 73 percent of diners are not fans of auto-tipping prompts on digital screens, with 58 percent saying they feel pressured to tip more than they'd like—often to avoid appearing stingy or cheap.

Inflation has affected the amount diners are willing to tip, according to 44 percent of survey respondents and more than half (55 percent) in the 18-34 age group. That being said, the majority of restaurant-goers remain generous tippers. 38 percent said they prefer to tip between 16-20 percent, with 34 percent opting for 10-15 percent and 13 percent tipping 21 percent and above.

Interestingly, for scenarios outside of the normal tipping etiquette, survey respondents were overwhelmingly supportive of tipping delivery drivers (61 percent), while coffee shops (28 percent) and ordering at the counter (19 percent) fell short.

QR Codes and Menus Don't Mix

The backlash against QR code menus is palpable. While 20 percent of respondents appreciate their hygiene benefits, nearly nine in ten (89 percent) would rather flip through a physical menu, especially at fine dining spots where this jumps to 94 percent. Some 34 percent say they downright 'hate' QR code menus, and a quarter (25 percent) grumble that the text on digital menus is just too tiny to read.

The disdain for QR codes is more pronounced among the older generation, with 62 percent of those aged 65 and above requesting a paper or printed menu when presented with a QR code by a server. Additionally, 32 percent admit to not being tech-savvy enough to navigate QR code menus.

Fourth of July Trends

Toast’s 4th of July data on food and alcohol trends that you may find relevant ahead of the upcoming holiday weekend. 

Among the key findings:

• Hot dogs reign supreme with the average restaurant seeing a 154 percent increase in hot dog sales compared to the average day. 

• Step aside beer, hard seltzers are the drink of choice, with restaurants seeing a 118 percent increase in hard seltzer sales compared to the average day and beer sales only increasing 87 percent.

• Another top cocktail choice on the 4th, is tequila and margaritas with sales up 105 percent around the 4th.

• Good news for guests as they plan their celebration: the average menu price of popular 4th of July foods has increased only slightly since last year (by about one to three percent), except for wings, which decreased by 0.8 percent. 

Personalization at the Drive-Thru

The CMO Council and uKnomi,  released a brief advocating a new AI-powered service model for uplifting customer engagement and experience at 200,000 drive-thru locations nationwide.

Some 70 percent of the $350 billion in U.S. quick service restaurant (QSR) sales comes from the drive-thru channel, which has multiplied as a result of Covid and the nation’s growing appetite for speedy, tasty, convenient and affordable meals away from home.

Using “Real-Time AI Interaction at the Point of Transaction,” the playbook shows how personalization can boost drive-thru revenue by 20 percent through more relevant suggestive selling per order, repeat visits, increased frequency, and customer advocacy. Mainstream deployment of digital AI in drive-thru lanes is expected to: 

• Automate individual customer knowledge gathering at scale
• Leverage personal meal preferences and order history insights
• Prompt added-value, higher-margin menu suggestions
• Acknowledge and reward frequent customer visits better than mobile apps
• Speed up accurate drive-thru service and build consumer brand preference

Further, the report maps ways to personalize and grow drive-thru revenue through a marketing-in-the-moment model. The model consists of five key components working together to get the personalization engine humming:

• Real-time anonymous recognition
• Intuitive, real-time engagement
• Guest intelligence and analytics
• Operational visibility + lift
• MarTech value + ROI

Brewing Success

The coffee segment seemingly can’t be stopped—visits to coffee chains increased year-over-year in every single state in the continental U.S. between January and May 2024. That’s according to a new white paper from Placer.ai, titled Brewing Success: Winning Strategies for Coffee Chains. The white paper looks at some of the strategies a handful of the largest coffee chains in the U.S. are using to continue growing.

Key takeaways from Placer.ai’s white paper:

• Coffee is flourishing nationwide.
• Some of the biggest industry-wide visit growth in early 2024 was seen in smaller markets, but states like Texas, California, Florida, and New York also experienced YoY foot traffic increases.
• Leading coffee chains are growing their store counts – and their visits.
• YoY visits to Starbucks, Dunkin’, Dutch Bros., and BIGGBY COFFEE increased as the chains grew their footprints. But the average number of visits to the brands’ individual locations also increased or declined just slightly – showing that the expansions are meeting robust demand. 

Starbucks visit growth is being fueled by the return to office. In early 2024, Starbucks visitors were more likely to proceed to their workplace following a coffee stop than in 2022 or 2023. And a greater share of early-morning visits lasted less than ten minutes – as many customers likely grabbed a cup of joe on their way to the office.

Dunkin’ is benefiting from customers on the go. Between January and May 2024, statewide markets drawing higher shares of very short visits (i.e. those lasting less than five minutes) saw the greatest YoY visit increases.

Dutch Bros. does particularly well in metro areas with higher proportions of one-person households, while BIGGBY COFFEE’s top locations draw greater shares of suburban population segments.

New Era of Cocktails

Exclusive new research from CGA by NIQ reveals consumers are moving towards lighter, fruitier and more colourful cocktails in US bars and restaurants.

The latest edition of Cocktail Sales Tracker—the expert monitor of category dynamics that helps suppliers understand consumer trends and maximize their brand potential—highlights a significant move away from heavier and higher-alcohol cocktails towards more refreshing alternatives. Big category winners include the Spritz, which has enjoyed a remarkable 30 percent increase in value velocity over the last 12 months—the highest of any of the top 30 cocktails in the US. 
 
Other cocktails with high growth include the Bellini and Paloma, which have seen year-on-year value velocity uplifts of 19 percent and eight percent respectively. Lesser-known but fast-rising cocktails include the Gin Fizz, which has recorded a 45 percent increase, albeit from a low base. The Spritz was the sixth most popular cocktail in the US in the first quarter of 2024, up by two places from the fourth quarter of 2023, while the Bellini has climbed one place to ninth. 
 
CGA’s USA Bartender Report delivers more evidence of the shift in cocktail preferences towards more refreshing and visually appealing drinks. Asked about likely cocktail trends for 2024, 45 percent of bartenders anticipate more bold and vibrant cocktails that are served with social media appeal in mind. 

With nearly all bartenders (96 percent) saying they make drinks recommendations to guests on every shift, and three in four (75 percent) saying guests buy those recommendations every or almost every time, it is imperative that beverage brands shift their strategy to encourage bartender advocacy. 
 

Iced Coffee Popularity

The team from Coffeeness analyzed Google searches to see what most popular iced coffee drinks worldwide are. 

Among the findings:

• Frappe emerges as a widely popular choice across different continents, with 35 countries naming it as their most preferred iced coffee drink.
• Some countries have a preference for unique or regional variations, such as eiskaffee in Austria, mazagran in France and Portugal, Spanish latte in Malaysia, Qatar, Saudi Arabia, Singapore and the United Arab Emirates, and iced latte in Thailand. 
• The Spanish latte is the most preferred iced coffee drink served in the Middle Eastern region. Countries like Qatar, Oman, Saudi Arabia and the United Arab Emirates simply love it.
• Cold brew is the preferred coffee drink in countries like Brazil, the Czech Republic, Hong Kong, Indonesia, Poland, Norway and Singapore. Surprisingly, this coffee beverage is also popular in Turkey, outdoing the famous Turkish coffee on its home ground.
• Residents of the U.S. prefer iced vanilla latte.

Handwashing Survey

In a recent survey by Bradley Company, nearly 70 percent of Americans reported having a particularly unpleasant experience in a public restroom due to the poor condition of the facility. The top restroom aggravations include clogged or unflushed toilets, an old, dirty or unkempt appearance and unpleasant smells.

Unfortunately, restaurants that neglect restroom cleaning and maintenance are jeopardizing customers’ repeat business and sales. Almost 60 percent of respondents believe an unclean restroom shows poor management, 56 percent are left with a tarnished opinion of the business and half vow not to return or will think twice about doing so. 

On the other hand, 62 percent of Americans make a point to stop at businesses with clean and well-maintained bathrooms when they need to use the facilities, and nearly 60 percent willingly spend more money there.

Those findings are based on a 2024 survey of more than 1,000 American adults conducted by Bradley, a leading manufacturer of commercial washroom fixtures. Bradley has conducted the Healthy Handwashing Survey™ for 15 years to monitor the state of public restrooms and perceptions surrounding them, as well as Americans’ handwashing habits.

This year’s findings pinpoint key consumer pain points, and preferences and behaviors in restrooms, providing insights on ways to improve restaurant washrooms for repeat business. 

Here are some of the study’s biggest takeaways:

Misbehaviors Spoil the Restroom Experience

Sometimes it’s the lax or poor behavior of other restroom users that irks restroom users, which can still reflect poorly on the business. Top restroom pet peeves include used paper towels left on the floor or sink; water splashed around the floor or sink; and careless or reckless behavior that results in damage. 

The survey also queried participants’ attitudes when they observe someone in a public restroom not washing their hands before exiting. Almost 70 percent of Americans recall seeing somebody use a restroom without washing their hands, which creates a negative impression about that person. Men (79 percent) are more likely than women (59 percent) to witness others skipping the suds. 

COVID Hangover

Despite being four years out from the COVID-19 pandemic, people remain in an elevated state of germ consciousness, causing sensitivity to the cleanliness in restroom spaces. In fact, 80 percent of Americans say they are now more conscious about coming into contact with germs because of the coronavirus. The facilities that cause people the most concern about germs are:  1) stores, 2) health care establishments, 3) restaurants, and 4) gas stations.

Can’t Touch That

People go to great lengths to avoid coming in contact with germs in public restrooms. Almost 70 percent of Americans use a paper towel as a barrier between themselves and flushers, faucets and doors. 46 percent use their foot to flush a public toilet — much to the dismay of building maintenance staff responsible for fixing broken flushers. 

With so many people cautiously avoiding contact with restroom surfaces, it follows that 86 percent believe it is important to have touchless fixtures in a public restroom. 70 percent are more likely to return to a business that offers touch-free technology like faucets, flushers, soap and towel dispensers in its restrooms. 

Another bonus: based on their integrated design – no handles, levers or buttons – touchless fixtures are easy to clean and their concealed mechanics can help discourage tampering.

Restroom Wishlist

When asked the most important improvement they’d like to see in restrooms, respondents said, “clean them more regularly and keep them better stocked.” Next on the wish list is making everything touchless. The annual Healthy Handwashing Survey from Bradley queried 1,003 American adults Jan. 4-9, 2024, about their handwashing habits, concerns about seasonal viruses and their use of public restrooms. Participants were from around the country and were fairly evenly split between women (51 percent) and men (48 percent). 1 percent of survey respondents selected other.