The restaurant industry took the brunt of the pandemic’s economic and societal impact and is now being asked to respond to the permanently changed consumer landscape. As the world grapples with the next wave of COVID-19, businesses are confronted with product and labor shortages, a sudden increase in ecommerce and a variety of shifting consumption patterns. It’s not enough just to recover, retail and specifically restaurants and the food industry are compelled to pivot, adapt and create a model that will endure.
Here are five trends in the restaurant industry to consider post-COVID:
Labor Supply, Wages and Automation
Restaurant and bar employment (as of July 2021) remains down by 1.5 million since the start of the pandemic. Many companies are offering signing bonuses, iPhones and higher wages to entice employees. One hotel in upstate New York increased salaries of kitchen staff to $20 from $12.50 an hour. Signs of difficulties are reflected in some restaurants reducing hours and downsizing their menus. In lieu of available labor, companies are turning more to automation.
Expect to see more self-ordering kiosks already present at Taco Bell, Panera and McDonalds. A major theme among all retailers is to accelerate the digitization of the consumer experience and restaurants will see benefits from allowing customers to pay using tabletop applications, mobile-enabled menus for ordering and paying, and the use of robot cleaners to reduce the need for waiters and janitors.
Home Delivery, Contactless Society, Increased Remote Work and the Gen-Z Digital Generation
The use of delivery apps, like UberEats and DoorDash, provided a much-needed revenue stream allowing restaurants to rely less on an in-person brick-and-mortar experience. Look for an expansion of physical and digital accommodations to support delivery service (like more parking spaces and pickup lockers). Ghost restaurants that capitalize on online delivery are a $45 billion market, much higher than the $41 billion previously estimated. As for the thousands of restaurants that operate as a small business, Gen Z business owners seemed to be more poised to pivot to digital.
According to a survey of 500 small businesses, more than 50 percent of Baby Boomer and Gen X owners experienced loss due to COVID while only 17 percent of Gen Z businesses did. Consequently “more than 80 percent of Gen Z-owned businesses expect to get more than half of their revenue from digital (web, mobile, online delivery, social media) by 2022 versus only 33 percent of Baby Boomer-owned businesses.” Younger generations recognize the benefit of embracing digital in their business model.
The Store Experience
Brick and mortar stores will need to elevate their dining experience to be more appealing and more flexible to the changing attitudes and perceptions of the American public. Ongoing public health and safety concerns push down demand for the indoor restaurant experience. Restaurants relying solely on the traditional indoor sit and eat business will be less likely to survive as variants of the virus re-emerge. Companies like CMX Cinemas, who depend on their dine-in theater option filed for bankruptcy within the early stages of the pandemic.
A future forward restaurant model will be characterized by contactless delivery, curbside pick-up, and outdoor seating and will be more able to respond to heightened anxieties about business hygienic practices. Conventions and meeting spaces, theme parks and hotels, and restaurants are finding it better to reduce indoor seating as it requires too much maintenance and risk. With more people working from home, a restaurant can provide a ‘break’ for workers to enjoy being outside enjoying the scenery and having a safe social distanced conversation with friends and colleagues.
Owners will need to get creative and step outside of their comfort zones and target these kinds of demographic preferences and provide the matching dining experience. There has been a general increase in the number of outdoor seating accommodations, and it is becoming more of a year-round experience. Venues like Buffalo Wild Wings have invested in all-weather outside seating outfitted with heat lamps, awnings, sunshades and misted fans. If you currently lack outdoor seating, you may want to consider renovations or look for a new location that can accommodate.
Food Trucks Factor in the New Normal
Mobile food trucks are adopting new technologies, reducing costs, and responding to change. They were gaining in popularity prior to the pandemic, with the Census Bureau estimating 5,970 food trucks in 2018, “nearly double the 3,281 in 2013.” That number grew to 23,873 in 2020. Factors for their success in the pandemic are owners having more flexibility in creating menus based on available supply and their inherent low labor requirements. As workers go back to the office these trucks can also serve as proximity distribution points for delivering meals into the offices and eliminating the need for customers to stand in queues and mingle.
These reasons and the low cost of entry compared to brick-and-mortar establishments are why you will continue to see a growth in the number of food trucks. It would suggest that more restaurants will routinely incorporate food trucks to help drive their business and sustain revenues San Francisco’s Warfare Tavern,recently opened a food truck in addition to its restaurant. Not only does this provide a separate channel for sales but it supports the restaurants brand and visibility within the surrounding community.
Retail Is Remodeling and Partnering
Restaurants should consider following the example of big box retailers. Target stores plan to spend roughly $4 billion in each of the next few years on new store remodeling and other projects. Target also entered a partnership to open Ulta beauty stores within some of its locations and Walmart got into an E-commerce partnership with secondhand clothing store ThredUp. The National Retail Federation (NRF) expects retail sales to grow 13.5% in 2021 or double the previous forecast. The demand for retail looks favorable and restaurants should consider a shift in their business models to capture their share.
Change is necessary in the restaurant industry as consumers will continue to expect the convenience and service provided by digital capability as well as a flexible business model to deal with pandemics and safety protocols. Leaders in this space will continue to invest and consider more automation, contactless delivery, curbside pick-up, outdoor dining, mobile food trucks and potentially partnering with retail stores. These new trends will offer a more convenient, safety conscious and easy to use experience for customers and sets a new threshold for what it takes to thrive post-COVID.