Without Innovation the Restaurant Sector Will Remail Stifled

 

Capitulating customer counts year after year and relying on menu price increase in order to find sales is not a business formula, they would ever teach at any business school. Sadly, it appears to be the state of the restaurant industry once again. Remember that the status quo is not in the minds-eye of the consumer.

Regular readers of this blog know that Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® routinely, regularly, and repeatedly has call on restaurant to evolve their business models, stating, “if your restaurants today look more like 1990, 1998, or 2015 than a restaurant of today or tomorrow your sure to be capitulating year over year customer counts. 

Even the National Restaurant Association forecast in its annual “2023 State of the Restaurant Industry” report released last week, the association expected sales to increase $60 billion over the $937 billion last year, which had exceeded the association forecast of $898 billion.

Noted that the 6.4% increase in forecast sales over 2022 includes “high rates of menu price inflation,” said Hudson Riehle, the association’s senior vice president of research, in an interview. Here is that interview:

“Sales in uninflated dollars have yet to return to 2019 levels, before the pandemic was declared in March 2020. “If you go back and track it from 2019 through this year, the real sales are down by 8.6%,” Riehle said. “So, it basically is the new normal.”

The industry’s “new normal” demands innovations, he said.

Restaurant operators obviously have to look for creative solutions in this environment,” Riehle said, “because the traditional restaurant model, from a cost standpoint, was not designed to endure the depth and breadth of this sustained period of much, much higher food and labor cost.”

Among other findings in the annual study:

• The foodservice industry workforce is projected to grow by 500,000 jobs, for total industry employment of 15.5 million by the end of 2023. The association said employment in the industry was 15 million in pre-pandemic 2019. “In the second-half of 2023, the industry recovers to a level that is higher than it was before the pandemic,” Riehle said.

• About 70% of operators said business conditions have settled into — or are on the path to — a new version of normal.

• About 84% of consumers said going out to a restaurant with family and friends is a better use of their leisure time than cooking and cleaning.

• Inflation continued to dog the industry, with 92% of restaurant operators saying the cost of food is a significant issue.

• In 2023, 47% of restaurant operators expect competition to be more intense than last year.

Revenue streams will continue to expand, Riehle said, citing subscription plans, loyalty programs, meal bundles, outdoor dining and prix fixe offerings.

Alcohol to-go for table-service concepts has been especially popular, though some communities have tightened restrictions as pandemic concerns ebb , Riehle said.

“Particularly among the younger age cohorts,” he said, “the ability to add alcohol to that off-premises order is a big deal.

At least four in 10 operators in each of the three limited-service segments — quick service, fast casual and coffee/snack — said the addition of drive-thru lanes will continue to be more common in 2023, the forecast found.

Technology continues to be at top of mind for operators, the report found. More than four in 10 operators planned new investments in equipment or technology to increase front- and back-of-hour productivity. Most of those investments will be in the order and payment arena rather than automated systems like robots to prepare food, association surveys found.

“The report is quite clear that consumers are extremely comfortable with using technology in their daily restaurant encounters,” Riehle said, adding that younger consumers expect some technological savvy, be it smartphones, kiosks or video menu boards.

The report found:

• Among fine-dining restaurants that offered delivery during the pandemic, 79% added it for the first time; and eight in 10 of those planned to continue it.

• Two-thirds of adults said they’re more likely to order takeout food from a restaurant than they were before the pandemic.

• Off-premises-only locations were expected to grow in popularity with more than four in 10 limited-service operators saying they would more common this year.

• 69% of adults said they like the option of dining outside.

Riehle said many brands are finding new revenue streams in branded merchandise such as clothing and other retail products.

The forecast noted that the restaurant and foodservice industry added 2.8 million jobs over the past 24 months, bringing the industry total to 15 million at the end of 2022. The foodservice industry remains 400,000 jobs below pre-pandemic levels. With hiring in 2023, Riehle expects employment to return to 2019 levels later this year.

Association surveys found 87% of operators said they will likely hire additional employees during the next six to 12 months if qualified applicants are available.

Between 2023 and 2030, the foodservice industry is projected to add an average of about 150,000 jobs a year, with total staffing levels projected to reach 16.5 million by 2030.

Surveys found only one in 10 restaurant operators said recruiting and retaining employees will be easier in 2023 than it was in 2022, with about 58% of operators saying that use of technology and automation to alleviate labor shortages will become more common in their segment in 2023. Riehle noted that operators said technology is generally complementary to human labor and primarily intended to enhance, rather than replace, workers.

Operators are in an “uncertain environment,” with the federal debt ceiling increase and other issues on the horizon for 2023, Riehle said, but the pandemic had the largest impact.

“I don't think anybody ever in any of their models anywhere could have predicted such a substantial impact,” he said. “For the restaurant industry, among all the industries in America, it was the industry that was most severely impacted in terms of employment and sales declines.”

Riehl added that “2023 is in many ways still a transitional year, but it is a year in which that ‘new normal’ has gained a greater presence of mind — both in the mind of the consumers as well as the operator.”

Operators plan to respond to trends, which include a majority of operators across all segments expecting to keep their menus in 2023 similar in size to last year and to enhance eco-friendly business practices, which appeal especially to Millennial customers.

“The major tenet that holds the whole thing together — and this was true even during the pandemic — is that consumers love to use restaurants in their daily lifestyle, and sometimes that's on-premises sometimes it's off-premises,” Riehle concluded. “They prioritize that spending. … We asked them about how essential is the industry in their daily lifestyle: They're very large numbers, particularly among younger consumers.”

Customers see restaurants as part of their standard of living and prioritize spending toward the foodservice industry, Riehl said. “That's not true of a lot of other industries in America,” he added.”

In case you did not know, the full 2023 report can be accessed from the restaurant association’s website. The association, founded in 1919, includes nearly 1 million restaurant and food

Don’t under estimate the consumer.  Consumers are dynamic, not static. Do not accept the status quo.

Don’t over reach. Are you ready for some fresh ideations? Do your food marketing ideations look more like yesterday than tomorrow? Interested in learning how Foodservice Solutions® can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us or visit us on our social media sites by clicking the following links: Facebook,  LinkedIn, or Twitter