While wrapping the year in my home office, I came across an article that offered a few restaurant design predictions for 2020. While the piece showed some very interesting visual designs, most meant more for upscale applications and perhaps one-off locations, this article made me begin to wonder about how Industrial Engineering in Foodservice will impact restaurant design in 2020.
As the article suggested, one aspect of design we all must consider is designing with purpose to differentiate the restaurant in today’s crowded and competitive marketplace. The bigger challenge, though, is designing with a purpose while on a budget. In other words, “everything that glitters does not have to be gold,” especially in the more expensive construction environment that currently exists.
Toward the end of last year, we were working on several new prototype design projects for medium and large restaurant chains. In doing so, it seemed as if we were constantly chasing our tails when it came to reducing capital costs, a key goal of the initiative.
The projects sought to make the units much more compact, to the tune of 15 percent to 25 percent smaller. Oddly, though, the capital expenditures to develop these locations did not seem to decrease proportionally due to rising construction and development costs. Although the concept did not set out to be in this position, management recognized that if the company had not taken on an initiative to reduce capital, it would have ended up with a concept that was more expensive to develop, perhaps to the tune of 15 percent to 25 percent more.
A second aspect of design is efficiency of everything, especially labor use in the restaurant. Keep in mind the $15 per hour minimum wage train has left the station. A restaurant may not be in a market where this is in place (yet), but it’s only a matter of time. And in some cases, adopting this higher hourly wage is completely voluntary to attract talent. I have driven around in markets that although the minimum wage may be at $10 or $11 per hour, restaurant operators advertise in their windows a minimum wage of $15 per hour or more to start.
It used to be that operators’ desire to retain employees led to the increase in wages. Nowadays, more and more operators need to increase wages to simply attract potential employees. Concepts that struggle to find employees to fill their shifts may not have enough personnel on hand to appropriately deliver on the brand promise. This can negatively impact the guest experience, be it in service times, product quality and overall hospitality experience. One other aspect of finding labor is the need that prospective employees have to be given longer shifts to make their time worth it.
A third aspect of design in 2020, is that operators may not need to worry so much about having a front-of-house. In these instances, operators could save capital by reducing the size of the FOH or by eliminating it. The latter is happening more and more as ghost or dark kitchens continue to become more prominent. These are remote spaces that produce food that gets delivered to customers. Some concepts even rent space in their units for other concepts to run their businesses from, in order to use the real estate more effectively. Sort of like renting an apartment. All of these dynamics are changing the paradigms of the real estate side of the restaurant business in 2020.
A fourth aspect of design to consider in 2020 is the more prevalent application of technology. Instead of using technology just for the sake of doing so, this centers around applying technology with the purpose, to gain a competitive advantage. These may include kiosks, an online ordering application and using third-party aggregators, among others. On the latter, third-party delivery providers, while originally very expensive, have had to become more competitive in cost in order to not lose market share to other providers. When working with larger chains, some third-party delivery providers have lowered their rates pretty significantly. In such a price sensitive market, any little bit helps. These fee reductions are beginning to permeate to smaller concepts that have less purchasing leverage. The new year will continue to provide fertile ground for the field to be levelled further.
A fifth aspect of design to consider is the need to use more analytical and sophisticated methods to deliver not only food but hospitality in order to mitigate the risk of failure. Whether it is site location models, capacity analysis models or labor models, concepts will engage more prevalent science to help them drive shareholder value and better unit economics more intelligently.
One final design factor to consider in 2020 is one I call the surprise factor. What will the politicians bring forth in 2020 that will create challenges to restaurant operators? Take, for example, minimum wage, healthcare mandates and the joint ownership discussion that impacted labor, the relationship between franchisors and franchisees and more, among others.
No matter what challenges 2020 brings for all of us in the foodservice industry, demand for food prepared outside of the home will continue to grow. After all, the foodservice business is one of the largest business sectors in the U.S. This demand provides fertile ground for strong concepts that have a differentiating proposition in the marketplace to thrive, while others that are more run of the mill will not.
What challenges and opportunities do you think that this year will bring? Bring it on, I say!
Have a great 2020!