With a new year fast upon us, you can’t help but wonder what is in store for the foodservice industry in 2023. I am very optimistic about this year, both personally and professionally. For one, having lived the last few years, I am convinced the restaurant industry is so resilient and strong, that we can endure almost anything; sometimes we even come through trying times stronger than we were before.
Juan Martinez, PhD, PE, FCSI, Principal, Profitality Labor GuruHere are my Top 10 predictions and recommendations for the restaurant industry for 2023.
No. 1: Labor will continue to defy gravity. You know that I had to start with arguably the most sensitive topic. The old adage of what goes up must come down is not even close to reality when it comes to labor in this industry. Wages will stay high. The good news is that scarcity of labor will get easier for reasons I will outline later.
No. 2: Don’t manage labor as a financial metric. Labor costs do show up in a profit and loss statement and as such it is an operation’s financial performance indicator. The best companies take an activity-based approach to managing labor, though. This approach addresses labor needs by location based on the time it takes staff to execute their assigned tasks. To be true to their employees, operators need to provide the stores the time it takes to execute any product, regardless of how much they charge for it. This is the most optimum way to ensure the operations team has the right labor in the right place at the right time doing the right things. Activity-based information can also help provide a clearer picture of the impact of any changes in any of the operating and design parameters, thus making it easier to calculate the return on investment from any initiative.
No. 3: Restaurants will and should continue to adjust to these labor realities. I wonder if by the time employees realize they need a job and want to come back to the one they had in the restaurant industry, if the positions will be there. As restaurants continue to work toward becoming more efficient they will naturally come to rely less on labor through many efficiency efforts.
No. 4: Menus will begin to grow again this year as operators look for ways to increase sales potential. Restaurants, with the help of industrial engineering consultants like us, will figure out how to make menu growth more effective and efficient, thus enhancing profitability. Through the optimum design of all the operating parameters, diversifying menus can be easier to execute. This includes designing the most optimum processes and procedures, people deployment, place design, products, equipment and technology platforms. If the menu must grow, then grow it following efficiency in all the operational parameters to facilitate consistent delivery of the customer experience. Efficiency will continue to rule!
No. 5: Pricing pressures will level off. Over the past few years, prices the restaurants charge grew very quickly for a variety of reasons, including supply chain related issues. While these prices will likely not decrease, they won’t continue to grow at the speed they did in 2022, either as the industry becomes more effective and efficient across the board. Restaurants realize they cannot continue to take price to address their eroding profit margins.
No. 6: Restaurants will use analytics more. Many concepts have a lot of data available to them, yet they do not use most of it to help drive business decisions. You can say many operators are data rich and information poor. The key is to convert the data operators have to information that provides actionable plans and use analytics to drive decisions and strategic initiatives, as well as operational excellence at the store level. Analytics will provide you the truth if you let it and that truth will set you free. Right information in the right place at the right time is important to drive the business more optimally.
No. 7: The use of automation will be more widespread. Restaurant leaders must understand the expected impact of automation on their businesses. There will continue to be growth in physical plant automation/robotics devices, but other forms of automation help restaurants with the labor challenges they have.
No. 8: Off-premises dining will continue to be king! Concepts need to maintain their edge when it comes to serving off-premise customers, including those that order via digital means and those that simply want takeout. One challenge in doing so is maintaining the gains in off-premises sales that a concept made during the COVID period as inside sales return. Concepts need to figure out how to optimally do both as they strive to continually enhance unit economics.
No. 9: Successful restaurants will continue to pivot quickly. One huge lesson learned during the last couple of years is that we could pivot on a dime. Keep this behavior as part of your corporate and operational DNA, so that you can quickly gain benefits that the very fast and dynamic market changes may offer. Because make no mistake: change will continue at a very fast rate in the restaurant industry.
No. 10: Don’t go back to analysis paralysis! I don’t mean that you should shoot and them aim to see what you hit, but also don’t aim and re-aim too many times before you do shoot. Be willing to accept failure, but do it fast, have short memory and move on. Recognize when things don’t work as quickly as possible. Make sure that you follow a “fast” and disciplined approach as you continue to strive to be the “Greatest Restaurant/Company on Earth.”
I am bullish on 2023 because when we work together our industry can overcome the most challenging of times. Working together leads to better design solutions that drive better customer experiences which, when done right, leads to profitable hospitality. And shouldn’t that be everyone’s goal?
Here’s to a great 2023!
