The answer would have been vastly different nine months ago; the coronavirus gave birth to a new restaurant era.
As we near the end of 2020, the state of the restaurant industry and noncommercial foodservice has changed dramatically compared to just one year ago. The coronavirus continues to dramatically impact how Americans create and source meals.
Prior to 2020, food expenditures were divided fairly evenly between grocery outlets and restaurants. Americans had been increasing their use of restaurants as the economy improved and job growth continued. With more money in their pockets, Americans took advantage of continued restaurant unit growth, new formats and interesting new locations. Consumer restaurant use was further enabled by new technology which made online food ordering easier than ever. And, if we did not want to leave home to pick up our meal, the ever-expanding reach of third-party delivery services enabled more Americans to enjoy the convenience of restaurant-quality food from the comfort of their couch.
Today, many Americans have shifted their food purchasing back toward grocery and mass merchants as we now prepare a majority of our meals at home. According to the National Restaurant Association, approximately 100,000 restaurants have permanently closed since March 2020. Forecasts call for thousands more restaurants to close in coming months as government support ends and the pandemic drags on.
Closures continue to impact fast-food establishments as well as full-service outlets, c chains and independents, too. In other words, this economic crisis does not discriminate.
The top-performing units in the industry remain fast-food pizza chains, which led the industry in technology innovation and delivery speed for many years. Regardless, the fact remains that the restaurant industry will likely never return to the unit counts and sales rates it had been experiencing prior to the coronavirus. Too much has changed in American lives — specifically, several factors which contributed to the historical strength of the restaurant industry have been affected. The most notable changes include the vast increase in people working from home, the growth of supermarket and mass merchant delivery services and a decrease in disposable income among a sizeable portion of the population. Each of these factors diminish the demand for meals sourced from restaurants.
Rebuilding the Base
Unfortunately, until Americans feel safer traveling outside of their homes, and local municipalities reduce current seating restrictions, restaurants will have a difficult task bringing customers back inside their doors. Food retailers of all sizes learned from restaurants and implemented technology that makes ordering for delivery as easy as ordering from a restaurant. With Amazon as a model, many supermarkets have created systems that enable customers to order food and have it delivered the same day, if not within a few hours.
The ability to have food delivered from grocery outlets and mass merchants so rapidly has overcome one of the primary advantages once held by restaurants: convenience. As such, what changes do restaurants need to make in the next few years to rebuild their customer base and a financially viable business? What does the restaurant of the future look like?
A few distinct factors will differentiate the successful restaurants of the future from many restaurants today. It must be said, however, that much of what restaurant owners and franchisees need to accomplish builds upon initial measures already taken by numerous such operators since March 2020. The successful restaurant of the future will have owners and managers who wholeheartedly support the need for technology and ongoing safety measures that protect customers and staff. The coronavirus will not disappear over the next few years. Successful restaurants will be the operators that best work to deal with and overcome the difficulties presented by the continued presence of the coronavirus within the U.S. population.
So, what actions will successful restaurant operators take over the next few years? First, restaurant operators will implement more technology, both in the front of house to make customer interaction more seamless, and in the back of house to make the food preparation process more efficient.
The front-of-house technology will include access to Wi-Fi for all guests and employees. Americans have access to Wi-Fi almost everywhere they travel outside of their homes, including cars, planes and subways. The expectation is that this service is available everywhere because being connected 24/7 has become the norm. Without the availability of Wi-Fi, patrons cannot share photos of their food, message their friends or keep up with email. Luckily for operators, the cost of Wi-Fi continues to drop, making the service more affordable for operators to provide for customers. Access to Wi-Fi among FOH staff enables use of tablets and handheld devices to place orders and speed the check payment process. Both of these enhancements should serve to increase customer satisfaction and encourage return visits.
If operators have not already added off-premises meals to their offerings, they will need to do so in order to survive in the coming years. The coronavirus accelerated the shift from eating on-premises to carryout, drive-thru and delivery. It is likely this shift in consumer behavior will not reverse in the future, as Americans have become accustomed to the increased speed of obtaining their food after ordering online.
For example, as of the end of the quarter ending June 2020, 42% of all restaurant transactions were via drive-thru, according to a study by NPD Group released in September 2020. This represented a 26% growth rate compared to year ago. It also represents the growing strength of fast food relative to the full-service sector. Restaurant delivery has also grown at tremendous rates as more operators now offer this service to customers. Delivery growth has derived from both chains and independents, fast-food outlets as well as full-service establishments.
Importantly, carryout has become an area of opportunity for full-service operators to better compete with fast-food outlets since many municipalities continue to restrict on-premises seating. Digital technology continues to rapidly enable all off-premises solutions. Apps have been modified to allow for complete no-contact ordering, payment and delivery. Many apps now also enable users to order for pickup at a specific time, minimizing the amount of time customers wait in line or in a lobby area. The most efficient apps save order favorites and credit card information, speeding the order process and making the entire transaction more efficient from start to finish.
As the result of Americans becoming more accustomed to carryout and delivery as an alternative to dining on-premises, operators will have to upgrade their websites and mobile apps to not only provide menu and calorie information, but also to store location, pickup instructions and geofencing capabilities to deliver micromarketing efforts. Combined, these enhanced capabilities lessen contact with restaurant staff and the wait time required to pick up food curbside or at a specified counter location inside the unit.
If an operator offers a delivery option, a growing number of restaurants will choose to handle this with their own staff to maximize the margin of each order. Only when building a delivery team is financially impossible should an operator consider use of a third-party delivery service because of the high fees paid to delivery providers. Over the coming years there will be further consolidation of delivery services in the U.S., which will lessen competition and enable remaining providers to maintain their current fee structure.
BOH Tech Ahead
Back-of-house technology will aggregate meal orders from all sources on a single screen. Order accuracy will be higher because language barriers, from either the customer or staff, will no longer come into play. Restaurants will sequentially fill off-premises orders, with inputs given by customers providing enough detail to ensure meals are ready when guests arrive to pick up their food or delivery staff is ready to head out.
Back-of-house technology will enable the meal prep process for on-premises diners to progress at a different pace than off-premises meals require. Finally, when on-premises diners are ready to leave, they will use contactless technology to pay for their meals. No more waiting for staff to generate the bill and then take a credit card to a station to complete the transaction. Again, this payment technology exists today in the form of tableside tablets, apps accessed via cell phone or handheld card readers. The industry need not wait for the development of this technology. The primary benefits of this operational enhancement are saving time for diners and staff and limiting interaction between staff and guests, thus reducing potential spread of illness.
Back-of-house technology will also take the form of new multifunctional kitchen equipment. By performing more than one function, this equipment will allow operators to make more effective and efficient use of their kitchen space. Cooking equipment will be able to bake and broil food in the same unit. Combi ovens will continue to cook food at a wide range of temperatures. Operators will store food in equipment which will serve as either a refrigerator or at lower temperatures, more like a freezer.
Operators may require less back-of-house storage space for food. To offset labor challenges, they will order more food components in a partial or fully prepared state. As a result of operators streamlining their menus, they will order and inventory fewer food items too. This savings will help to offset the potentially higher cost of newer, enhanced kitchen equipment.
Despite the advances being made in the development of a vaccine, the risk of contracting the coronavirus will unfortunately remain a threat. In the restaurant of the future, operators will ensure they continue to do everything possible to keep staff and customers safe so as to minimize the opportunity to spread the disease. To customers, operators accomplish this in ways clearly visible to anybody walking in the door.
In the seating area, operators will continue to space tables as local ordinance requires. Operators will continue to clean tables, menus and counters on a regular basis, and hand sanitizer will remain prevalent throughout the dining area. All parties that choose to eat on-premises will receive a specific seating time in order to minimize interaction with other guests.
Operators will keep using a schedule to clean bathrooms and will ask customers to not line up to use restrooms. Restaurant staff will continue to wear masks and gloves — all of the time. Every unit will have signage visible to customers regarding the steps being taken to keep them safe. The restaurant’s website will feature similar messaging so those still deciding where to purchase a meal will feel safe utilizing that establishment.
Many current safety measures, including masks and gloves, will continue for staff so that they feel comfortable working at a location. Other measures will consistently include staff having their temperatures taken when they arrive at work and answering a daily questionnaire about their health.
The restaurant of the future will feature reasonable space in the kitchen so that staff have the opportunity to work at a safe distance from co-workers. It also may entail organizing staff into fixed teams in order to minimize exposure to other team members who may be carriers of the virus. Just like a restaurant’s customers, staff will be reluctant to return each shift if they are not comfortable; they want to remain healthy while on the job.
The successful restaurant of the future will install and enhance existing technology and procedures. These changes will take place in a growing group of restaurants designed with a smaller footprint than many units today. As a result of lower levels of demand for on-premises eating, many operators are downsizing their front-of-house space. For fast-food operators, increases in counter space used for customer pickup orders and third-party delivery services often accompany reduced seating space. In suburban and more rural areas, improved drive-thru capacity often is a component of new unit construction. Better technology continues to be more affordable for more operators, making for an overall better customer experience. Enhanced safety measures encourage more customer visits and can reduce staff turnover.
Technology and safety procedures operating in more efficiently designed units work hand in hand. In the long run, the combination of these factors will greatly improve the opportunities for operators to remain financially strong, enabling them to stay in business long term.