Consumer Trends Affecting the Restaurant Industry
Restaurant business models that put the guest/customer and employee first by anticipating and responding to emerging consumer trends reshape and create markets that dethrone incumbent and dismissive brand leaders.
These are some of the trends changing the relationship between consumers and restaurants:
Via drive-thru, self-order kiosks, or other enablers is becoming increasingly important in today’s restaurant industry landscape. In the last 20 years, in the U.S. sales in limited-service restaurants and retail stores and vending have grown faster than average, resulting in increased market shares for these segments (+8.3%, +11.2%). These changes reflect the consumer demand for convenience, which is feeding into LSRs’ and retail stores’ sales.
With less time at their disposal, consumers are relying more on delivery and consumption at home. Globally, close to one-third of foodservice occasions take place off-premise (convenience stores and “on-the-go” snacks also contribute to this). This doesn’t mean the end.This doesn’t mean the end of full-service restaurants, but more and more consumers will dine-out only if it’s worth it as a differentiated experience.
“A Better Way”
More than 80% of Millennials expect companies to publicly commit to doing good. Large restaurant chains are taking steps to be part of this trend that emphasizes corporate social responsibility: Starbucks plans to create 10k eco-friendly stores globally, and is tracking and quantifying its environmental footprint; British delivery aggregator Just Eat is investing in R&D for alternatives to single-use plastics; and McDonald’s.
Digital Marketing Trends Restaurants Can Leverage
Not only do the number of channels available for marketing grow every year, as social media platforms pop up overnight and then disappear just as quickly (still miss you, Vine!), but new technologies, like narrowcasting, smartphone apps, and self-ordering kiosks, all demand their own approach. These are only three of the trends that need to be considered during marketing modernization:
- Social Media turning conversational: brands are engaging with their customers at a new level, not only passively listening but interacting directly. With up to 25% of the marketing budget allocated to social media, large restaurant chains like Wendy’s are getting huge ROIs. In 2017, Wendy’s #NugsForCarter twitter campaign reached more than 3.6 million retweets (more than $7m worth of retweets at an estimated cost of $2k annually).
- Voice Search: with about a quarter of people aged 16-24 employing voice-search, this is another digital marketing trend the restaurant of the future is likely to rely on. Domino’s pioneered voice ordering back in 2014.
AI and Machine Learning: in 2019 McDonald’s acquired Apprente, an early-stage leader in conversational technology that employs proprietary neuroscience-based artificial intelligence tech to create systems that understand and reproduce human interaction. The technology is expected to boost drive-thru order accuracy and speed, and may eventually be of use for kiosks and mobile ordering.
Restaurant Trends Driving Changes to the Investment Thesis
And even though habits might change and trends might shift, the global restaurant industry remains a force.
There is an abundance of cheap capital sloshing around the global economy that’s looking to the restaurant industry eager to invest in the next Yelp, Chipotle, or UberEats; when a company comes along that is potentially disruptive to the global restaurant industry, investors line up to fund the future.
This means emerging brands and new competitive threats can come seemingly out of nowhere and attack incumbent brands faster than they can react.
Restaurant Trends Over Time
We’ve been covering trends affecting the restaurant industry for some time now. Many of the ones we called-in almost a decade ago, like the rise of fast-casual, the share-of-stomach war of groceries vs restaurants, and the need for a new unit economic model are more valid today than ever. These are some of the articles we’ve written for how different trends have been affecting the restaurant industry in the last ten years.
- We called the shifting tectonic plates in the industry (with fast-casual cutting into the market share of QSR and casual dining) and the shrinking box (the need for new restaurant unit economics) in our Restaurant Trends 2013 SlideShare.
- And then in 2015, we wrote about the cannibalization of fast-casual, how Netflix could affect the restaurant industry, and how new unit economics are changing how investors make their decisions. Read it in 10 Trends Reshaping the Restaurant Industry (Restaurant Trends 2015).
- By the time 2017 rolled around, the question on everyone’s mind was how Trump’s presidency would impact the foodservice industry. We published our view on the effects on labor, immigration, trade, and regulations. We could already see back then that America’s Appetite was Changing and how the demands on the restaurant CEO were evolving.
- Restaurant Trends 2018: In 2018 we emphasized digital trends including mobile ordering, augmented reality, artificial intelligence and other tech trends affecting restaurants.
- As an early warning for the global foodservice industry, in late February, we said that Disruption from Coronavirus could be especially significant for the restaurant industry and followed it up in early March with Foodservice Workers on the Front Lines of Coronavirus Outbreak and that caught criticism for laying out the industry effects “without jelly”. Only a few weeks later in an interview with CGTN, it was still met with skepticism. The coronavirus crisis will most likely be the single-most impactful event for 2020 across industries. But other factors are also having a long-term impact on the foodservice industry. These include activist investors (which can have a negative or positive spin), the need for cost optimization, international expansion, and labor models and modernization. We cover all of these and more in a view of how CEO priorities are evolving in 2020.
- The future of foodservice will almost certainly include the growth of venture capital funding, how the scalability of fast-casual will continue to make a dent in casual dining, operating margins decreasing in many markets, and restaurant innovation including automation, big data, machine learning, voice ordering, alternative formats, and more forward-looking foodservice trends.