The restaurant industry is expected to pass $1 trillion in annual sales this year for the first time and, after four (exhaustingly) challenging years, we’re hearing the word “normalize” more frequently on earnings calls, amid conversations and everywhere in between. During a recent presentation at the Restaurant Leadership Conference, Technomic’s Joe Pawlak and Rich Shank called 2024 the year of “reality reset.”
“The last four years we’ve been dealing with abnormal situations; sales dropped dramatically, then spiked, then they were down, then they spiked again. Now there are more normal patterns. Same thing with inflation. Now there is a little moderation. This year, we’re going back to reality, which is a pre-pandemic mindset,” Pawlak said.
No doubt we should celebrate the resiliency of this industry four years after a devastating, once-in-a-lifetime event. That said, it’s also important to be pragmatic. By no stretch of any imagination are things back to “normal,” given inflation, high interest rates, labor shortages and costs, insurance costs, energy costs, and so on and so forth.
All these factors have contributed to a sort of redefinition of “growth.” Sure, unit counts continue on an upward trend, though they remain below pre-pandemic numbers. Sales also continue moving in the right direction, though they’ve been driven mostly by higher menu prices that have, frankly, started to repel some consumers. All of this sets up some uncertainty about what’s next and how to get there.
“The previous viewpoint was more units equal more dollars at the exit (for private equity). But you can’t depend on linear growth anymore. Now it looks more like an octopus. You have to have modular, catering, delivery, nontraditional. We’re building brands to survive outside of four walls,” said Lauren Fernandez, founder and CEO of investment firm Full Course. “Brands of the future will need to exist in multiple parallel channels.”
Growth is no longer a tidily defined concept, in other words. Some operators are focused on growing their four-wall economics, adopting more efficiencies, adding revenue streams like retail or merchandise, and so forth. Others are looking at unit count growth but approaching it with more discernment based on market or with smaller prototypes. Others yet are growing through mergers and acquisitions, striving for increasingly critical economies of scale.
An important takeaway from this “octopus” is that any growth is better than no growth (or opposite of growth), no matter where it may come from. Let’s take a closer look at what growth means now amid this “reality reset.”
What does “growth” mean for restaurant businesses in this “new normal”? Find out throughout the Growth Report: