The smartphone as the new kiosk
There are fewer pieces of technology as debated as the kiosk. While many larger chains like Shake Shack, Yum Brands and BurgerFi have said in recent earnings calls that they are going all-in on the self-order kiosk as a way to combat labor pressures, several smaller brands and tech experts have identified the kiosk as a tech trend that’s on its way out. The “kiosk in your pocket” could take over as the less expensive alternative that lets customers interact with brands, place orders and pay on their phone for both in-person and virtual restaurant visits.
Next year, smartphones are likely to be the most important tool in an operator’s tech stack and will create more efficient and frictionless interactions between guests and operators, and also between employees and managers.
“The best part is that the customer already made the purchase [of a phone] for us,” Brooklyn Dumpling Shop CEO Stratis Morfogen said. “The kiosk is going the way of the fax machine.”
A recession looms
Most economists have predicted a minor recession to transpire in 2023, so this prediction isn’t necessarily derived from rocket science. What does it mean for the restaurant industry, specifically? It’s tricky. This downturn is unlike the recession of 2008–2009 because, simply, consumers and banks have more cash. Should a recession push the unemployment rate up a material amount, consumers will start to rein in their discretionary spending. The sweet spot for restaurants will be maintaining the current demand while a recession eases inflationary and supply chain pressures. If restaurants can also manage to maintain some of their current pricing, things should be somewhat rose-colored, according to MUFG’s Nick Cole. It’s been a very, very long time since this industry has seen rose-colored anything — and it’s due.
TikTok will be more visible real estate than the corner of Main and Main
It used to be that the corner of Main and Main was the best real estate that you could find. But these days, with the use of digital marketing tools and apps like Instagram and TikTok driving discoverability, there is no need to have that prime real estate (and the correlating cost) for your restaurant. According to MGH, a marketing and communications agency, 53% of Millennial TikTok users have visited a restaurant and/or ordered food from it after seeing it on TikTok. Additionally, 38% of TikTok users across all generations — approximately 51.8 million diners — have visited a restaurant or ordered food from it after seeing a TikTok video about it.
The MGH survey also found that TikTok videos have prompted users to travel longer distances for new dining experiences, as well as swayed them to spend more money than they usually would on restaurants. Of the TikTok users surveyed, 30% have traveled longer than they normally do to visit a restaurant after seeing it on TikTok, and 28% have visited a restaurant that was slightly more expensive than the ones they usually visit after seeing it on TikTok.
“What this survey shows is that this once-dismissed social network, TikTok, has completely changed the way people behave, where they spend their time, and more importantly, how they spend their money,” said Ryan Goff, EVP, social media marketing director at MGH. “TikTok truly is a restaurant marketer’s dream come true. There aren’t many other tools we have left in our marketing toolbox that can drive the sort of impact promised by TikTok through this survey.”
Unemployment climbs, for better and worse
Christine Balderas 2018
Predictions of a recession in 2023 are growing as the Federal Reserve continues to inch up interest rates to readjust a historically high inflationary environment. However that scenario fully plays out, labor demand is expected to fall throughout 2023, according to Fitch Ratings. Olu Sonola, head of U.S. Regional Economics, forecasts the unemployment rate increasing to 4.7% at the end of 2023 and peaking at 5.3% in 2024. Higher unemployment rates tend to ramp up applications in the restaurant space. They also, however, tamp down consumer demand for discretionary spending at restaurants. Pick your poison.
CNBC reported in February that tequila could soon outsell vodka in the U.S. It was the second-fastest growing category in 2021, only behind ready-to-drink cocktails, and was No. 2 in total sales volume behind vodka, which has been the top-selling category since the 1970s.
Some beverage professionals expect the agave-spirit to outsell vodka as soon as next year, including Beau du Bois, vice president of bar and spirits of Marisi in La Jolla, Calif., and Puesto, which has nine locations in Southern California and the San Francisco Bay area. He said increased transparency in how tequila is made is adding to its appeal.
The involvement of many celebrities, from Mark Wahlberg to Nick Jonas to Dwayne “The Rock” Johnson, hasn’t hurt, either.
Low-tech becomes a counterpoint trend
While we won’t see this everywhere, there will likely be a smaller, persistent backlash against the wave of digital technology innovation. Restaurants (like mom-and-pop diners, for example) that refuse to get rid of their paper menus and have servers take orders with a pencil behind the ear will become more of a throwback novelty that could see a resurgence next year and beyond.
Blockchain and Web3 take over loyalty
Casey Terrell, chief marketing officer for the 300-unit, Dunwoody, Ga.-based Krystal, said his company is looking at blockchain technology — popularized with the plethora of cryptocurrencies — and Web3 for Krystal’s loyalty offerings. That includes using non-fungible tokens (NFTs). “We need to figure out Web3 just in general, and NFTs as something valuable for our customers,” Terrell said, “instead of the traditional model of you buy something, you get points, you trade in.”
Starbucks is one brand that has forged the Web3 territory in loyalty apps, and more brands are looking to find similar success. Leveraging tools like NFTs and the metaverse for loyalty programs allows brands to create more exclusive and interactive experiences for their VIPs, thus providing more appeal for brand loyalty.
M&A activity accelerates
By comparison to 2021, 2022 was a slow year for restaurant mergers and acquisitions, as well as for initial public offerings. That is likely to change in 2023 should inflation start to fizzle, according to Peter Cadigan, senior analyst at consulting firm RSM U.S. “There’s dry powder on the sidelines and [investors] want to put that to use. We’ll reach a new equilibrium where both sellers and buyers mutually understand a new M&A environment and we’ll see it pick up again. The environment is ripe for consolidation because operators better understand the benefits of scale now,” he said.
Hybrid ghost kitchens
The lines will continue to blur between ghost kitchens/virtual brands and traditional restaurants. As NRN previously reported on the new generation of ghost kitchens that’s coming out from the shadows, it’s very likely that restaurants will take a hybrid approach to operations, borrowing elements from both “regular” restaurants and delivery-only brands. The hybrid ghost kitchen of the future might look something like Oomi Kitchen in Dallas or Nimbus in Brooklyn: a place that you can find on a map, physically visit, interact with staff, and even attend private events. On the flip side, it has no dining room and customers order food online either for delivery or for pickup in person, possibly via temperature-controlled lockers.
“It’s much more joyful and hospitable that way instead of walking into the back of a spooky warehouse,” Markus Pineyro, founder of Oomi, told Nation’s Restaurant News in an October interview.
Former industry workers don’t return — but foodservice labor still trends upward
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The 500,000 or so employees who have yet to return to the industry from pre-pandemic times may never come back. The projected labor force growth is lower than expected, long Covid is keeping millions of people out of the workforce, people are opting for more flexible gig work, and legal immigration has slowed, said Austan Goolsbee, former chief economist with the Obama administration.
But Goolsbee also said consumers are shifting back to service versus goods spending, which will likely move the labor market in the same direction. So, the industry may not get those 500,000 workers back, but it should make some gains. It’s also worth noting that legal immigration trends are starting to bounce back to pre-pandemic levels, according to the Pew Research Center, which is a big deal considering nearly one-fifth of the restaurant industry’s workforce is foreign-born.
Emerging brands embrace nontraditional growth
Emerging chains like Locali are expanding through nontraditional means like food halls for maximum growth with minimum effort. Locali is partnering with Local Kitchens to grow through its chain of food halls in several U.S. cities, and the California deli brand isn’t alone. More small brands across the country are joining the ranks of the major chains and growing through airport locations, colleges and universities, and other nontraditional opportunities because the space is open and it’s inexpensive to operate.
Kiosks make a comeback
Kiosks are certainly not a new trend, having first been introduced to restaurants over a decade ago. But it is somewhat surprising to see them reemerge as a popular tech at major restaurant chains that are looking to further digitize and streamline their ordering processes. Shake Shack, KFC and Popeyes are just a handful of the brands that have recently announced their intentions to roll out more kiosks.
Value deals look to increase foot traffic
Peter Boivin, vice president and head of the restaurant industry segment at marketing solutions firm Vericast, said foot traffic will be important in the year ahead as companies look to stem the loss of customers due to rising prices.
“With almost half of consumers planning to cut restaurant dining in the next six months, I expect that casual and midscale dining to be hit the worst by the potential recession,” Boivin said. He added that deal promotions across multiple channels will help operators attract customers. Boivin cited statistics from Prosper Insights that indicated 71% of purchase influence for diners comes from print and digital media.
West African cuisines
Kith and Kin
Public relations firm Af&co and sister consumer research firm Carbonate say in their latest annual trends prediction report, “West African food in general and Nigerian food in particular are attracting a wider audience and gaining prominence and prestige where it was once overlooked and under-represented.”
Indeed, The Culinary Institute of America’s Worlds of Flavor conference held in Napa, Calif., in November was titled Africa and the World and focused on the influence of African cuisine on the Western World. Much of that influence came from the slave trade, primarily shipping West Africans to North America and Central Africans to South America. The influence can be seen in much of Southern cooking, such as gumbo (a Central African word for okra), jambalaya and dirty rice, both of which are arguably variations of the West Africa’s Jollof rice, Hoppin’ John, black-eyed peas, barbecue and much more.
This interest is being spurred on by Black chefs in the U.S. who are seeking out their own roots and more freely expressing their heritage.
Carbonate points to jollof rice, the spiced grilled meat suya, and pepper pot soup as standout items we’re likely to see pop up on menus.
Digital subscription programs
It’s like Netflix but for your stomach. The subscription trend has permeated nearly every aspect of American consumerism, from music and movies to printers and the seat warmers in your car, but the restaurant industry has been noticeably slow to adapt.
Next year, we should start seeing subscription programs for food halls (both physical and virtual) and mid-level chains. Think of it as yet another step up from the punch-card rewards cards of yesteryear. Restaurants will begin experimenting with subscription programs for their most loyal customers that charge a flat fee for a certain amount of meals per month.
Premium food at exclusive venues
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Although restaurant chains report that lower-income people are cutting back on spending, the wealthy are doing just fine and luxury ingredients such as wagyu beef and caviar are enjoying increased sales. “If you want dinner tonight at a big-city upscale restaurant, forget it ... they’re overbooked,” Baum & Whiteman report. “Some have hundreds of hungry souls on waiting lists. The more expensive the restaurant, the longer the list.”
Meanwhile, they report a surge in private clubs with extremely high membership fees — up to $500,000 annually. “Entire mansions are converted into multi-level clubs ... multi-level meaning four stories or more, with accessibility to certain spaces based on what you’ve sunk into your initiation fee,” they said. “On top of that, restaurants are opening as members’ clubs. And launching NFTs, the purchase of which may entitle you to three reservations a year, or a prime table, or just about anything cooked just the way you like it ... if you can understand what an NFT is.”
Flexibility becomes critical to recruitment and retention
Restaurants are competing over a smaller labor pool against both a growing gig economy and an all-time-high allure of entrepreneurship in the wake of the pandemic. They won’t stand much of a chance without flexibility, and more restaurants are adopting a nimble mindset accordingly — implementing technology that enables team members to swap shifts directly, experimenting with three-and-four-day workweeks, offering unlimited vacation time and more.
Smaller dining rooms, bigger kitchens
With off-premises sales skyrocketing, restaurants will continue to shrink their stores and focus less on dining rooms.
“What we're seeing our franchisees do is think more about the drive-thru and to scale down the dining room,” said Sam Siddiqui, president of Popeyes Louisiana Kitchen. “Pre-pandemic, the average Popeyes restaurant would have about 75 seats. Now what we're seeing in our pipeline is the average restaurant has about 25. On the flip side, we're building a lot of double-thrus.”
Something that is growing? The kitchen. To facilitate more off-premises sales — and, in some cases, to incorporate virtual brands — many chains are expanding their back of house.
As digital sales grow, so go chains’ geographic footprints
Online and mobile ordering have made restaurants instantly available to consumers — so long as they’re able to fulfill orders. Expect restaurants to broaden their geographic footprints as they look to connect with the growing legion of digital customers.
Sam Siddiqui, president of Popeyes Louisiana Kitchen, said digital sales are about 20% of Popeyes’ business. He thinks that share will continue to grow in the years ahead. “Our biggest barrier is convenience,” he said. “So we're trying to open as many restaurants as possible and get closer to our guests in our digital business. I think we're seeing a lot of traction in both those spaces.”
Delivery expands the definition of a restaurant
The concept of a restaurant is expanding, even as dining rooms shrink. With the food delivery revolution that peaked during the pandemic, restaurant operators are starting to wear many hats, from offering CPG products to transforming into multimedia brands on social media.
In our on-demand-centric culture, you can order burgers from your favorite local restaurant, a six-pack of beer, and toilet paper all in one order. The lines between grocery, c-store, and restaurants are blurring thanks to the rise of the third-party delivery platforms. This gives restaurants an opportunity to be more than just a place to sit down and have a meal. Restaurant operators like Shawn Walchef of Cali Comfort BBQ are branching out into CPG, podcasts, and social media to expand their voice and audience through new means.
“The restaurant P&L is going to look a lot different in five years,” Walchef said. “Some of the best barbecue brands in the country are doing so well on [shipping platform] Goldbelly. … Chefs can have podcasts, TV shows, spices that you can buy online. It changes what a restaurant operator really is.”
Baum & Whitemen say this was the “nut of the year” for 2022, and the firm expects it to continue its spread on menus. “We’re seeing more and more pistachio nuts on menus … replacing pine nuts in pesto; as an ingredient in inventive Mexican moles; with cheese as a filling for tortellini.” They report that it’s also being added to pastries and being used with mortadella as a pizza topping.
Benefits get way more appealing
Restaurants are also pulling out all of the benefits — beyond just higher wages — to promote recruitment and retention. Some examples include immigration reimbursement, child and elder care coverage, mental health services, college tuition support, same-day pay options, employee resource group offerings and more — benefits we wouldn’t have dreamed about in this industry just 20 years ago. In light of restaurant workers deemed essential in the pandemic, these benefits are part of a much-needed evolution toward promoting the industry’s labor opportunities as a career path, not just a starter kit. This evolution will continue in 2023, the NRA’s Riehle predicts.
Off-premises channels reshape the restaurant prototype
Sweetgreen’s latest store prototype, a test that it announced during its Q3 earnings call, is a fully autonomous restaurant in partnership with Spyce, the fast-casual company it acquired in 2021. “These restaurants will serve our food with even better quality, perfect portioning, [and] faster speed and will create a more consistent customer experience, all while elevating the role of our team members,” CEO Jonathan Neman said on the Q3 call.
This is in addition to Sweetgreen’s prototype that opened just last month in Schaumburg, Ill., that boasts pick-up and delivery only, along with a drive-thru. It’s a transformative strategy for the fast-casual salad brand, one that epitomizes the direction of the restaurant industry: Brands are streamlining their footprints to focus primarily — and in some cases entirely — on off-premises sales. Just look at casual-dining chains Chili’s and Applebee’s; the former introduced a delivery-and-carryout-only store, while the latter is adding a drive-thru window to some locations. Then there’s Subway, which is rolling out sandwich vending machines.
Outdoor dining stays critical to restaurants post-pandemic
Cities across the country created outdoor dining zones in parking lots and otherwise unused space to survive the pandemic — and it’s here to stay. Many localities have made the new spaces legal (along with cocktails to-go) and are embracing the new street-side dining vibe. Restaurants are even happier with this, designing elaborate outdoor spaces beyond just heaters, tables and chairs.
Optimism abounds among brands big and small
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Small concepts that don’t have the ability to scale and establishments that have drained their liquidity are in precarious positions as the economy slows, RSM’s Cadigan said. As with economic downturns that have come before this one, the big are only likely to get bigger. That said, there is a fresh sense of optimism that perhaps didn’t exist before because restaurant businesses big and small navigated unprecedented uncertainties with COVID and emerged with stronger, more creative business models. A recent Bank of America survey found that nearly 70% of business owners expect sales increases in the new year, while 52% plan to expand.
Possibly part of the broader nostalgia trend that is seeing Salisbury steak and baked Alaska appear on menus after decades of absence, this grandfather of bologna is “suddenly a signifier of sophistication and respectability,” Baum & Whiteman report. They say it is being mixed into meatballs “where it adds a new flavor dimension,” and is topping pizza and appearing on increasingly common charcuterie boards. It’s also appearing as an upscale addition to deli sandwiches, the firm reports.
Artificial intelligence will be more functional, less cute
At the 2022 National Restaurant Association Show, the technology pavilion was rife with roaming server robots with smiling interfaces and the ability to roam restaurant floors with trays of food and drinks. While these robots are supposed to help with labor shortages, the real work on AI in the hospitality industry is being done behind the scenes and will be decidedly less cute than a smiley-faced android server. AI and kitchen equipment automation will be more useful to restaurants in the long run than robots.
“At one time, we thought robots would change everything, but it wasn’t as easy as it sounded,” said Josh Boshard, COO of Savory Fund. “Machine learning, artificial intelligence, and predictive analytics is where we’re heading, and that’s going to be in the processes side of things, and not so much about robots that can scoop beans into a tortilla.”
Sky-high demand for restaurants
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Even if we do enter a recession with a slight uptick in unemployment, consumer demand for restaurant usage is expected to remain high, according to Hudson Riehle, SVP at the National Restaurant Association. He expects restaurant sales to continue to advance despite continued uncertainties, in part because of that demand and in part because “restaurants have become more essential to consumers’ lifestyles throughout the past several decades.” As it turns out, two years without guaranteed access to restaurants is too long for the American consumer. There are also societal factors providing a tailwind for the industry, such as the return of travel and tourism.
Urban areas rise from the ashes
Critics wrote off downtowns when the pandemic started, noting that the work-from-home trend would kill business districts and install suburbs as the place to be. But cities have survived and are once again thriving. Even as brands like Shake Shack and Sweetgreen build drive-thrus in the suburbs, those same chains are now zeroing in on urban areas once again. Sweetgreen’s autonomous Infinite Kitchen is intended for urban real estate, and that company is also ramping up growth of its Outpost catering program. Panera is also moving into the city, with new pick-up-only locations in New York City and Chicago.
Loyalty programs level up
Expect more restaurants to roll out loyalty programs, and for existing programs to become much more sophisticated. This is not only driven by innovations in Web3, but also by the fact that millennials and Gen Z are “more willing to do something or go somewhere if they have a positive experience,” said Alex May of marketing firm Movable Ink. “Gone are the days when a simple points program was enough to stand out amongst competition.”
Restaurants will need their loyalty programs to be more interactive via rewards, personalized deals, order recommendations and special events. May said marketers in the year ahead will likely “capitalize on evolving technology to create better in-app experiences, such as AI or even VR/AR [virtual reality/augmented reality].”
International food and restaurant consulting firm Baum & Whiteman says this Japanese practice is gaining a foothold in other cuisines, too.
“Chefs are … dry-aging fish in much the same way you’d age a rack of New York strip steaks,” the firm reports. The process firms up the texture, concentrates the flavor, eliminates fishy odors and increases the fish’s umami.
The reduced moisture also improves shelf life, it says, adding that more chefs are brining their fish, too.
Crypto will be dropped from NFTs
When NFTs first began trending in the restaurant industry last year, customers had both a steep learning curve and a steep financial investment curve. Although restaurants are making their way into the metaverse — especially larger brands — they had been handicapped previously by the need for cryptocurrency. Even though NFTs, blockchain, and the crypto community have been making headlines for the past couple of years, the average person does not really understand what they are or how they work.
The more recent NFT programs from large companies like Starbucks are offering the best of the virtual metaverse experience to customers with no cryptowallet needed. One might think, “if you can buy NFTs without cryptocurrency, then isn’t it just another rewards or subscription program?” Yes, but NFTs without crypto are the next generation of the loyalty program and can reach a much wider audience that way.
Restaurant expansion strategies slow way down
The anticipated economic downturn isn’t likely to cause as many restaurants to close as did during the pandemic, but it will very likely keep the pace of growth slow, particularly as business loans become more expensive. “The reality is that it’s hard to build restaurants right now. There is not a ton of growth because operators are just battling the middle of the P&L. They’re managing through it, but it does take some patience before these things realign. These economic cycles can take a few years,” said MUFG managing director Nick Cole. In other words, patience is a virtue in 2023.
Af&co see koji, the Japanese mold used to catalyze the making of sake and miso, as the latest ingredient in the whole fermentation trend it said started with the New Nordic culinary movement about a decade ago.
“Koji, a Japanese product traditionally made from fermenting rice, barley, or soybeans — but it can also be made from other ingredients containing both starch and protein — plays a starring role in many of these [New Nordic] restaurants,” Af&co reports.
The PR and consulting firm said that “different flavor bases, ingredients, and approaches are coming into play as more chefs as well as bartenders are taking to the process as an appreciation for the flavors that come from fermentation is spreading across cultures, cuisines, and service categories.”
Smartphones as consumer engagement
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Some 52% of QSR sales are projected to be digital by 2025, according to marketing firm Movable Ink. As such, brands will need to find new ways to engage and retain consumers, said Alex May, associate director for travel, hospitality and foodservices at the New York-based firm.
“Utility and convenience will be key,” he said. “For example, to make customers more comfortable with making purchases, they should highlight all relevant details (price point, serving size, deals, etc.) upfront. The more comfortable someone making a purchase is, the more likely they will do it. What better place than in a mobile app?”
Af&co and Carbonate say chefs have long used mushrooms as a meaty alternative to actual meat, and photogenic maitake mushrooms, also known as hen-of-the-wood mushrooms, whether roasted or fried, “have been taking the place of yesteryear’s grilled portobellos.”
They say “the craggy surface makes for an explosion of texture, while also capturing any bit of flavorful sauce or dressing. It may not taste like meat, and it’s not actually trying to, but it is incredibly satisfying.”