The restaurant industry is in full transformation.
It’s looking for new and better ways to handle changing customer preferences, rising food costs and crippling staff shortages.
What innovations will stick around when the air clears up again, and why?
It is not a pandemic.
COVID-19 delivered a massive blow to restaurant and food service operations. No doubt about it, but we’re still here as an industry.
Some of the innovations turned out to be temporary patch-ups, while others will still be around when the decade ends. This means that the drivers for change are deeper than a social disruption, however deep that disruption was. And that something else is fuelling innovation. If we zoom out a bit, we get a clearer picture and see an industry that has been reinventing itself for years.
And the root causes for these innovations are:
Running a food business feels apocalyptic even without the tidal wave of a pandemic crashing down on you.
That’s why forward-thinking restaurant leaders have been rethinking menus, service models, inventory management practices and general strategies long before a virus hit the world. They will tell you that the innovations we see today, were already in the making, but their implementation was not planned until 5 years later.
In this sense, COVID-19 was more like a huge engine for change, an accelerator for an already underway evolution.
With that in mind, let’s see which developments made the list.
There are two underlying currents. Actually, it’s two questions:
Let’s start with the obvious: online ordering went through the roof.
It is not that people don’t like dine-in anymore. That is still a precious experience. The issue sits at the other end of the spectrum. People want to invest far less time in preparing a meal than they used to.
Food delivery sits halfway on the line connecting shopping for food and restaurant visits. When you are hungry, a meal is only a click away. There is no going to shops involved, no standing in line, no making reservations or cleaning the kitchen.
In short, it’s about convenience, not experience.
It’s not going anywhere.
People are glad to leave the house and will always seek each other’s company. Nothing beats the experience of being at a restaurant.
But when it comes to satisfying the need for food, customers now have a range of options. A prepared meal doesn’t have to come from a traditional restaurant anymore.
Take the rise of ghost kitchens, which we discussed in our restaurant trends article. Ghost kitchens could create a 1 trillion dollar global opportunity by 2030, according to Euromonitor. To be clear, that is 1.000.000.000.000 dollar.
There is no arguing: the demand for delivery is here to stay.
Is delivery a new thing? Not at all, but the thing that changed is that now everyone is aware of its convenience, grannies included. And that is not going to change anytime soon.
Okay, with that out of the way, let’s dig into the individual trends. In no particular order, here they are.
Food service businesses are pivoting their operation and service models.
With the most challenging parts of the learning curve behind them, some of these new channels now provide stable revenue streams. And growth opportunities.
Takeout, delivery, subscriptions and meal kits; the foodservice industry is covering ‘new’ ground. All segments do so, QSR, fast-casual, FSR and all else.
(Coffee shops take the lead in the quest for recurring revenue. Also, check out this frying pan pizza kit.)
Not all new channels will generate new revenue. In part, they only redistribute existing income. That is not a bad thing. It means these businesses are adapting to changing customer expectations.
If last year showed us anything, it is that agility is critical. Putting all your eggs in one basket no longer makes sense for an industry where a few rainy days can plummet footfall.
To diversify is to thrive. Mind you, diversifying revenue sources is not like flipping a switch. It takes time and energy but is well worth the effort.
Rethinking strategy, product and operations opens a window to improve procedures, to offset expenses, and to outfox the competition.
Grocers add ghost kitchens to their arsenal.
Deloitte says about the impact of COVID19 on grocers and food retailers:
“They are responding to an unprecedented demand that strains the entire ecosystem. Customers from all demographics, but especially those over 50, have shifted to digital and delivery, ushering in a new normal for food retail that may become permanent.”
Supermarkets have been inching towards the foodservice industry for decades. Convenience is the main driver.
Grocers always had a range of products that cater to customers looking for an easy meal. Think of meal kits, ready-to-heat and ready-to-eat products, and even dine-in in some cases.
The next logical step is to provide chef-prepared, on-demand, home-delivered meals.
Besides, the age-old supermarket model (you go to a place to buy your groceries) is losing steam. It doesn’t offer much opportunity for growth anymore.
Adding a cloud kitchen to a supermarket makes perfect sense. Ask Kroger and Ahold Delhaize for example. They both launched delivery kitchens last year.
Think about it:
These are all critical elements for a successful cloud kitchen operation. It makes it all the more likely that in 2021 grocers will become a fierce competitor in the delivery market.
“Restaurant tech investment will be all about the back-of-house.”
Sounds like something our sales reps would say, right? After all, digitising the back-of-house is what Apicbase does.
Except, it is not anyone from Apicbase who said it.
It is the headline of an article by The Spoon journalist Jennifer Marston. She explains:
“Restaurant tech investment reached new heights, but the bulk of that went to software, devices, and other tools meant to power the front of house. By contrast, we will see that balance shift. This time next year, I expect to be writing about the vast amount of investment funnelled into making the back of house safer, more efficient, and more automated.”
Forbes also noted:
“One thing sure stands out: there has been a notable shift toward a growing number of solutions focused on back-of-house operations and systems (versus guest-facing solutions).”
In the intro, we list the main drivers for innovation in the restaurant industry. High expenses and operating costs are at the top of that list.
Automation, efficiency, and control are the keywords for this section.
Back of house tech provides the insights needed to streamline production. Plus, it offers a firm footing for growth and upscaling.
And because workforce turnover is high, the automation aspect appeals to many foodservice chains.
A restaurant’s back-of-house has countless moving parts. Knowing where all the money goes is challenging without the right tech.
Think of how a small mistake in product development impacts purchasing, overstocking, food waste and food cost.
Accurate data about the production process helps to optimise recipes, menu engineering and procurement. And boost the bottom line.
For all these reasons, investments in restaurant tech are surging. Restaurant IT budgets have doubled since the pandemic, now accounting for 7%-10% of revenue, says Bank of America. According to Square, 54% of restaurants plan to spend more on technology in 2024. In another study, 46% of respondents said that business intelligence will be the top technology investment in 2024.
Recommended Resource: How to Choose the Best Kitchen Management Software for Your Multi-Outlet Food Business
Building a restaurant’s tech stack comes with an unwanted consequence: data silos.
Information sits in one system and can’t translate to another. And, since the restaurant industry became a data-driven industry, almost overnight.
That has become a real problem.
EPOS, online orders, purchase orders, inventory counts, accounting, dietary information, menu engineering, kitchen tech – there are so many apps running in the background, and they are churning out so much info that it becomes hard to make sense of it all.
Organisations end up with stacks of valuable but unrelated information. Try and find cost-reducing or revenue-boosting insights in there.
But also, it undercuts the need for traceability and predictiveness [to identify potential sources of cross-contamination and forecast purchasing needs].
That is why we believe the industry we’ll move towards more solid tech ecosystems.
A single source of truth is a system that connects the dots between an organisation’s data sources. It is a platform capable of capturing the information, making sense of the data and sharing it group-wide.
We expect to see a more holistic approach to technology because so many people in restaurant organisations these days rely on real-time data.
Recommended Resource: How Hotels are Benefiting from a Single Source of Truth for F&B Management
Think about an F&B manager who uses the stock and sales data to optimise procurement. What if part of that information is locked in a spreadsheet on the executive chef’s laptop. Then purchasing becomes a guessing game, which leads to over, under and no stocks.
Other good examples are the allergen and nutritional values reports. The product development team will make the reports. That information has to make it to the front-of-house staff and customer-facing apps.
For a multi-unit operator to display allergen information at every location is hard, but is easy when data travels flawlessly throughout the company. And because recipes, menus and suppliers change all the time, access to real-time data is absolutely crucial to avoid incidents.
Off-premise business models are still evolving. Different models crop up. Most won’t survive.
The off-premise model, nonetheless, is likely to become dominant. It is easier to maintain and cheaper to run, even in a future where social distancing is no longer necessary. Ghost kitchens are part of that trend.
If you ask us, two ghost kitchen models will take the lead:
A ‘hub and spoke cloud kitchen model‘ has several variants — single brand, multi-brand, shared kitchen, and so on. All have a centralised production unit where most of the cooking happens. And pop-up locations where staff gives the final touches before pick-up.
A ‘multiple virtual brand model‘ is a set up where one business runs several brands (generally different cuisines) from a shared kitchen space.
Why these two? The two main reasons are:
Restaurants are reducing their menus to streamline operations amid the coronavirus pandemic.
You could call it a covid patch up, but it isn’t. Streamlining operations is necessary even when there is no pandemic.
Menus have been shrinking for a long time. It makes no sense to maintain a 12-page menu when 80% of sales come from only 16% of menu items.
Fast-casuals have small menus and were thriving before the pandemic. It is no surprise that when the foodservice industry had to pivot, fast-casuals could adapt more easily (careful, we’re not saying it was easy). Agility and a lean operation are at the core of this business model. That is why we foresee growth for fast-casual restaurants when governments lift covid restrictions.
Maybe restaurants were hesitant to shrink their menus before, out of fear of putting off loyal customers, but we don’t expect they will turn back the clock when this is over because the benefits are huge.
Big menus equal big CoGS. The importance of menu-engineering will reach new heights.
The fact that people are health-conscious is a usual suspect on restaurant trends lists.
Then why are we talking about it, again?
Two reasons:
Besides, all the major QSR chains are investing heavily in plant-based meals.
Yum!Brands for example – the parent company of KFC, Pizza Hut, Taco Bell and The Habit Burger Grill – highlights the expansion of its vegetarian and plant-based options in its Recipe for Good-Report.
But also modern concepts are going full-on plant. In Europe, Bright Kitchen, a popular ghost kitchen, only runs plant-based virtual brands. Same goes for Vegan Masters and many more.
We predict a bright future for the plant-based industry.
When a hamburger can come from anywhere, restaurants must ensure customers crave their hamburger—not just any hamburger.
Digital marketing is the key here. We expect organisations will be upgrading their marketing teams. They need the expertise to promote the owned channels and help put the food in front of the customer.
It is more of a wish than an actual trend that we’re spotting.
Off-premise is generating vast amounts of waste. Let’s hope the packaging industry comes up with affordable eco-friendly solutions.
The restaurant industry is in an innovative mood. We are seeing evolutions in business models, service models and operations to meet the industry’s major challenges, such as changing consumer preferences, rising food prices and staff shortages.
Returning to our initial question about enduring innovations, we bet on those addressing long-standing industry issues and adapting to changing consumer needs.
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