Technology will be one of the restaurant industry’s biggest assets over the next 10 years, even as that same technology helps to feed rising competition from non-food companies and delivery-only “virtual restaurants.”
These are among the more important findings of the National Restaurant Association’s Restaurant Industry 2030 report, which contains feedback and predictions from more than 100 industry experts.
“The off-premises market — carryout, delivery, drive-thru and mobile units — is where the majority of industry growth is going to come from over the next 10 years,” the report notes in an introduction that declares “restaurants have become a now industry.”
In fact, the very definition of “restaurant” is a work in progress.
“The digital world and evolving consumer preferences are resulting in an array of restaurant models aimed at giving customers what they want, when and where they want it. Some restaurants will morph into a hybrid model, offering counter service, full service, takeout and delivery, and meal kits.”
The report describes “cloud kitchens” and “virtual restaurants” as entities that exist only online or via an app. They are typified by a proliferation of centralized kitchens that exist solely to support “the ongoing growth of app-based meal delivery services.”
While third-party delivery services have enabled restaurants small and large alike to cash in on changing consumer preferences, they pose a tangible threat to individual-restaurant loyalty. “Third-party delivery apps are emerging as a key gatekeeper between consumers and restaurants, able to capture consumers’ business with convenient, frictionless ordering.”
Choosing whether to sign on with one or more third-party deliverers or handle home delivery in-house is a decision every major restaurant chain seemingly has to make.
A case in point is Shake Shack, which spent much of its recent third-quarter earnings call with investors explaining why it’s ditching DoorDash, Postmates and Caviar for a national partnership with Grubhub — a nascent decision that could crimp delivery revenue not only in the fourth quarter but into 2020 as well.
Concurrent with the sales impact, Shake Shack must ramp up spending to market its Grubhub relationship region by region. “We have two years of people who have built up habits, whether it’s on Postmates or Doordash or Caviar,” Shake Shack CEO Randy Garutti said on the earnings call. “And we’re going to have to move those people over.”
One of the more intriguing findings of Restaurant Industry 2030 is the potential for non-food companies to add food and prepared meals to their offerings as an added service.
“For example, a media-streaming service could buy or pair with existing meal delivery services to create an all-in-one dinner and entertainment experience. Or an online retailer could leverage one-click ordering, logistics and delivery expertise to add meals to their subscriptions,” the report notes.
Adding to the complexity of future restaurant operations is the issue of sustainability — which shows no sign of diminishing on the list of consumer interests — and bespoke menu offerings suited to an aging U.S. population and advanced genetic knowledge.
“The rising incidence of lifestyle diseases such as heart disease, obesity and Type 2 diabetes will create growing demand for meals that provide specific health benefits to diners on an increasingly personalized level,” the report states.
“In some cases, these meals may be prescribed by doctors or as part of coverage by insurance companies. For restaurants, costs for providing these meals could be offset by relationships with health care and insurance providers, which would direct patients to eateries with the proper medical meal and portion for their condition.”
Restaurant Industry 2030 was conducted in partnership with American Express and Nestle Professional.
The off-premises business may show higher growth over the next 10 years, but the variations of this business model have yet to prove they can last. Some one will eventually have to absorb the costs of restaurants losing out on the high margin beverage and dessert business and the expense of delivery services. Once profit becomes the focus, the real costs are likely to be passed to the consumer, only a portion of which have the ability and willingness to pay the true price of such convenience.