OLD FOURTH WARD, ATLANTA, GEORGIA, UNITED STATES – 2019/03/30: Restaurant, Ponce City Market. (Photo … [+] by John Greim/LightRocket via Getty Images)
Convenience-driven technologies, labor challenges, sustainable food practices, a swiftly changing consumer set, intensifying competition, name it. All of these factors (and more) have affected the $833 billion restaurant in the past couple of years unlike any other time in the industry’s history.
Where does the industry go from here? What will it look like in 2030?
The National Restaurant Association put together a team of prognosticators to ambitiously ask that very question for its “Restaurant Industry 2030 Report.” Their main thesis: “The only constant will be the speed of change and the hyper-competition the restaurant and foodservice industry will face.”
Here are their top 10 predictions for the next decade in foodservice.
The definition of restaurant will change. Hudson Riehle, SVP of the National Restaurant Association, recently said we’re at a tipping point for the emergence of a new business model for certain restaurateurs. “The basic paradigm of what constitutes a restaurant in America today is changing,” he said. These changes will continue–and accelerate–throughout the next 10 years, driven by the continued growth in off-premise business. We’re starting to see glimpses of this through delivery-only ghost kitchens, food halls and takeout-only models. These models, by the way, aren’t proliferating under the surface, major players like Starbucks, Chick-fil-A and McDonald’s are jumping on board. As the report outlines, “Virtual kitchens could substantially alter the franchising model.”
Also as noted by Riehle, off-premise opportunities will drive much of the industry’s growth. Sixty-percent of restaurant meals are now consumed off-premises, and these off-premise channels are expected to make up around 80% of the industry’s growth by 2025, according to research from the National Restaurant Association. This shift will affect everything from (delivery-friendly) packaging to real estate site selection.
Because of added channels and fulfillment obligations, most drive-thrus in the quick-service segment have slowed down, according to a recent study from SeeLevel HX. Lisa van Kesteren, CEO of SeeLevel HX, attributes this to cluttered kitchens and operations: “It’s all happened so quickly in an industry which just isn’t used to changing that fast,” she said.
In other words, restaurant designs, specifically back-of-the-house, will also have to change in order to keep up.
Margin pressures–driven by labor, real estate and technology investments–will continue, which is bad news for an already-thin-margined business. This trend could also include higher food costs caused by extreme weather patterns. A new report from the Intergovernmental Panel on Climate Change stated that as the effects of a warming planet get more severe, food security will become increasingly unstable, which will inevitably result in higher food prices. Plenty of chains, from Taco Bell to McDonald’s, have pared down their menus in an effort to save on food costs while simultaneously speeding up operations.
The restaurant industry has become oversaturated, as illustrated by the retrenchment that has occurred across segments, from Subway to Applebees. In a sea of sameness, differentiation will become even more critical. That differentiation will be facilitated by data-driven decisions. Brands, such as Cava and &pizza, that leverage data to know where their customers are and what they want, will have tremendous staying power. This is also the reason many of the bigger players are restructuring their digital teams and gobbling up sophisticated technology startups.
Demographics will look very different in 10 years, with a consumer base that is both older and more diverse. The projected Hispanic American population in the U.S. is expected to reach 74.8 million (21%) in 10 years, for example. Some brands, like Denny’s, are trying to stay ahead of the curve by launching marketing campaigns directed toward multicultural customers. These demographic changes will also have a direct effect on our menus. According to the National Restaurant Association’s most recent “What’s Hot Culinary Forecast,” global flavors rank higher than previous years. The global ethnic foods market is projected to register a compound annual growth rate of nearly 12% through 2024.
Labor recruitment/retention will remain a priority, especially as the domestic workforce continues to shrink. For the restaurant industry, this trend will affect its biggest pool of workers: According to the National Restaurant Association, there will be 1.2 million fewer 16-to-24-year-olds in the labor force by 2028. By 2028, workers age 65 and older are expected to outnumber teenage workers by 11 million. This means that restaurant companies will have to rely more on older workers and some chains are being proactive. McDonald’s, for example, just teamed up with the AARP to recruit older adult employees into its restaurants. The changing labor force will also lead to more automation, particularly for repetitive tasks, like filling a smoothie order.
Technology will not only be used to woo mobile-dependent consumers, but also benefit operators navigating supply chain logistics and food safety mandates. Some chains have already implemented such systems. According to Restaurant Dive, for example, one of McDonald’s biggest beef suppliers–Golden State Foods–uses blockchain technology to better track its beef supply, including food temperature and production times. Considering the risks involved with a food safety or supply chain issue, these technologies will undoubtedly (and quickly) become more common.
Regulation and legislation will continue to affect the restaurant business in new ways. Consider recent laws that have emerged, like predictive scheduling, which requires that employees receive their work schedules in advance and that employers refrain from altering those schedules. Chipotle has come under fire for violating this law in New York City. Additionally, expect imminent regulation around third-party delivery. All eyes will be on California’s AB5 bill, which goes into effect Jan. 1 and will force delivery companies to replace contractors with employees who are eligible for wage minimums and benefits. Also, as the industry (industries) becomes more digital, expect more legislation on how businesses should handle customer data.
Sustainability will continue to be a focus, with brands stepping up their efforts to introduce better packaging (we’re talking more than straws here) and better sourcing. Smaller, nimbler chains like Just Salad will lead the way here, but major players like Yum Brands and Chipotle will continue to adopt creative practices to reduce their environmental footprints. Chipotle, for example, donates used equipment to local schools and nonprofits. Yum Brands is committed to building LEED-certified units and adopting more vegetarian options (KFC was the first chicken chain to test plant-based chicken, for example). Speaking of plant-based, there’s a reason it’s growing at a staggering rate in the restaurant industry. New research shows that avoiding meat is the single biggest way to reduce your environmental impact on the planet. Consumers will continue to answer this call, which means restaurants (and manufacturers) will have to continue meeting their demands.
Finally, despite the apps and kiosks and personalized menu boards and other digital bells and whistles, the industry’s cornerstones–hospitality and service–aren’t going away. On-demand conveniences may be growing, but so, too, are experiential concepts like Cooper’s Hawk. The association’s report predicts third-space restaurants to “become an arena in which people actively try to undo some of the polarizations of society.”
As all of these changes continue, and accelerate, it’s important to note that a significant amount of growth is expected in the industry. The National Restaurant Association projects industry sales to reach a whopping $1.2 trillion by 2030, from $833 million in 2018.