Tomato everywhere

A number of trend watchers see the versatile tomato as the key ingredient for next year. Consumer and menu research firm Technomic, a sister company to Nation’s Restaurant News and Restaurant Hospitality, went as far to say that 2024 will be the “year of the tomato” and expects it to appear in unexpected places like dessert or as a meat replacement. It also expects tomato-based dishes from across the globe, such as Mayan sikil pak and Libyan chraimeh, to grow in popularity, similarly to the way shakshuka started spiking before the pandemic.

Both Technomic and Af&co/Carbonate (sister marketing and market research firms) expect to see more of what they call Caprese cocktails — drinks made with tomato, olive oil, basil, or a combination thereof.

Yelp also anticipates more savory Martinis with ingredients such as truffles and Parmesan cheese, noting that searches for such drinks are up by 131%. – BT

Lab-grown meat increases on smaller restaurant menus

After its approval for sale in the U.S. and proceeding success at Dominique Crenn’s and José Andres’ restaurants earlier this year, lab-grown meat is having a moment. According to market research firm Datassential, 17% of consumers say they would be open to trying lab-grown meat. And according to Mintel’s Global Food and Drink Trends report, 34% of U.S. adults say highly processed food is a top concern of theirs when picking food that may be good for lab-grown meat’s future. – HP

Customers will be resilient, but selective

“These are still unprecedented times, and some economic uncertainty remains, but resilience of the American consumer will continue to buoy spend in restaurants. Consumer confidence is still riding high, but Americans are gripping their wallets tightly headed into 2024, repeating the trading down behaviors of 2006–2009. In 2024, most restaurants outside QSR will see a decline in sales, and full service will also see a decline in frequency of visits.” – Lauren Fernandez, CEO, Full Course

A shift from software to hardware

Over the past couple of years, restaurant technology has seen a massive focus on software, from delivery management to employee scheduling apps and everything in between. But as tech needs become more sophisticated, there will inevitably be a shift toward hardware to make sure that restaurants have the right machines, kiosks, kitchen display systems, etc. to handle the rapid software changes.

“There will be a great deal more attention and capital spending on hardware — that’s neither easy nor inexpensive, but it is necessary,” said Michael Schatzberg, co-managing partner of Branded Hospitality Ventures. “The industry is fully aware that software is critically important to improve margins and address the many pain points and headwinds facing operators, but this digital transformation … requires the embracement of the connected kitchen and hardware.” – JF

Franchisees close more stores

Longtime restaurant franchisees are likely to close more units in 2024 after cleaning up their portfolios in 2023. The best example? Burger King. The burger concept had a number of closures through chapter 11 bankruptcy protection, at least three cases with major franchisees. At the end of the third quarter, parent Restaurant Brands International said it had 19,035 Burger King units, compared with 19,789 at the end of 2022. Expect more franchises to be on clean-up duty in the year ahead. – RR

Economic growth varies by region

“The economic environment in 2024 will be one of more modest growth, with inflation easing but remaining elevated. As a result, overall industry sales will continue to advance. There are obviously some caveats; as the industry progresses, it is becoming more fragmented, and the overall economy is becoming more fragmented as well. This means there can be strong geographic variations that reflect the underlying micro economies of different regions, states, and metropolitan areas. The good news is there is still a positive outlook. The challenging news is because of changing demographics and a variety of microeconomic climates in different trade areas, outcomes can be substantially different.” – Hudson Riehle, SVP of the Research and Knowledge Group, National Restaurant Association

Cooked cheese

The National Restaurant Association in its annual What’s Hot trend forecast, for which it surveys more than 1,5000 culinary professionals, sees baked or similarly heated cheeses such as Swiss raclette, Greek halloumi, and Tex-Mex queso fundido as a significant trend in the coming year. – BT

More IPOs from smaller brands

With the success of CAVA and its IPO earlier in 2023, smaller brands are seeing a chance to make it big like the Mediterranean fast casual and Sweetgreen before it. In 2023, GEN Korean BBQ House went public with just 34 units.

“We think a lot of assets will come to market in the beginning of the new year,” said Roger Matthews, managing director of Bank of America’s Consumer and Retail Investment Banking Group in its Restaurant Industry Trends & Outlook for 2024 report. “There’s pent-up demand on the buy side from institutional investors and on the sell side from operators interested in an exit, both of whom have been holding out for a better deal-making environment.” – HP

Consolidation marches on

“We’re probably in the fourth or fifth inning of consolidation in this industry. A lot of buyers who own a lot of restaurants intend all along to sell them within a 3-5-7-year horizon. It hasn’t been a good time to sell in the last two or three years, but those time horizons aren’t going away. So, just out of necessity of investment means, they’re probably going to come to market soon. The biggest uncertainty of all of this has hopefully subsided, and that is the lumpiness of the post-Covid stuff. Look at 2020 and 2021, the crazy Covid years, and then in ’22 and ’23, you had the aftereffects related to Covid. I think there’s a sense now that as we go into next year, we’ve gotten kind of past that and feel like we’re coming into a more normal operating environment.” – Rick Ormsby, managing director, Unbridled Capital

More drive thrus with license plate recognition technology

While 2023 was the year of voice AI in the drive-thru lane, 2024 will prove to be the year of drive-thru personalization technology. Already, multiple technology vendors have released software uses license plate recognition technology and geofencing to recognize customers in the drive-thru lane and time their arrival, like BlueDot and UKnoMi tech companies. This tech can be synced up with a loyalty program so that customers can see how many rewards points they have when they pull into the drive-thru lane.

This trend will likely continue as personalization and customization becomes the standard for off-premises hospitality.

“Using license plate recognition, restaurant staff can link an order to a customer's car and use it as an identification to deliver their order once ready,” said Dean Drako, CEO of Eagle Eye Networks, a video surveillance company. “The menu can display past preferences and upsell based on the available data. The data collected will help create future strategies to identify customer preferences influencing a company's sales and marketing strategies.” – JF

Aperitivo hour

International restaurant consulting firm Baum + Whiteman predicts a decline in highballs and “sugar bomb cocktails” in favor of “sophisticated lower-alcohol, bitter-tinged, brightly colored cocktails,” as well as low- or no-alcohol beers, especially before dinner, when they expect guests to order sparkling water with vermouth or bitters, Cava or Prosecco, pastis, and Campari spritzes (they say Aperol is too sweet).

“This age-old European pre-dinner unwinding time is gaining traction versus booming, boozing happy hours … often in hotels,” they said.

Ana Castro, executive chef and owner of Lengua Madre in New Orleans, also expects lower-alcohol drinks “for those folks who still drink alcohol but don’t want to get drunk.”

By contrast, Ivy Mix, cofounder and co-owner of Leyenda in Brooklyn, N.Y., sees guests “getting back into stronger drinks … albeit very tiny ones.” She anticipates more small but impactful drinks, like two-sip Martinis and her own favorite “Teeny Rita” — “a small Margarita that scratches the itch without being a whole drink.” – BT

Brands get more strategic with delivery

While the pandemic understandably left a bitter taste with many operators, a sweet spot was the increase in off-premises sales. Now they are looking to hold onto those pickup and delivery channels into 2024.

Promotional adjustments are the low-hanging fruit when it comes to staying relevant, and operators are now basing such promotions on labor availability and volume during certain dayparts. Checkers/Rally’s, for instance, is intentionally promoting its delivery channel at night. CEO Frances Allen said 50% of the company’s late-night business is delivery, while the channel makes up about 18% overall.

“Our delivery channel is still growing 1-2% a year and is especially strong at night, which has helped that daypart’s recovery,” she said. “We excel in late-night and that is in large part due to delivery, and so that’s where we’re really focused.”

Other brands are simply focused on leveraging third-party platforms because they generate a lot of eyeballs with their marketplaces (Uber Eats was estimated to have about 81 million users across the world last year). As such, long-time holdouts like Domino’s and Jimmy John’s have begun leveraging third-party delivery services. For Red Robin Gourmet Burgers, the third-party opportunity inspired the company to invest more in those aggregators.

“If we show up on page four, we’re not going to be a top choice for customers looking for a burger,” said Red Robin CEO GJ Hart. “We think investing more will allow us to do more.”

More brands are also trying to maximize delivery to make up for the additional resources and focus it requires. As such, several restaurants have hung onto the virtual brands they launched during the throes of the pandemic to make up for lost dine-in sales. A good example here is Dog Haus, which continues to grow its delivery-only Bad-Ass Breakfast Burritos brand. Bad-Ass delivers a significant uptick in revenue between 1 a.m. and 6 a.m., when the Dog Haus kitchens are otherwise underutilized. Denny’s plans to expand its test of the virtual Banda Burrito brand in California after seeing success with the existing in-house Meltdown and the Burger Den. And IHOP, the division of Dine Brands, has also found that its growing virtual portfolio has beefed up the company’s late-night business when the kitchen is otherwise slow. – RR

No quick fixes to a healthier profit

“I think there’s going to be meaningful less pricing taken in 2024. Cost inflation is coming down to more normalized levels, but it also means if you’re going to grow your business and margins, there’s not a quick fix to it. Part of the answer is technology and part of it is treating your employees well. I don’t think traffic will be robust, but I also don’t think it will be that bad. On the whole, it doesn’t seem like it will be a bad environment.” – Mark Kalinowski, president and CEO, Kalinowski Equity Research

More restaurant ads, but in unexpected places

As the economy stabilizes and the restaurant environment grows more competitive, expect to see more brand marketing efforts in the year ahead.

Tampa, Fla.-based Bloomin’ Brands, parent to the Outback Steakhouse and Carrabba’s Italian Grill brands, said it intends to increase its marketing in the fourth quarter and into 2024 amid traffic slippage at its casual-dining concepts.

Brands are looking to distinguish themselves in the market and maintain customer traffic. But the marketing will put on a very different face from the television ads of yore. For example, Chili’s Grill & Bar, the division of Dallas-based Brinker International, has brought back its “Baby Back Ribs” jingle in the style of ’90s band Boyz II Men, but the version has been highlighted in social media like YouTube and TikTok. For a summer campaign, Chili’s also brought back “The Office” actors and best-friends-in-real-life Jenna Fischer and Angela Kinsey.

Speaking of unusual places: Pizza Hut, the division of Louisville, Ky.-based Yum Brands, put a Thanksgiving-special QR code on the Las Vegas Sphere. – RR

Non-Asian fried rice

Baum + Whiteman see fried rice made with non-Asian ingredients, such as Spam, prosciutto, foie gras, and barbecued beef, being served in non-Asian restaurants.

“In steakhouses it is lobster-fried rice, of course, but we’ve seen the dish with crab legs, too,” the firm reported, adding, “Oxtail fried rice is a big winner.” – BT

Pent-up demand for growth

“Equity investors will continue to experience throttled deal flow as sellers hold deals back for better market conditions. While still bullish on franchised restaurants, many equity firms will see development slow to a crawl. Franchisees ready to grow will continue to be stalled by a lack of available retail real estate and affordable lower- and mid-market lending. As banks drag their feet on lending or issue double-digit rates, a rise in private lending may occur in 2024, closing the gap in our industry between high interest rate loans and solid entrepreneurial growth. Heading into an election cycle, we may see drops in the interest rate, making debt more accessible and setting the table for an industry hungry for the capital to grow.” – Lauren Fernandez, CEO, Full Course

The year of robot and drone delivery (or is it?)

With DoorDash warning customers of potential poorer service if they don’t include gratuity and consumer tip fatigue on the rise, there might be a machine backlash in the near future. Although we’ve been talking about drone and robot delivery for a while now, more brands are signing up to test out the technology, like Mendocino Farms and Chick-fil-A, which both just announced drone delivery tests, alongside other brands like Jersey Mike’s, Freddy’s, and Sweetgreen. Chick-fil-A is also among the many restaurant brands that have been testing out robot delivery vehicles, alongside Domino’s, Pizza Hut, Uber, and more.

With the backlash against delivery fees and gratuity, 2024 could be the year we see more restaurants upgrade their robot/drone tests to more of a systemwide option. Most recently, drone startup Flytrex received approval from the FAA to operate without the requirement of visual observers. But is it still a little too soon? Experts are skeptical.

“The air attack will have to wait a few more years,” said Juan George, cofounder of tech consultancy 858 Partners. “These technologies still face scalability, safety, and regulatory hurdles before they’re ready for prime time.” – JF

Operators get more thoughtful with their menus

“Restaurants got comfortable raising prices and were focused on invoices versus customers. Sales were up, so everyone was high fiving, but traffic was down, and margins were suffering. Operators have to be careful not to get to a pricing plateau where you leave people behind out of sheer economics. Indiscriminate pricing increases have sent traffic away, and when that becomes a secular trend, which it has, it teaches (operators) to be more thoughtful about menu, portions, mix, everything you can do besides that sticker shock, and I think we’ll see more of that.” – Kevin Burke, partner, Franchise Equity Partners

The incredibly shrinking food-tech industry

Food tech has been growing at a rapid pace for a few years now, with seemingly new tech vendors and features coming out of the woodwork every day. But what goes up must come down, and private-equity funding is not infinite.

2024 will be the year we see the restaurant technology industry shrink as the weakest or smallest companies fold or are bought up by larger players. According to data from Carta, the amount of tech startups shutting down due to bankruptcy or dissolution more than tripled in two years. In the long run, this will mean less chaos for the average restaurant startup and more quality options.

“The hospitality industry is now embarking on a transformation that so many other industries have already gone through,” said Schatzberg of Branded Hospitality Ventures. “Operators are going to go back to their roots of ‘hospitality first,’ and with that, their tech stacks will comprise of all-in-one solutions. … So, we’re going to see continued consolidation and acquisition in the tech space.” – JF

Buckwheat

Af&co and Carbonate expect this seed, best known these days as the base for Japanese soba noodles, but also in crêpes from the French region of Brittany and as a grain-like preparation called kasha in Central and Eastern Europe, to appear in more desserts, thanks to its gluten-free nature, high protein and fiber content, and “subtle nutty and earthy flavor.” – BT

Venezuelan cuisine

Baum + Whiteman expect Venezuelan cuisine to gain more of a footing in the U.S. in the coming years, owing in large part to the fact that nearly 500,000 of the incoming refugees from that country will be allowed to work at the end of 2024, and “probably half will be in the hospitality sector.”

They advise becoming acquainted with guasacaca, a creamy sauce from Venezuela that’s typically served with corn cakes called arepas and is made with avocado, cilantro, parsley, chile, vinegar and/or lime, garlic, and olive oil. – BT

Restaurants as off-premises distribution points

The “omni-channel” experience will continue to play a big role in restaurants. More brands are likely to follow the lead of drive-thru stalwart Whataburger, looking for locations that offer to-go options without requiring an automobile. Whataburger opened a Digital Kitchen location this year in Bee Cave, Texas, that has no drive-thru and offers food cubicles for order pickup — both for delivery drivers and to-go customers. Still other brands, like Taco Bell with its Go Mobile prototype, are developing more efficient footprints designed with multiple drive-thru lanes and quick access to digital orders.

AlixPartners issued a report in 2023 that summarized areas where restaurant operators could prepare for competition. Those areas include investing in digital infrastructure to help grow sales, engineer menus to improve margins and reduce complexity, reduce the costs of new buildings and remodels, improve the supply chain to return margins to operations and offer “execution excellence.” – RR

The trade-down effect

“Continued normalization is a reasonable prediction for 2024. We didn’t get that this year. We had very high cost of inflation; sales trends were funky in the first half. 2024 may be the first year this decade where you quote/unquote ‘get a normal operating environment,’ and that should reveal what companies are well prepared for the future based on unit economics. It might also reveal what concepts have a tougher go. The consumer is going to get more guarded and will likely trade down. There are now signs of some weakening, and I expect Q4 will be the lowest for same-store sales. That sets the tone for next year.” – Mark Kalinowski, president and CEO, Kalinowski Equity Research

Tech-enabled hospitality

With the rise of the tech-forward restaurant, there has inevitably been a backlash against replacing traditional hospitality with AI and automation. In fact, last year, NRN predicted that low-tech restaurants would be a counterpoint to digital-first restaurants. But technology can also be used hand-in-hand with traditional hospitality — to free up staff and use their time and tasks more efficiently — and will become more of a trend in 2024, Technomic predicts.

“In the coming year, we’ll see technologies get implemented using the kitchen as the central hub for the purpose of freeing up staff time to enhance the customer and employee experience,” Technomic said in its 2024 predictions. “Online ordering systems will be integrated with kitchen systems to ensure a seamless takeout experience and facilitate order-ahead drive-thru service. Sales data will combine with supply-chain management and marketing software to better predict supply, demand and proper staffing levels, as well as deliver data to drive loyalty. Kitchen equipment will automate dangerous and repetitive tasks that allow for staff to redeploy their efforts elsewhere.” – JF

Consumers drawn to constant evolution

“This industry has a history of constant evolution and responds in real time. As a result, consumers have continued to shift their food spending toward away-from-home solutions. That will continue as the industry continues to develop and fragment and have these niche markets and new business models that are becoming entirely viable now. Looking ahead over the next decade, sales will continue to grow, share of value away from home will continue to edge up, employment in the industry will continue to grow, and the supplier community that supports the industry will continue to grow.” – Hudson Riehle, SVP of the Research and Knowledge Group, National Restaurant Association

More chains jump on the lifestyle bandwagon

The lifestyle brand trend has been chugging along for a decade or so now, with several restaurant concepts building deeper relationships with guests through brand extensions like clothing and accessories, plus experience-oriented loyalty programs. Now it’s going up a notch. Brands like Sweetgreen and Chick-fil-A both introduced entire clothing lines in 2023, giving fans a way to wear their brand all the time. And smaller chains — like the crop of growing coffee shops — are getting in on the action too. According to Datassential’s 2024 trend report, 18% of consumers have worn a clothing item from a food brand. – HP

Against all odds, the economy soldiers on

“Two-thirds of the economy is consumer spending, and consumer spending this year has been odd because those that have been spending the same and those that have not have been restricted on spending. Credit cards are full, there’s a trillion dollars of student debt, a trillion dollars of auto loans. This overhang on the economy I think will continue into the new year. The credit picture in this country is better than it was in 2007-08. The banks are in better shape and have made more intelligent loans. But with credit costs being so overwhelming, it’s shocking how companies keep slugging through. That’s a bit of good news.”– Kevin Burke, partner, Franchise Equity Partners

Experiential concepts provide community

Expect to see the experiential trend continue into the new year — and it will go beyond pickleball. Respondents in the National Restaurant Association’s “What’s Hot” for 2023 survey indicated that operators expected customers to display eagerness to reclaim a sense of community in 2023 after the 2020-2022 pandemic.

State of Play Hospitality in November announced it would expand its experiential concept, Flight Club, with a new venue opening in Philadelphia summer 2024 in the historic Philadelphia Stock Exchange. Inspired by the heritage of darts from British pubs and fairgrounds, Flight Club applied technology for automatic scoring and runs exciting multiplayer games for groups of up to 400 people. State of Play launched the first Flight Club in the U.S., under license, in the downtown Loop area of Chicago in 2018. Since its North American debut, State of Play has taken Flight Club to Atlanta, Boston, Denver, Houston and Las Vegas. State of Play also has the AceBounce and Hijingo concepts, and spun off Puttshack. – RR

Mergers and acquisitions accelerate, but with lower multiples

“(Mergers and acquisitions) activity was slow in 2023, driven by sellers who were reluctant to go to market because of weakening earnings and traffic patterns. From a buyer perspective, with interest rates going up 300-400 basis points, that changes one’s ability to pay with the same returns. I don’t think we see a recession, but with interest rates up as much as they are, the pressure is on any company that’s been leveraged and any concepts that are weak. There will be more M&A activity in 2024 than 2023, but sellers will settle for less. So, there will be more activity and deals getting done, but at lower multiples.” – Mike Esposito, cofounder and managing partner, Franchise Equity Partners

Restaurants embrace unique personalities

Today’s brands have to be involved in social media or they will miss valuable marketing opportunities. Think about Chipotle and the Taylor Swift/Travis Kelce tweets, or the infamous Popeyes “you good?” at Chick-fil-A in 2019. It’s crucial for brands to use social listening to be a part of a moment, especially smaller brands that could use the marketing power. Datassential reports that 28% of participants in its 2024 trends survey said it’s OK for brands to be funny or risqué online. – HP

The IPO market opens up

“If you look at the history of time since the 1950s, the IPO market is 100% correlated with the equity market, and with equity bouncing back, IPOs should be strong by the latter half of 2024. We’ve had two years of very little IPO activity. If I’m a betting man, when the flood gates open, it will be unusually high.” – Mike Esposito, cofounder and managing partner, Franchise Equity Partners