The Evolution of Chain Restaurant Operations During and After COVID-19The Evolution of Chain Restaurant Operations During and After COVID-19

For the restaurant industry, the year of COVID-19 was certainly unprecedented.

The global COVID-19 pandemic, which was declared by the World Health Organization on March 11, has — through a series of alerts, lockdowns and quarantines aimed at slowing the coronavirus’ spread — accelerated change, transformed hospitality and, sadly in some quarters, decimated the industry.

As many as 110,000 restaurants have closed since the pandemic was declared, according to the National Restaurant Association, and foodservice sales have fallen $255 billion in the year since.

“Restaurants now have to figure out what’s the fewest number of things to focus on in order to satisfy their customers and maintain strong sales,” said Bob Johnston, CEO of Tampa, Fla.-based Front Burner Brands, the restaurant management company for the 97-unit Melting Pot Restaurants Inc.

COVID-19’s impact on the restaurant industry was fast and deep. MarginEdge, which provides back-office platforms, analyzed sales and operational data from nearly 2000 restaurants in 47 states and estimated a drop in sales of 66% between March 11 and March 22, when most of the nation was under strict lockdown.

“While the industry has faced recessions in the past, a contraction this precipitous had never before been seen,” MarginEdge noted.

Slow recovery expected

The National Restaurant Association said the pandemic-induced economic crisis reduced restaurant staffing by 2 million jobs, or a decline of 16%, by the end of February as compared to pre-COVID-19 levels.

But signs indicate things are getting better. The U.S. Labor Department said 75% of the 379,000 jobs added to the U.S. economy in February, or 285,900 positions, were from within the food services and drinking places subsector.

“Although some operators foresee a normalizing of business conditions during the next several months, the time horizon for a recovery in the restaurant workforce will be significantly longer,” said Bruce Grindy, chief economist for the restaurant association.

Black Box Intelligence, the Dallas-based analytics company said Thursday that same-restaurant industry sales in February were down 12.6% from the same month a year ago, before the pandemic restrictions were imposed, and same-store traffic was still off by 19.1%.

“Despite poor topline results for February, there are some reasons for restaurants to remain optimistic about the continued, albeit irregular, recovery of the industry,” Black Box said in releasing the February comparisons, citing February’s long period of intense winter weather across broad sections of the nation.

Grindy of the National Restaurant Association offered some positive news.

“In recent weeks, the combination of accelerated vaccine deployment and additional fiscal stimulus boosted expectations that the 2021 economy will produce the strongest growth in decades,” Grindy said.

President Joe Biden on Thursday signed a $28.6 billion Restaurant Revitalization Fund, part of the $1.9 trillion American Rescue Plan Act, to help eateries across the nation.

“This fund is a win for the smallest and hardest hit restaurants that have sacrificed and innovated to continue to serve their communities.,” said Tom Bené, president and CEO of the National Restaurant Association, in a statement.

While earlier Paycheck Protection Program funds were open to large restaurant companies, the newest revitalization fund called for creating a new federal program for restaurant owners with 20 or fewer locations. Operators can apply for tax-free grants of up to $5 million per location, or up to $10 million for multi-location operations.

Funds from the grants can be spent on a wider range of expenses, including mortgages or rent, utilities, supplies, food and beverage inventory, payroll and operational expenses.

The revitalization fund comes at a crucial time, as restaurants have had to make investments in technology and delivery to accommodate consumers caution in the pandemic.

“Whether it be focusing on takeaway and/or delivery, even full-service restaurants had to pivot quickly to offer these to their customers,” said Johnston of Front Burner.

“Before the pandemic, Melting Pot never had a to-go program, but like the others, we knew it’d be something to implement to overcome restrictions on dining in,” he said. “To-go and delivery make up a small percentage of our sales and will likely remain a small percentage, but the pandemic has shown the importance of continuing to offer these to your customers.”

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Burger giant McDonald’s Corp., for example, sees 70% of its revenue coming through the drive-thru and, in many areas with dining room restrictions during the pandemic, that rose quickly to — and in many cases stayed at — 100%. Automation in its drive-thru lanes was a big piece of its initiatives outlined in November.

The pandemic also forced operators to streamline menus to reduce costs.

“Dining restrictions and the difficulty of maintaining staff meant having to streamline costs in order to be profitable,” said Johnston of Front Burner. “For instance, reviewing your menu offerings to see which items are the ‘stars’ while removing items that aren’t as popular in order to focus on those that drive profits.

“Melting Pot, in collaboration with our franchisees and an outside consultancy, launched a newly engineered menu that did just this and has performed amazingly, increasing our per person average sales and guest satisfaction.”

Hope ahead

As the restaurant industry enters the second year of COVID-19 and a vaccine program rolls out nationwide, operators are preparing for the light at the end of the tunnel.

At Brinker International Inc., parent to the Chili’s Grill & Bar chain, CEO Wyman Roberts said he expects restaurant consumers to be “fundamentally changed” by the pandemic

“We don't expect a return to the old normal,” said Roberts of the Dallas-based brand, which also owns Maggiano’s Little Italy. On an earnings call earlier this year, he said “2020 fundamentally changed us as consumers. We were forced to use technology to enjoy our favorite restaurants in new ways like third-party delivery, curbside takeout, QR code menus and mobile payment.”

Roberts added: “Now that we've experienced greater convenience and control over our experience, we're not likely to give it all back.”

Mat Schuster, chef and owner of Canela Bistro & Wine Bar in San Francisco, said through a press representative:

“The main thing that I have learned is just how resilient and strong the people who make up the food and beverage industry are.

“This industry was never made to stop for more than a day or two,” Schuster said. “The expenses are just too high. So just as you see creativity in restaurant menu and decor, we have now gotten to see that creativity manifest in ways we never dreamed.

“I’ve been really inspired by the people who are making the most of the situation and using it as a springboard,” Schuster said. “There are a million reasons not to, so the ones who are thriving are impressive to me.”

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

Ghost kitchens and virtual restaurants have been the buzzwords in the U.S. (and global) restaurant industry over the last two years. The pandemic has driven an explosion in new business models, as the industry grapples with building a delivery-centric future that is financially sustainable for all stakeholders.

While third-party ghost kitchen facilities operated by companies like CloudKitchens or Kitchen United dominated much of the discussion in 2019, 2020 and 2021 have placed more of the spotlight on companies such as Ordermark. With its Nextbite program, Ordermark connects a stable of virtual brands to restaurants with spare kitchen capacity — i.e, most restaurants.

Looking beyond the U.S., players such as Rebel Foods in India are resurrecting the vertically integrated delivery-only model seen in the U.S. from now-defunct players such as SpoonRocket, Sprig or Maple. All of these new models are likely to benefit from a permanent lift in delivery spending post-COVID.

While eat-in traffic will recover throughout 2021, the nature of eat-in traffic is likely to shift going forward, as faster delivery (facilitated by ghost kitchens) captures a larger portion of daily commodity “refueling” occasions.

Eat-in traffic has fallen steadily in the U.S. for at least the last decade, reaching 50% of spending in 2019, according to Euromonitor International estimates. Not surprisingly, this number collapsed in 2020, falling to less than one quarter of total spending. While delivery gained significant share, more than doubling to over 15% of U.S. restaurant spending, both drive-thru and takeaway surged with eat-in service shut down and with consumers searching for low-contact options.

Though the eat-in share of restaurant spending is expected to bounce back in the second half of 2021 and into 2022, we have entered an era where eat-in traffic could potentially fall below 40% of total spending over the next five years.

Going forward, most new restaurant concepts — and certainly most new multi-unit concepts — will be built from the ground up, with delivery as a major part of the business model. Ghost kitchens, whether third-party or in-house, will be central to those strategies.

Yet the expansion of ghost kitchens goes beyond delivery-only production facilities for a restaurant’s own menu.

2020 saw an explosion in virtual concepts, many of them partnering with existing restaurants to fulfill delivery orders from brands which only exist online. One oft-cited example is Wow Bao, a Chicago-based producer of Chinese-style steamed buns.

While Wow Bao outlets are Chicago-only, it has partnered with a variety of restaurants nationally to fulfill third-party delivery orders, with Wow Bao products shipped from a central production facility and finished at a partner restaurant.

Steamed buns are a natural fit for this approach given how they are prepared, and this points to a future where restaurants could routinely prepare both their own orders and various partner brands as capacity permits. This separation of brands and preparation represents a further evolution of the franchising model that dominated the 20^th century, in theory allowing a brand to reach a large regional or national market with relatively little capital investment.

It could also bring a surge in investment into the foodservice industry, as packaged food-and-drink brands partner with various producers to create new meal and snack brands ordered via third-party delivery services.

An example of this model in action can be seen with India’s Rebel Foods, which operates more than a dozen virtual brands across more than 350 of its own kitchens in six countries.

The company’s model explicitly aims to build a portfolio of brands that capture a wide range of daily consumer eating occasions while driving as many efficiencies and synergies between brands as possible. All of the company’s brands are prepared side by side in its network of kitchens, with Rebel Foods’ own app serving as the primary consumer touchpoint.

The company’s Launcher program turns this model outward, selling its kitchen and services to outside brands. Current partners include small startups as well as Wendy’s, which recently agreed to a deal with Rebel Foods to develop and operate around 250 ghost kitchens across India. This “kitchens-as-a-service” model goes beyond real estate, with Rebel Foods explicitly citing its ability to efficiently organize production across multiple brands as a key advantage alongside the traffic generated by its app and large brand portfolio.

Looking ahead, the future for eating in restaurants is likely brighter than it currently appears — the pandemic will subside, and our need to socialize in person will likely drive a surge in visits to restaurants and bars. However, a more delivery-optimized food system is here to stay.

Over time, the restaurant industry will mirror developments in the retail industry — luxury fine-dining restaurants will remain largely eat-in concepts, while the number of large, 100% virtual concepts will likely be limited.

New chain concepts will combine a host of formats, from eat-in only locations to takeout kiosks to third-party ghost kitchens and production partnerships with other restaurants, all (ideally) knit together in a single app.

Likewise, cheaper, faster delivery via a handful of third-party apps will blur the lines between retail and foodservice, prepared foods and packaged foods, likely bringing a host of new occasions in play for foodservice operators.

Michael Schaefer is the global lead of food and beverage at Euromonitor International. He provides insight on consumer trends, product innovations and the evolution of eating and drinking from around the world. 

This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.

Sponsored by Stratas Foods

Confronted with restrictions to on-premise dining, supply chain disruptions and changing consumer expectations due to the COVID-19 pandemic, many chain restaurant operators are making major changes to both the front-of-house and back-of-house. These operators are investing in everything from adding takeout/delivery to offset dine-in capacity restrictions to changing food and beverage suppliers to more easily access difficult to source products to remixing menus to reflect consumers’ increased comfort-food cravings.

With a lack of any similar situation in recent history to guide restaurant professionals as they make decisions about their business, many chain operators are challenged to figure out how to adapt in order to survive. Stratas Foods, along with Nation’s Restaurant News, conducted a survey to discover which measures chain operators are taking to drive traffic and sales and keep their brand top of mind in these uncertain—and unprecedented—times.

Highlights include:

The top measures operators have taken during COVID-19
What menu alternations operators have implemented
How suppliers and manufacturers can help restaurants now
Top challenges, pain points for chain operators during COVID-19
How optimistic operators are about the future, and what concerns them most. 

Download the Industry Insights today to find out here

Three things we’ve learned for certain in the last 11 months since COVID-19 hit: 1) the foodservice customer has changed; 2) the foodservice team member has changed; and 3) the systems and process we deploy to serve each of those constituencies has changed too. And in case you haven’t noticed, that includes leadership.

Here are four key leadership attributes that have evolved. Integrate these strategies into your unit manager and above-store leader training and development.

Leaders are made, not developed. Change has always been a part of the foodservice industry operational landscape, but in the last 12 months a seismic shift has occurred: Change has transformed from being episodic to being continuous. And that is likely to continue for the next decade or so.

Preparing for change is what leaders used to do. Managing perpetual change is what they’re now tasked with. This requires new skillsets, mindsets and development strategy.

Chief among those mindset changes is the fact that you can no longer presume that leaders are more important than individuals. It was our individual team members, after all, who faced the pandemic head-on and made the necessary pivots and changes happen at the store level.

Critical thinking and adaptive skills are paramount in all current and future leaders. Hierarchy no longer determines who’s a leader and who is not. Plus, we’ve learned to value the “whole-person” approach to leadership development for unit supervisors: Help make them better people, as well as better managers.

Not surprisingly, most above-store leaders realized that that’s what they should have been doing all along. Think of it as “Leadershift.”

Get ready for a hybrid workforce. Former Soviet Premier Mikhail Gorbachev told the story about the Russian manufacturing facility of the future that would be operated solely by robots and machines. There would be one tiny office above the plant floor that contained a chair and an on/off switch for the machines. A manager would sit in the chair, and a large dog would be chained alongside him. When asked the function of the dog, Gorbachev replied, “to bite the man if he reached for the ‘Off’ switch.” 

Since technology integration and innovation in the restaurant business has accelerated more rapidly in the last ten months than it had in the last ten years, one has to consider tech’s impact on traditional leadership. As artificial intelligence more fully integrates into our systems, as more robots share our kitchens, as predictive analysis and cognitive science and neuroscience-based learning assimilates into our planning and training, is leadership a bigger or lesser priority? 

Strategic “direction” for machines is determined by engineers and algorithms. Career development, strategic clarity, dignity, care, respect, “purpose” and equity are meaningless to robots and AI. So how — and whom — do leaders lead in a hybrid workforce restaurant?

Excel at indirect influence. For the first time ever, area managers found themselves unable to visit their stores when the coronavirus hit last March, due to government mandates. These routine visits are the very essence of the job an above-store leader is expected to perform. Restaurant visits routinely assess adherence to brand standards, store-level management capabilities, effectiveness of systems and processes, customer interaction and team member performance.

When prevented from visiting, area managers soon discovered how long (or short) of a leadership shadow they cast. That’s because their in-person absence meant that restaurant unit managers had to assume roles, responsibilities, and decision-making that was traditionally relegated to their supervisors.

True leadership is formed in the moments that challenge us most, and what’s more challenging than a worldwide pandemic that requires a full system reset and a strong pivot to daily innovation and dogged resilience?

General managers and assistant managers rose to the occasion. Enlightened area managers soon realized the importance of developing, reinforcing and inspiring self-efficacy in unit managers. Self-efficacy is the confidence we have to set and achieve our own goals under the circumstances surrounding us. A high degree of self-efficacy is what enables managers (and team members) to successfully navigate the challenges thrown their way.

Smart above-store leaders learned to lead more through governance than hands-on management. That means they no longer see themselves as the person who shows up and “fixes things.” Instead, they become more adept at one-on-one coaching at scale by evolving from compliance inspector to indirect influencer and brand ambassador.  

Define and deploy better practices. Teaching managers to lead via best practices is a peculiar process. It goes something like this: You find an Abe Lincoln (or a Norman Brinker, or a Howard Schultz, or a Nelson Mandela). You identify a bunch of best practices and attributes of Abe Lincoln. And you tell managers that if you do these things you will be like Abe Lincoln.

Sounds silly when you read it, but that’s what traditional leadership has done for the last fifty years: Identify, codify and teach best practices, and then wonder why we haven’t become an industry of Abe Lincolns.

Adam Grant, an organizational psychologist and author, puts it this way: “In performance cultures, people often become attached to best practices. The risk is that once we’ve declared a routine the best, it becomes frozen in time. We preach about its virtues and stop questioning its vices, no longer curious about where it’s imperfect and where it could improve. Organizational learning should be an ongoing activity, but best practices imply it has reached an end point. We might be better off searching for better practices.”

So what are the new lessons in leadership that area directors and GMs can glean from these four leadership shifts? First, presume that every single day team members ask: “Do I matter?” At that point you realize your primary role as a leader is to routinely affirm — not just periodically inform — your crew.

Second, pursue the bright spots. Invest as much time scaling successes as you do solving problems.

Third, when you visit stores or conduct manager meetings via video, be upbeat and provide strategic clarity: Know the way, show the way, and go the way.      

Jim Sullivan is the CEO of Sullivision.com, a consultancy whose clients include Panera, Chipotle, Domino’s, Burger King and Texas Roadhouse. He’s the author of two bestselling books: Multiunit Leadership and Fundamentals, available at Amazon.  For daily leadership insight join Jim’s 400K social media followers at LinkedIn, Twitter and YouTube.

Senior food and beverage editor Bret Thorn and food trend expert Nancy Kruse discuss the latest cultural trends in this column.

Nancy Kruse begins:

We’ve both been working in and around the restaurant industry for some time, Bret. Don’t you worry, I won’t make one of those gee-whiz longevity statements — you know, how our combined experience in the business is over 175 years or whatever. But still, we’ve seen lots of hot trends cool off and many bubbles burst. I bring this up because it appears that we currently have multiple bubbles at the boiling point, and I’m curious which you think will boom and which will bust.

As a quick refresher course for our readers who’ve been in the business less than 175 years, some notable foodservice bubbles of the past include what was once dubbed HMR, or home meal replacement, an unwieldy moniker that was coined specifically to describe the Boston Chicken, later redubbed Boston Market, phenomenon. It included madly overheated stock offerings and spawned lots of wannabes, including supermarkets that rushed to cash in on the craze.

Other food retailing sectors that have experienced similar irrational exuberance include the make-and-take business, which you and I discussed awhile back. Brands like Dream Dinners and Super Suppers offered kitchen space, ingredients and recipes with their requisite mise en place in place for consumers, who were to come in and cook up a week’s worth of family dinners. Consumers neither came nor cooked, and the segment fell way short of the $1 billion in sales that Mintel had predicted in 2010, leaving hordes of hapless operators holding the bag.

From the menu perspective, I’d argue that recent items like Korean yogurt, Hawaiian poke and perhaps even so-called better burgers have been overhyped, too. Promoted as the next big thing, each attracted lots of investors, who committed to lots of sites, lots of which never got off the ground. It’s not that these products are without appeal, Bret, it’s that they aren’t necessarily appealing or differentiated enough to live up to their unrealistic expectations. 

Which brings us to the present day, in which the shutdown has given rise to several sizzling sectors. Take third-party delivery services. Please. Pre-COVID, the segment was about three-quarters of the way through the familiar business lifecycle that goes from scrappy startups to competitive overpopulation to segment consolidation as big guys gobble up smaller players. COVID-19 provided an unexpected second wind to these companies, most all of which started life with unsustainable economic models and a predatory relationship with their restaurant customers. The pandemic has rendered them temporarily indispensable to many operators, but I question their long-term viability, especially given their failure to fix their financial and operational weaknesses. As I type this, nimbler, smarter startups are multiplying, some supported by local municipalities, some utilizing underutilized taxi services, and some cooperative ventures among local operators, who’ve been burnt by the big guys. 

And what about ghost kitchens? Players are rushing into the segment, and many are using un- or underutilized commercial kitchen space in restaurants and hotels. Many other ghost-kitchen operators are building their own ground-up facilities and renting them out to both budding entrepreneurs and established operators like Chick-fil-A, which need a little extra kitchen capacity. They’ve proved a lifeline for some existing restaurateurs and an initial foot in the door for newcomers. A recent story in the New York Times reported that market researchers at London-based Euromonitor forecast ghost kitchens to be a $1 trillion market globally in the next decade. Holy smoke. That’s a lot of capacity given the pent-up demand for the dining experience that will be unleashed when the COVID curse is banished.

While we’re on the subject of inflated expectations, can we stop a moment to reconsider the meal kit? The segment has been up and down, down and up several times over the past decade or so. It has seen early chef-driven, home-delivered subscription services being supplanted by supermarket meal kits that require no commitment and can be picked up along with a gallon of milk on a regular grocery run. With the restaurant lockdown, the segment perked up yet again as homebound, culinarily challenged consumers sparked to offers from brands like Blue Apron, which promises maximum flexibility in terms of number and type of dishes and length of commitment, all starting a $7.49 per meal. But it seems like déjà vu all over again for this segment, which has failed more than once in normal times.

While each of these sectors predates the pandemic, it has provided them a big boost and in some cases a life-saving infusion of both capital and consumer interest. But what will the landscape look like next year and the year after? I don’t think for a minute that delivery or ghost kitchens or meal kits will disappear from the food retailing landscape. Far from it: All will remain viable foodservice niches, assuming the companies have the requisite combination of savvy management, operational expertise and adequate funding. But I see them as niches, some more viable than others and none a serious long-term threat to the traditional hospitality industry.

However, there’s some very serious money betting I’m wrong, and I wonder where you come down, Bret. Would you care to weigh in and suggest which, if any, you’re bullish on and which you think will receive a collective buh-bye as they head to the foodservice boneyard?

Bret Thorn responds:

Nancy, back sometime in 2019 I was at a restaurant opening, sitting with an industry friend who had just backed out of a restaurant in a food hall after realizing that he couldn’t produce the volume during the lunch rush necessary to satisfy his customers. And since that particular food hall was only busy during lunch, it was a business disaster.

He asked me if the future of the industry was just going to be a bunch of ghost kitchens run by Uber Eats. I shrugged.

As you and I discussed just a couple of months ago, restaurants were in crisis before the pandemic as consumer habits were changing and costs were rising — a big chunk of that was third-party delivery, as you just mentioned — and it seemed like the only people making money, in full-service restaurants at least, were servers.

The pandemic has been a gigantic, angry fist punching down on the industry’s reset button, but it was a button that needed pushing.

That’s not to downplay the disaster that COVID-19 has been for restaurants and the people who work in them, but with disaster comes opportunity, both real and imagined.

Meal kits are an imagined opportunity. Not for everyone — Eric Rivera, a chef in Seattle whose restaurant Addo was a tasting-menu-only concept before the pandemic, has put together elaborate meal kits, along with live video tutorials, to guide people into making their own tasting menus at home — but I think most operators will find that their customers want the restaurants to actually cook their meals for them.

Delivery, on the other hand, is absolutely an opportunity. The third-party big boys have incurred the wrath of angry restaurateurs and restaurant-loving media, as well as governments that are capping delivery fees. Smaller services seen as being more restaurant-friendly have risen to the occasion to offer different business models. I have no idea how it will all shake out, but I think operators and delivery services will find a solution that works for everyone, because they have to. The demand for delivery’s not going away, and everyone needs to get paid.

You mentioned home-meal replacement, which was all the rage at the turn of the century, as was curbside pickup. They’re both back with a vengeance, and this time I think they’re here to stay. Geofencing technology allows operators to know exactly when their customers’ cars are pulling up, allowing for seamless service that’s cheaper for guests than delivery, and more profitable for restaurants. However, family meals — those bundles of lasagna for six or burgers, fries and drinks for four that so many restaurants tried during the pandemic — are not long for this world. Operators tell me that, for whatever reason, they mostly haven’t performed that well. Of course there will be exceptions, like the eternal bucket of chicken, but it seems that most people just want their own meal, even if they’re going to eat it together at home around the dinner table — or I guess more likely in their respective rooms on their own handheld devices. 

I think ghost kitchens, where food is made in buildings without storefronts for delivery only, have a bright future. So do virtual restaurants, concepts without buildings that operate in a different restaurant’s kitchen. Why waste money on real estate in high-traffic areas if people want their food delivered to them anyway?

Wow Bao, a dumpling concept by Chicago-based Lettuce Entertain You Enterprises, has created a whole new revenue stream by selling their frozen product to restaurants and letting them reheat it in an unused corner of their kitchen, to be delivered to customers who don’t care whether there’s a storefront or not.

And there are restaurateurs like Ember Management Group in West Palm Beach, Fla., which took the greatest hits from two of its restaurants, Buccan and Imoto, and started preparing them in the kitchen of their third restaurant, Grato, and selling all three as a virtual brand out the backdoor, where delivery.com drivers are waiting. 

I don’t think any of these bubbles will burst, actually, but they won’t be easy money, either. Each of these concepts is part of a smorgasbord of revenue-generating ideas, and successful post-pandemic operators will figure out which ones work for them — plus retail, whether in-store or via mail order, virtual cooking classes and wine pairings, and other approaches to maximizing their profitability and diversify their sources of income to make sure that, the next time disaster strikes (and it will), they’ll be ready.

Nancy Kruse, president of the Kruse Company, is a menu trends analyst based in Atlanta and a regular contributor to Nation’s Restaurant News.
Contact her at [email protected]

Contact Bret Thorn at [email protected] 

Follow him on Twitter: @foodwriterdiary

Sponsored by Stratas Foods

Since the onset of the COVID-19 pandemic, nearly every aspect of the restaurant industry has been disrupted. Revenue streams have been significantly reduced, or in some cases stalled, forcing operators to make drastic changes to both the front- and back-of-house.

To better understand how the restaurant industry has been disrupted by COVID-19 and what steps operators have taken to overcome the challenges, Stratas Foods, makers of Frymax and Mazola frying oils in conjunction with Nation’s Restaurant News, conducted a survey of nearly 300 mostly chain operators. 

The effort revealed operators’ critical need to reduce costs, meet consumers’ increased expectations, and drive traffic and sales. It also shed light on the pandemic-related measures operators have taken so far, including increasing their use of deep fryers to quickly and easily prepare comfort foods consumers are craving today. 

Key Findings Include:
•    A clear majority of respondents (86%) have made some alterations to the menu mix during the pandemic, most commonly offering family meals (51%) and removing labor-intensive options (45%).
•    Just under half of respondents (45%) report increased orders of comfort foods during the pandemic, most commonly fried foods (40%) and burgers (39%). 
•    Aside from cost, the most important attribute in products/ingredients is quality (76%), followed by food safety (51%).

In this research recap/white paper you will better understand the role operations, ingredient sourcing and decisions on oil usage play in helping you achieve your business goals amid the pandemic — and long after it’s behind us.

Download the research recap/white paper here

From 2019 to 2020, COVID-19 impacted the restaurant industry catastrophically, with sales plummeting 19.2%. According to the National Restaurant Association’s State of the Industry Report, 2021 sales are projected to climb 10.2%, though not nearly enough to recover from the steep hole caused by the pandemic.

This will be the “year of transition and rebuilding,” Hudson Riehle, senior vice president of the research and knowledge group with the National Restaurant Association said, and it will take time before the industry gets back to pre-pandemic levels. Last year ended with sales $240 billion below the forecasted levels, with approximately 110,000 foodservice establishments permanently closed (and nearly three-quarters of those operators saying they would not open another restaurant).

“On a positive note, 2021 will be better than 2020 and for most [restaurant segments] the operational trend is advancing, not retreating,” Riehle told Nation’s Restaurant News. With 2020 being the worst year in restaurant industry history it will take some time to get back to pre-pandemic levels across a variety of operating pararemeters.”

Despite the grim numbers, pent-up consumer demand will create a mad rush once things get back to normal. In April 2020, the number of adults who said they don’t offer takeout as much as they’d like rose from 44 to 52%, though by December 2020, that number had settled down to 33%. In April, 83% of adults surveyed said they were not eating out as much as they’d like, nearly twice as many people (45%) who were asked the same question in January 2020.

Here are some of the most crucial aspects of operations and hospitality that impacted restaurant industry performance in 2020, according to the National Restaurant Association’s State of the Industry report:

Off-premise was king, but not all forms were in high demand

It’s no question that as states and cities locked down throughout the pandemic — many for the majority of 2020 — that restaurant operators would come to rely more on off-premise experiences in the wake of their darkened dining rooms. Now, 68% of customers say that they’re more likely to purchase takeout or delivery now than before the pandemic.
Curbside pickup was also big, as “one of the least capital-intensive offerings” a restaurant could add during the pandemic (four in five family dining, fine dining, and fast-casual operators added curbside pickup during the pandemic).

And even as restaurant operators scrambled to get on third-party delivery apps (or expand their partnerships if they had not done so before), two-thirds of consumers still say that they preferred ordering directly from a restaurant.

"For cerain operators, the availability of third-party option has had utility and in comparison, certain operators have elected to basically insource that delivery component, depending on your business model/physical location, and because the industry is so large and widle-varied, experiences are different," Riehle said. 

Ghost kitchens are not in the public consciousness yet

Although ghost kitchens and virtual restaurants have been steadily on the rise for the past couple of years, they became a hot commodity in 2020 as operators sought to expand their reach and increase sales without spending the funds to open a brick and mortar restaurant.  

But even with their growth in popularity, only 5% of operators added a virtual restaurant or ghost kitchen since the pandemic began, and customers are still not keen on the idea: 72% of surveyed adults say it’s important that their delivery orders come from a location they can visit.

But Riehle thinks attitudes will change as virtual restaurants become normalized.

“The one characteristic accelerated by the pandemic is focusing on points of access rather than locations,” he said. “Virtual restaurants and ghost kitchens are an operational model that allows growth for the industry. That doesn’t mean they are the answer for all segments, but the pandemic really did focus operations into tapping into that off-premise potential.”

Customers want convenience technology

Not only is digital ordering technology a perk of the off-premise restaurant experience, but customers have come to expect it: one in four to-go customers say that app-based ordering would influence their choice of one restaurant over another.

“Consumers are more receptive to how they pay for restaurant meals now, in terms of technology,” Riehle said.

And operators are stepping up to the plate: 25% of operators say they added technology to allow customers to order through apps and 40% of operators across all segments say that they added a contactless or mobile payment option since March.

Experience narrowly wins over convenience

Despite the fact that customers are now looking for the frictionless digital ordering tools, traditional restaurant experience still narrowly wins out. Nearly 64% of customers say that they would choose to sit in a restaurant with traditional table service vs. an experience with a tablet or smartphone ordering.

The key is to learn to balance convenience with socialization: the two key aspects of the modern restaurant experience.

“Looking at the history of the restaurant industry over past decade, much of that growth was coming from the off-premise market and so obviously during the pandemic it was disproportionately skewed higher because the socialization driver is not available,” Riehle said. “Once the socialization aspect of the restaurant experience becomes possible again, consumers will shift some of their spending to the on-premise market, though it will not return to pre-pandemic levels.

Significant workforce challenges remain  

By far one of the toughest challenges remaining to restaurant operators is the workforce demand shift. Before the pandemic, the restaurant workforce was an oversaturated and increasingly competitive market. But the labor force has shrunk considerably across all sectors and age groups and there are nearly two million fewer 16-34-year-olds in the workforce during the pandemic than before the pandemic. Nine in 10 operators are reporting staffing levels lower than in pre-pandemic days, with two in five fast-casual, family dining, and casual dining restaurant operators reporting that they are having a hard time filling job openings.  

What’s next?

With COVID-19 still negatively impacting the success of the restaurant industry in 2021 (though the National Restaurant Association expects steady improvement as the vaccine is rolled out to more people), what will restaurants look like in the near-future?

The pandemic brought many operational changes, from off-premise investments to technology upgrades and menu overhauls, and 68-74% of operators across all segments say that they plan to keep at least some of these changes.

The most likely COVID-19-related shifts that will mold long-term operations strategies include trimmed menus and the popularity of more off-premise options including meal kits and cocktails to-go: 35% of consumers and 53% of Millennials say they’ll be more likely to choose a restaurant if they can get an adult beverage with their to-go or delivery order. More than half of adults say they’d be likely to order a meal kit from their favorite restaurant in the future. As the pandemic continues (and even beyond), comfort foods are a major selling point, with 33% of off-premise customers saying their food orders over the next several months will be influenced by if the restaurant sells their favorite comfort foods.

“The environment continues to change rapidly,” Riehle said. “But in the end, there will always be that underlying demand for meal solutions away from home.”

Contact Joanna Fantozzi at [email protected]

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