How can the restaurant industry regain lost ground
The restaurant industry was among the worst affected sectors through multiple waves of Covid over the past couple of years. The industry lost business to the tune of hundreds of billions, not to mention the millions who lost their jobs. In the UK, nearly 1/10th of the total restaurants closed in 2021; while in the US, nearly 90,000 restaurants closed over the course of pandemic and in 2020 the industry suffered a loss of $205 bn before cutting the loss to $65 bn in 2021 compared to the pre Covid year 2019. The pandemic is far from over, however the world is slowly moving on and the restaurant industry is trying to find its feet again. Among the major challenges faced by the restaurant industry are: profound changes in the consumer behavior, labor shortage, depleted coffers and behind the curve technology prowess. As consumers spend less time outdoors thanks to the hybrid work model, intuitively they will cut back on dining outside; as per a recent survey, 54% of the work from home employees in the US are going out to dinner less frequently than they did before the pandemic, while 47% of them are doing likewise for the lunch.
The challenges are daunting, however the restaurant industry can bounce back by keeping a close tab on the transformed consumer behavior. The restaurant chains need to adapt fast by making relevant adjustments mainly to their product & service offerings, delivery model and the in-dining experience; these are the essential consumer touchpoints that need serious attention
Product & service offerings: The restaurants need to have a relook at their products and services suite in order to ensure what they have on offer meets consumer aspirations. Loyalty program is among the most important area for immediate intervention since the overwhelming number of consumers want more from the membership service. The brands will also benefit from the unique insights gathered through a robust loyalty program and use it to personalize the customer experience. The food subscription service is another offering that can help restaurant chains benefit from assured revenues; In 2021, Leon (UK based fast food chain) launched a vegan subscription which offered customers 30% off all vegan dishes on the menu £6 a month. The use of local ingredients is becoming increasingly important to draw in the consumers and it needs to be highlighted in the menu. The restaurants need to be careful about the pricing strategy as 3/4th of the consumers might cut back on eating out if there is a price increase. How the restaurant is being projected on social media is also a key determinant of the success since majority of the consumers rely on social media for discovery of new food outlets; the restaurants need to commission social media influencers to encourage more footfall. Consumers are increasingly getting concerned about the companies’ treatment to suppliers and employees and efforts being made on the sustainability front; nearly 93% of the consumers expect restaurants to prioritise some form of ethical solutions. The trend of plant based diets has picked up pace in South Africa and across the globe. UberEats reported a 45% rise in vegan restaurants joining the app and orders increasing by 42% in 2020
Delivery model: The full-service restaurant chains need to prioritize capability building in the online delivery and fulfilment. Digital ordering currently in the US restaurants represents 28% of all orders compared with 10% before the pandemic. Consumers are also increasingly preferring the 3rd party ordering apps over directly ordering from the restaurants. In UK, more than half the consumers (surveyed) stated to have ordered food from the service providers like Uber Eats and Deliveroo in 2021. The full-service restaurants also need to expand take out and drive thrus service which is a forte of quick service restaurants; nearly a quarter of consumers in UK would like to see more of these services. The restaurant chains, besides focusing on inhouse digital capabilities must ensure a presence across multiple 3rd party ordering apps to increase the user penetration. Following the anticipated mainstreaming of hybrid working model, a careful thought needs to be given to reimagining the catering model; newer orders are more likely to be individually packaged: box lunches, for example, instead of large trays of shared food. In the new work environment, managers with remote workers might want to send food gifts their employees for virtual parties and get togethers
In-dining experience: The restaurants need to make drastic changes to enhance the in-dining experience since consumers are coming back after a harrowing 2-year period. They need to be open to new experiments and offerings to assure consumers they are not behind times. Unlimited food and drinks is one of the biggest motivations for the consumers to visit a food outlet. Open kitchen is another major motivating factor for the consumers to visit a restaurant. Digital menu ordering using QR codes can bring about efficiency and take care of the hygiene and safety concern; nearly 12% of the consumers will be encouraged to visit a restaurant if the digital menu ordering is offered. Another interesting aspect is: while choosing a restaurant to eat in, consumers are almost 6 times as likely to be influenced by the cleanliness of a restaurant over the attractiveness of its interiors. It’s also vital to offer lot more flexibility in selecting the portion size to the consumers as they are increasingly conscious not to waste food and they would love a differential pricing accompanying this feature. Contactless payment needs to be default option to reassure the consumers about the safety and hygiene issue; as per a survey conducted by The Harris Poll, 42% of consumers believed contactless, tap-and-go payments is the safest in preventing the spread of disease
To conclude, we still don’t know about the shape Covid might take in the foreseeable future, however the planning for new normal should not take a backseat. There are plenty of whitespaces for the restaurants provided they are willing to be flexible and quick to adapt to the drastically changed situation. Covid for example has resulted in a lot of pent-up demand for celebratory get togethers and full-service restaurants are in a great position to tap this trend. Additionally, consumers’ comfortability and adoption of digital and food choices has increased manifold that makes it imperative for operators to reimagine their model across service, delivery and in-dining. Consumers also want companies to walk the talk on the sustainability and ethical conduct; it’s vital for the restaurant chains to fine-tune their communication strategy that explains in digestible formats how they are being considerate towards the environment, employees who work for them, their suppliers and consumers of all hues. Great and wide-ranging food would always remain core to the success of a restaurant, however in a new normal, the deeper appreciation of the ecosystem surrounding food and the consumers will provide the needed fuel for sustainable growth