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After reopening, what does the future hold for restaurants?

Has the business of restaurants been permanently transformed?

What does the future hold for restaurants after dining rooms begin reopening? Can restaurants come back during the downswing of the COVID-19 pandemic? These are good questions with answers that have yet to be fully formed. Social distancing and face masks do not immediately seem conducive to the on-premise dining experience. The details of reopening worry not only consumers, but also restaurant owners and operators.

According to menu-analytics firm Datassential, as of May 7, 56 percent of consumers were “very concerned” about coronavirus, and 55 percent of respondents said they’re avoiding eating out. That’s sombering news for restaurants that have built businesses on experiences within their walls. Restaurant business relies on occasions that set it apart from others. At reopening, safety considerations and restrictions will define both the style and quantity of on premises dining experiences.

Experts and industry insiders say that technology will make a positive difference. The pandemic has accelerated the adoption of restaurant technology by both consumers and operators. Takeout and delivery are here to stay; these could generate the principal revenue for many restaurants over the next few months. According to foodservice consultancy Technomic, the rise of ghost kitchens—shared, technology-driven kitchens that have no on-premise dining—will only accelerate. Moreover, it may be in some restaurant operators’ best interest to convert select locations permanently into takeout-only mode.

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Quick-serve restaurants have fared better than table-service restaurants during dining room closures, thanks to well-established experience with technology and drive-thrus. According to data-analytics firm Black Box, by the last week of April, limited-service fast-food restaurants were reporting only a 2 percent downturn in comp sales. The fast-casual segment was down 30 percent in comp sales, but that was a 20-percent improvement since the end of March. Table-service restaurants were down 62 percent from last year.

The fine dining landscape will change permanently as the segment transforms itself through convenience and technology. Sadly, the fallout includes closures. Long-renowned restaurateurs and many other independent fine-dining operators are closing up shop; for example, Momofuku closed 2 restaurants, one in Manhattan and one in Washington, D.C. For upscale operations, are ghost kitchens the answer then? We wrote recently about hospitality management company sbe and Crave Delivery.

Crave Delivery launches across the United States, debuts in Boise, Idaho
Crave will bring upscale dining to 50 markets in 2020. Photo by Jason Arquillano.

sbe is going all-in on ghost kitchens and virtual food halls with its C3 concept, hiring in advance for white-collar positions in Los Angeles. It’s partnering with and promoting major restaurant brands and chefs in this endeavor, and will work with both fast-casual and fine-dining brands. Meanwhile, Crave Delivery is serving upscale dining through its vertically-integrated solution, 16 brand partners and fleet of drivers. Crave plans to penetrate 50 markets. These are just two examples of an accelerating trend.

Design changes, seating configurations and air flow are likely on every operator’s mind. But there are more-long lasting and fundamental tactics to be embraced. As we dig deeper, this is what we are learning from experts:

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  • Pundits say that consumers’ memories are short, but the foodservice landscape may have changed permanently. In a recent webinar, Darren Tristano, CEO of Foodservice Results, said that a sort of evolutionary event has occurred and that up to 13 percent of restaurants would close as we head toward 21 percent unemployment. The industry was previously oversaturated and will return to a new equilibrium. Add to that customers’ concern for safety and it will be a long road to foodservice recovery.
  • For years, food retailers have been encroaching on restaurants’ turf, but now it’s time for payback. Restaurants are getting savvy about convenience, offering meal kit delivery, family meals, curbside grocery, and pantry essentials. Given the right circumstances, restaurant-provided grocery could be successful in the long term.
  • Convenience is king, but safety has taken consumers’ adoption of technology in ordering pick-up and delivery to a whole new level. For non-chain operators, the tide is turning toward regional and self-delivery as this is often the most profitable delivery to operate; just ask pizza operators. Restaurants and consumers alike yearn for delivery fees that make financial and common sense. Most independent operators make only 5 to 15 cents on the dollar in a good year, and many others fall far below. National third-party delivery fees rub against the grain of economics of independent operators, and are ripe for disruption.
  • According to Melissa Wilson, principal of Technomic, nearly all forms of takeout, including curbside, third-party restaurant delivery, self-restaurant delivery, drive-thru and pick-up have contributed equally to restaurants’ sales during the pandemic (20 percent-30 percent). She said on a recent webinar that restaurant operators should expect to operate a “dual-demand” business for some time to come.
  • Financial acumen will serve restaurateurs well. Detailed planning will help them sanely enter a chaotic and frenzied reopening drive for revenue. Managing PPP loans well will be a fine art, and CPAs and accountants will become the next set of heroes.
  • Datassential and Technomic have recommended that safety and sanitation form a big piece of customer communication, to be hammered home via multiple channels.
  • Restaurant operators are examining their expenses with a fine-toothed comb. The fundamental disciplines of expense management, labor management and food costing will rise to utmost importance. If even a large restaurant company like Lettuce Entertain One could find instances of paying for unused services and technology, then this is an opportunity for restaurateurs at every level to examine their spending closely.
  • Mobile & online ordering, technology adoption, contactless payments and POS integration will be new but necessary vocabulary for some operators. The National Restaurant Association projected that in the next decade, technology-centric careers will be part of the broader restaurant landscape, not just at big chains.

There are multiple, big challenges ahead, but restaurant operators are strong and most will endure. Experts suggest restaurant operators seek help and tread wisely and carefully.

Photo credit: Lorenzo Mitil (preview image)

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