As is the trend here in the blogosphere, today we’re going to talk about restaurant industry trends. I stumbled upon a pretty insightful article by a guy named Aaron Allen, in which he discusses the ones he thinks will reshape the industry as a whole. He’s a restaurant consultant who clearly knows what he’s talking about and was able to write coherently. I’m guessing he was working without an editor, though, because the post is long. Really long. Like, your-call-is-important-to-us-please-stay-on-the-line long. But he raises some very good points that restaurant owners need to be aware of. Unfortunately, if you’re reading this you’re probably a restaurant owner and don’t have the time to read his piece. As a service to you, the reader, and to Aaron Allen, the consultant, I’m going to break down what he has to say in a more concise manner. The way I see it, the trends he identifies lead to the conclusion that now is a very good time for small, independent eateries—and the future looks even better.
First, here are the 10 trends Allen sees as disruptors of the status quo:
- Cannibalisation. No, we will not be seeing a proliferation of fast-casual human sacrifice chains. Rather, Allen contends that the industry is eating itself; certain segments are growing at a much faster rate than others and threatening to overtake them. Specifically, he points to the quick- and limited-service type restaurants as a threat to fast food, which has remained stagnant or even lost ground in the past decade.
- The Chipotle-fication of the industry. The assembly line technique of food prep isn’t new, but Chipotle showed it could be done with fresh and ethically sourced ingredients. Interesting side note on this one: Chipotle showed it could be done, until they showed it couldn’t. 2015 saw outbreaks of Norovirus, Salmonella, and E. coli at many of their locations. This is because they’ve grown faster than their safety policies could adapt. In other words, they might have shown that “fresh and ethical” has its limit in the marketplace.
- Some chains are just too big. Piggy-backing off the first item is this fact of huge chains like McDonald’s being unable to respond quickly enough to the changing landscape of customer desire. Throw a dead fish in between a house cat and a bear, and the house cat wins every time.
- Consumers are more aware of where their food comes from. And they’ve learned it’s horrifying. Crowded feedlots, petro-chemically assisted agriculture, and laboratory created flavourings turned out to be fairly unappealing to people once they learned about them.
- Fewer & Fresher Ingredients. As a direct result of a more educated consumer, restaurants tend to do better when they advertise the fresh and whole-food nature of their menu. The ones that make good on their promises will do even better.
- Advertising to the consumer mindsets rather than demographics. As an example, this means appealing not necessarily to young audiences, but to those who identify as young. To be honest, this isn’t a new practice at all and I’m not sure why it’s included on this list. If psychographically targeted advertising could reshape the restaurant industry, it would have done so 40+ years ago when Coca-Cola declared its desire to teach the world to sing in perfect harmony.
- Restaurant revenue now exceeds grocery store revenue. In general, people like food but don’t much care for preparing it. But fast food no longer holds a monopoly on low-cost meals, and people can now hit up quick serve restaurants and eat a meal for under $10—without poisoning their bodies in the process.
- The cost of a new location for chain restaurants is no longer worth it. Another segment that’s catching shrapnel in the explosion of quick- and limited-serve restaurants is the casual dining chain. Places like TGI Fridays or Applebees have new unit startup costs in excess of $2 million, which is hardly worth it for an average check size of under $20. Compare that with a place like Chipotle, which costs around $800K and averages about $13 per check in far less time.
- Industry investment. My guess is that if humans only had four fingers on each hand, Aaron Allen would have written an article called Eight Trends Reshaping the Industry—and this item along with #5 wouldn’t be needed to fill out the list. Noting that we live in the crowd funding era, he then states investment banks are the largest restaurant companies in the U.S. This is a complete non-sequitur, and not worth the time to find its meaning. Because we’re just about to the end of the list, and it’s the one that ties everything together.
- Mobile technology. As devices get smaller, more powerful, and less expensive, the technology gap is closing between large and small companies. The tiniest of cafes can have the same marketing reach and sophisticated tools as billion dollar multinationals.
Summing all this up, we can construct a checklist of desirable qualities for a restaurant to thrive in this new paradigm:
- A fast-casual, quick service setup
- Serve a specific niche with a limited number of fresh and ethically sourced ingredients
- Assemble-to-order items based on various combinations of ingredients
- Single location, or modest regional chain
- Mobile infrastructure in place
- High tech tools to efficiently manage and operate each location
From all this data, we can only arrive at one conclusion: the future of the restaurant industry is going to favour smaller, more agile establishments—the types of places that can more reliably provide fresh, local ingredients with quick turnaround times and the latest technology to manage it all. So, congratulations Kounta customers! You’re more than halfway to success.