The tea leaves have settled and it’s time to read them:
- The Pandemic has provided a Petri dish in which to test third party delivery services like Grubhub, DoorDash, and Post Mates… and the verdict is in. According to Fortune Magazine, most (71%) of consumers prefer to order and pickup their takeout food from the restaurant that produces it versus from a third-party delivery app. Also, their business models are flawed and not showing any signs of changing for the better.
- If you read the Wall Street Journal, (seemingly) not a day goes by where there isn’t an article discussing pandemic-era restaurant health, whether about labor shortages, mask mandates, or social distancing. Another top topic is COVID’s impact on commuting vs. working from home. The “work from home” culture goes way beyond telecommuting thanks to co-working spaces like Industrious, Roam, and We Work where employees can meet with clients, when necessary, but otherwise work from home. Remote communication apps like Slack and Zoom have been folded into normal language and routines.
- Only 48% of restaurant owners who were forced to close during the pandemic, a list which is disproportionately made up of full-service restaurants, said they’d willingly stay in the restaurant business.
- Conservative investors have been betting on fast casual as a solution to “future proof” their investments. Look at CAVA’s and Sweetgreen’s lightening expansions into new markets in their attempt to meet post-COVID demand and as a hedge against the expansion of ghost kitchens that depend on third-party delivery apps (and I’ll say nothing of the flawed logic that Chipotle has somehow figured out a model worth replicating…but folks keep copying it, inefficient as it may be). Suburban markets are brimming with largely undifferentiated fast casual concepts that somewhat depend on the failing third-party delivery app model.
- Add to this list a report by Open Table[1] that says demand for full-service restaurant dining is rising exponentially from 2021 to 2022, and we can comfortably put together a few recommendations for your next move.
- Launch an ambitious full-service concept…in the affluent suburbs: If demand for full-service dining is roaring back, and work-from-home culture is here to stay, it might be a good time to open a full-service concept in the suburbs. Demand is high for quality dining near home, but “inventory” of restaurants is low because restaurants that once served this market have closed and don’t plan to reopen. There is a void that needs to be filled (but that void won’t last forever).
- Run a Ghost Kitchen out of your full-service restaurant: If takeout via restaurant order and curbside pickup is here to stay, full-service restaurants of the future should design space in their kitchens to service a “ghost” menu of items not served in their restaurants. Sure, they can use the same inventory so as not to bring in one-off ingredients, but the menu serves as a separate takeout restaurant altogether. The main reason full-service restaurants closed during COVID was their inability to pivot to takeout. Their menus were too expensive, and food often didn’t travel well. If a steakhouse creates a takeout concept serving amazing burger priced as a takeout burger (not some $18 burger that matches their fine dining brand), they can lend upscale credibility to their downscale brand and more easily ride out the storm without having to start from scratch to generate demand.
- Food Halls are a great way to provide variety and an inexpensive dining alternative to restaurants while remaining easier for patrons to socially distance should the need arise. Add in outdoor spaces and it can operate continuously, pandemic or no pandemic. Also, since food halls offer unique brands (non-chain), the property owner can create their own concepts as one restaurant, essentially functioning as a ghost kitchen with common area seating. The takeout feature is embedded in the architecture and prep spaces (and equipment) can be shared among concepts without the high cost of segregating space for each individual kiosk operator.
- Through the filter of a pandemic, outdoor spaces make good sense for helping a full-service restaurant remain in operation as much as possible. Rooftop and convertible dining spaces allow the owner greater flexibility to provide a safe, compliant dining space while also creating set change opportunities.
Risky as restaurants are perceived to be, people will always eat. A few years back I attended a futurist seminar where the speaker shared a trend where food ordered out will overtake food cooked in…like the way sewing your own clothes was replace by a trip to The Gap or J. Crew. Demand for food out will not wane. And despite people’s willingness to slum it with fast casual food some of the time, demand for a quality full-service experience will never die. Postmates is not likely to deliver your dinner for your 10th wedding anniversary. Companies that provide quality food with caring service – and do it with style – will be rewarded while posers will struggle. Restaurants that offer a second takeout offering can be much more pandemic resistant while food halls can behave as one giant restaurant with many occasions to use it. Mark my words, Fast casual is the false and dangerous next move while food halls and full-service, suburban restaurants are the future.
Ray Camillo – Founder & CEO, Blue Orbit Restaurant Consulting