London, United Kingdom Posted 3 years, 1 month ago
What Does The Restaurant Industry Look Like In 2021 And Beyond?
The COVID-19 crisis has forever altered most functions of the restaurant industry–how we forecast supply, how we schedule labor, how we configure our kitchens to meet off-premise demand, how consumers access restaurants in general.
Even when things started to feel somewhat “normal” again in the summer, with capacities and customers trickling back, things were different. And they will stay different.
So what does that mean for 2021 and beyond?
Well, the good news is that pent-up demand is huge. Data from the National Restaurant Association shows that 83% of adults say they are not eating on the premises at restaurants as often as they would like–up from 45% pre-pandemic. Baby boomers especially miss eating out, with 90% reporting they would like to dine at restaurants more frequently..
The not-so-good news is that there continues to be a significant amount of closures, about 17% of all U.S. restaurants and counting, and those closures are disproportionately independent concepts. That number is expected to grow as winter weather compromises the outdoor dining lifeline and as coronavirus cases tick up again.
This will, at least in the short term, create a deeper schism between the haves and the have-nots. As such, large, well-capitalized chains are circling emptying real estate parcels like vultures. Consider commentary from the last round of earnings calls as a glimpse of what’s to come:
- “Definitely the real estate market is favorable for Wingstop WING +4.9%, given the unfortunate circumstance of this pandemic ... we are seeing plenty of sites available, our solid banking relationships and generating cash flow from our restaurants is fueling further development.” – Wingstop CEO Charlie Morrison
- “Our teams are taking a look at the real estate opportunities that are presented by the fact that there are quite a few other restaurant and retail businesses that are closing out … I do believe that the shakeout and turmoil is going to create opportunity for us to further take share and continue to grow. Our teams are out there every day, looking for real estate opportunities that are opening up as a result of the pandemic.” – Domino’s CEO Ritch Allison
- “The real estate opportunities we see opening up across regions reinforces our excitement about the brand’s long runway for development in the U.S.” – Restaurant Brands International CEO Jose Cil
- “You see a number of brands that are either bankrupt or struggling and there’s going to be a lot of sites available. We want to make sure we go after the best … I think this is a great moment to be in the market and being a buyer.” – Shake Shack CEO Randy Garutti
And so on and so forth.
Most industry watchers might agree a bloated 2019 restaurant space was due for a retrenchment, but not likely for the sake of a chain-heavy landscape.
That’s not to say it’s time to write off innovative mom-and-pop concepts all together, however. Real estate costs will likely come down enough for ambitious entrepreneurial types, especially in devastated metro markets desperate to get that bustling vibe back.
There are also fresh opportunities for those not willing to hand over such a big chunk for occupancy costs, as virtual concepts have very much proved their viability in this crisis. They allow operators to start a concept from scratch by using existing (yet underutilized) kitchen space. Brinker International started doing this in the summer with its “It’s Just Wings” concept and predicts the brand will exceed $150 million in its first year–enough to secure a spot in the top 200 restaurant brands.
There seems to be quite a bit of runway with these virtual concepts, whether supported by a major restaurant company or not. Ordermark recently secured $120 million in funding and will use much of that to grow its burgeoning virtual restaurant business, Nextbite, for example. And you may have heard of YouTube celebrity MrBeast (you should have heard of him by now, he has nearly 49 million subscribers). Earlier this month, he launched 300 delivery-only restaurants, called MrBeast Burger. The virtual concept quickly became the most downloaded app on both iTunes and Google Play.
The idea of circumventing typical rent and labor and equipment costs to leverage such a concept is huge, and plenty of independents that faced closures have found a lifeline through the ghost/virtual kitchen space. In fact, the number of eateries using these concepts grew from 15% pre-pandemic to 51% in May, according to Technomic data. That momentum will continue.
Read the full article at: forbes
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