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NPD Exec: Restaurant Operators Must Lean Into Off-Premises Opportunities

Prior to last year, David Portalatin noticed it all the time.

In his hometown of Houston, restaurant customers sought "Instagrammable moments," in which they snapped photos of tasty-looking food and friends with whom they were enjoying an evening.

Then, the coronavirus rendered those moments few and very far between. But the restaurant "experience" – in which consumers are seeking memorable moments while dining out (or at least getting takeout food) – is coming back. Portalatin, The NPD Group's industry advisor for the food and foodservice industries, certainly thinks as much.

"We've seen all kinds of evidence that fine dining has come roaring back," Portalatin said during a webinar hosted by DMA in conjunction with The Food Institute, which examined consumers' current experiential spending and attitudes amid the lingering pandemic.

Prior to 2019, countries like the U.S. noticed a clear shift toward experiential spending on categories such as travel, live events, and in-person experiences, with such activities generating over $470 billion in annual consumer spending. And, while much of that spending ground to a halt over the past 18 months or so – and challenges remain – Portalatin highlighted a few reasons for optimism.

Portalatin noted that consumers have increased spending on entertainment this year. According to NPD research, average spending over the past six months rose to $858, compared to $715 during the same period a year ago. Plus, the group's research signaled that 90% of Americans are entertaining themselves this year by watching TV and movies.

That, Portalatin indicated, offers an opportunity for restaurants to take advantage of modern consumers' habit of "home-centricity."

He said that between now and the end of 2022, NPD's outlook "is that there will be continued recovery for the restaurant space." But he added: "the American consumer is engaging restaurants, especially quick-service restaurants, differently than before. Pre-pandemic, it was usually one person...Now, that same occasion is more about a complete meal-solution for everybody that's in a home."

And that, he noted, is driving a shift toward more purchases of premium-price menu items, more main entrée items, and fewer beverages.

An NPD survey from September showed that 63% of respondents said they were comfortable dining out. NPD's research also showed that, throughout 2021, consumers have slowly but steadily returned to stadiums and bowling alleys in addition to restaurants.

Still, several factors could limit foodservice's recovery according to Portalatin, including factors such as:

• Inflation: Food away from home is increasing faster than retail, making the relative cost of a grocery basket more affordable, according to NPD findings.
• Restaurant unit count: From the start of lockdowns in March 2020 to December 2020, the net unit count for commercial restaurants declined more than 41,000 units.

That said, one of the final slides shared by The NPD Group during the webinar predicted that restaurant traffic will recover to 98% of pre-pandemic levels by the end of 2022.

So, while issues like labor shortages are giving restaurant operators headaches now, the year ahead should be a more enjoyable experience, Portalatin said.

"Many quick-service restaurant operators are already back," he said. "There are many that are double digits ahead of where they were in 2019." And, for those fortunate restaurants, he added, it's largely because "they've really leaned into these off-premises occasions and the home meal-replacement opportunity." Food Institute Focus

Foodservice Distributors Face Challenges Despite Better 2022 Outlook

Although the 2022 prospects for foodservice distributors are on the rise, the industry still faces several challenges, according to Technomic Principal Wade Hanson.

Hanson, speaking on a webinar hosted by the International Foodservice Distributors Association (IFDA), said these challenges will force distributors to form closer relationships with their customers.

Prospects for Recovery in 2022

Hanson expects to see continued recovery in 2022, with foodservice distribution to senior living facilities, supermarket foodservice outlets, fast casual concepts, and quick service restaurants showing the strongest gains. Meanwhile, he sees weaker recovery in recreation, fine dining, caterings, and transportation.

The Challenge of Finding Workers

Hanson said there was an 81% increase in distribution job openings in June 2021 when compared to March 2020, showing just how difficult it's been filling positions since the start of the pandemic.

More telling, he noted that employees appear to have the upper hand in the current environment. In March 2020, 28% of total employee separations from a distribution company were initiated by the employee and by June 2021, the number jumped to 73%.

Hanson said warehouse technology improvements could help bridge this gap, with a special focus on robotics. However, this change won't happen overnight, and in the near-term, employers need to continue searching for human workers.

Labor Challenges for Operators Affect Distributors

Hanson said foodservice distributors are also aware of the challenges foodservice operators face in the current business environment.

Among restaurant operators, employee recruitment, retention, and training are top of mind, according to Hanson, who noted labor costs were also becoming more prevalent.

Two-thirds of surveyed operators noted the stress level among restaurant staff was high, with 56% saying it was difficult for employees to take time off. Fifty-five percent of employees are worried co-workers would leave the job, and 35% reported they were looking to leave the job themselves.

In short, employee morale is low, and operators are exploring a variety of ways to combat low staffing. Thirty-nine percent reduced operational hours, while 35% reduced seating capacity, according to the survey. Sign-on bonuses were also popular.

Product Shortages Stress Operator-Distributor Relationships

Product shortages are also a major challenge, with operators citing shortages of poultry (47%) and beef (45%), among other products.

Hanson also addressed rising costs on menu prices, which were up 4.7% month-over-month in August – representing the highest rate since 1980. Although consumers accepted the increases, Hanson said many in the industry were wondering how long consumers would absorb higher costs before pushing back.

Technomic research showed 55% of restaurant operators reported a change in distributor sales representative (DSR) behavior, with visit frequency declining. Seventeen percent of surveyed operators noted their DSR was replaced, reemphasizing Hanson's earlier points on the labor situation. Food Institute Focus

Industry Insiders: Time to Rethink Compensation Packages in Hospitality Sector

Recently released October statistics from Indeed Hiring Lab indicated fewer people are looking for jobs in the hospitality-tourism sector – nearly 24% fewer than in February 2020 when the pandemic first took hold.

Even with restaurants promising higher wages and more benefits, the number of searches fell nearly 10% from September to October. Drilling down to food preparation and service, interest was off 18.3% compared to February 2020 and nearly 5% from September.

Even among those without jobs, active overall job searches fell nearly 4 points from September to October as people reassessed priorities and decided to move to other industries.

Here's a look at the factors at play...as well as a few possible solutions for the food industry:

Workers Seeking Online Options

The restaurant industry has developed a reputation for employing people just part-time to avoid paying overtime and bestowing benefits, and for erratic schedules. Though such jobs traditionally have been a starting point for many, the pandemic has highlighted online options that often pay more with less exposure to the public.

So, the question is: What can the food service and preparation industries do to attract new workers and ease the crunch?

"A lot of organizations have been focused simply on the monetary aspect of their wellbeing: Are we paying them enough? Do we need to give them better benefits?" Claire Brummell, a human resources consultant with The Universal Needs, told The Food Institute.

"But if you want to lure people back to an industry that they have chosen to walk away from, you need to look at all aspects of their needs." This includes safe working conditions, training, opportunities for growth and a way for them to feel they have some control over their lives.

Hope, Transparency Sought

PeopleFinderFree co-founder Eden Cheng said the one thing employees value more than higher pay and improved benefits is the chance for career development, something that is especially important to low-wage workers.

"They want to be confident that there is a chance that they can grow their skillset and climb up quickly, whether it be through on-the-job mentoring or training initiatives," Cheng said.

Restaurant consultant Mark Moeller suggested part of the problem lies in the way jobs are advertised, saying ads should be written to make sure the right people are being targeted.

"Do you really need a line cook? Or is it really a short order cook for breakfast? Small changes in language can make a difference," he said.

Security Sought, Too

Chad MacDonald, a 20-year veteran of the restaurant industry said it's no wonder interest in low-paying food industry jobs has tanked considering the behavior of some customers.

"While a rude or demanding guest wasn't rare before, since the pandemic, the number of people who feel entitled to harass and attack restaurant and retail workers has increased exponentially," MacDonald said. "The sheer amount of vitriol directed at service workers these days is off the charts."

In addition to reassessing their priorities, hospitality workers may have been scared off by the realization their industry could be shut down arbitrarily by the government, said John Frigo, ecommerce manager for Bestpricenutrition.com.

"I think a lot of people are going to move to jobs that may not pay much more but are better work environments, e.g, someone who worked in food service maybe goes to get a job working in a call center for the same money but at least they have a 9-5 schedule, don't work holidays, and will get a steady 40 hours per week," Frigo said.

Key Option to Consider

If there simply aren't enough workers available, reducing the number of outlets may be necessary for some restaurateurs, said Andrew Fiebert, founder and CEO of Lasso.

But here's another option:

"I talk to pizza operators from all over the country. The solution is this – smaller restaurant footprints, tighter menus and larger delivery areas," said Eric Baum, vice president of sales and marketing for Perfect Crust 

Pizza Liners.

"The employees are not coming back, and restaurants need to adapt," he added. "Consumers, due to COVID, have changed the way they dine, and restaurateurs haven't quite adapted yet." Food Institute Focus

Store News:

• Panera has made a climate-change pledge to become "climate positive" – removing more carbon from the environment than it emits – by 2050. The chain said it'll set regular, smaller goals to meet between now and then, with several short-term targets to achieve by 2025, reported Restaurant Business (Oct. 20). Full Story
• Chili's parent company Brinker International is raising prices by 3% to 3.5% to combat higher labor and food costs. The owner of more than 1,600 casual-dining restaurants will institute the hikes for fiscal year 2022 in hopes of improving operating margins that fell by more than a percentage point in the first quarter, reported Restaurant Business (Oct. 20). Full Story
• Firehouse Subs was acquired by Restaurant Brands International (RBI) for $1 billion, expanding RBI's portfolio which already includes Burger King, Popeyes Louisiana Kitchen and Tim Hortons. Following the acquisition, Firehouse is expected to maintain its headquarters in Jacksonville, Florida, and CEO Don Fox and CFO Vincent Burchianti are expected to remain with the company, reported CNBC (Nov. 15). Full Story 
• Peter Piper Pizza acquired 10 of its franchise locations in Arizona and will open two new locations in San Antonio, next year. Full Story
• Jack in the Box signed seven development agreements during Q4 2021 to open a total of 47 restaurants. Full Story
• Dickey's Barbecue Pit will open 15 more locations in Singapore over 10 years. Full Story
• Buffalo Wild Wings is testing a wing-making robot. Dubbed "Wingy," the automated fry-cook innovation will debut at the sports bar chain next year, reported Restaurant Business (Oct. 21). Full Story 
• Salad chain Sweetgreen, which filed to go public on the New York Stock Exchange, plans to double its footprint over the next three to five years, reported CNBC (Oct. 25). Full Story
• Chipotle Mexican Grill is becoming the first restaurant brand to open a virtual location on Roblox, an online platform and storefront where users go to play games. Full Story 
• Subway is set to become the first QSR to offer a one-net carb bread option. The sandwich chain announced new zero-sugar bread will be tested in a handful of markets soon. Customers will be able to order artisan Italian bread that also has 12 grams of protein, and 26 grams of fiber per 6-inch sandwich. Full Story
• Popeyes will open 90 restaurants in Romania over the next 10 years via development deal with Sterling Cruise. Full Story
• DIG raised $65 million in a Series F funding round, which will enable the restaurant group to reopen locations closed due to COVID-19 and double its portfolio to 60 restaurants over the next three years. Full Story
• McDonald's is partnering with IBM to develop artificial intelligence technology for its drive-thru lanes. IBM will acquire McD Tech Labs as part of the alliance, reported CNBC (Oct. 27). Full Story
• FAT Brands will pay $130 million to acquire Fazoli's, adding the largest premium QSR Italian chain in the U.S. to its portfolio. Full Story
• Burger King is giving out cryptocurrency to loyalty members. The chain will give out mostly dogecoin, but some etherium or even bitcoin, to BK Royal Perks members who spend $5 or more, reported Restaurant Business (Nov. 1). Full Story 
• Wingstop's CEO said the price of chicken wings is "trending in the right direction." Charlie Morrison noted that wing prices have come down 40 cents per pound since their peak. Still, Wingstop is raising menu prices by another 4% to 5% on supply constraints, reported CNBC (Nov. 3). Full Story
• Burger King will open 65 locations in Quebec and Saskatchewan, Canada over the next five years and remodel 60 existing restaurants. Full Story
• Nathan's Famous entered Saudi Arabia with seven kiosks and will add three more in coming weeks. Full Story
• Inspire Brands announced the launch of a multibrand ghost kitchen in Atlanta that will serve customers from its portfolio of fast-food companies including Arby's, Buffalo Wild Wings, Jimmy John's, Sonic Drive-In and Rusty Taco. The concept, dubbed Alliance Kitchen, will allow customers to order from both third-party aggregator platforms and the brands' apps, reported CNBC (Nov. 9). Full Story
• Shake Shack is planning for its largest expansion to date, with up to 50 units in 2022, reported eatthis.com (Nov. 6). Full Story
• In-N-Out may expand to Florida after owner Lynsi Snyder-Ellingson spoke with Governor Ron DeSantis. Although the company's supply chain is West Coast-centric, DeSantis made the argument that the state's farms and cattle ranches could supply the company if they decide to expand into the state, reported SF Gate (Nov. 10). Full Story
• DJ Khaled, the Emmy award-winning producer and record executive, has partnered with ghost kitchen operator Reef Technology Inc. to create Another Wing. The delivery-only model is launching simultaneously with more than 150 kitchens in five countries: the U.S., the U.K., Canada, France, and the United Arab Emirates, reported Bloomberg (Nov. 11). Full Story 
• Orangewood Partners is acquiring Pacific Bells, one of the biggest Taco Bell franchisees in the U.S. with over 250 locations. Full Story

Executives on the Move:

• Walk-On's Sports Bistreaux hired John Gordon as director of real estate. Full Story
• Zaxby's appointed Bernard Acoca as CEO. Full Story
• Dave's Hot Chicken promoted Jim Bitticks to president and COO. Full Story
• Torchy's Tacos CEO GJ Hart is retiring effective immediately, prompting founder Mike Rypka's shift to interim CEO, reported Restaurant Business (Nov. 5). Full Story
• QDOBA Mexican Eats promoted Karin Silk to Chief Marketing Officer. Full Story
• JuiceLand named Mark Jacob president. Full Story

Robotics Advancing Across Foodservice, Delivery, Agriculture

What seemed like something straight out of science fiction just a few years ago is quickly becoming a reality for the food industry. Robots are now doing everything from picking, preparing and delivering supplies.

With that, The Food Institute decided to take a closer look at some of the companies making inroads in the food robotics space:

Delivery

Walmart has started using fully driverless trucking in its online grocery business, aiming to increase capacity and reduce inefficiencies. Walmart and Silicon Valley start-up Gatik said that, since August, they've operated two autonomous box trucks — without a safety driver — on a 7-mile loop daily for 12 hours, reported CNBC (Oct. 8). Full Story

Additionally, hundreds of robots are now navigating college campuses and city sidewalks. While robots were being tested in limited numbers before the pandemic, the companies building them say labor shortages and a growing preference for contactless delivery have accelerated their deployment, reported ABC News (Nov. 2). Full Story

Some recent developments include:

• Starship Technologies, which has more than 1,000 robots in its fleet, says it will deploy hundreds more soon. The bots currently deliver food on 20 U.S. campuses, with 25 more on the way.
• Kiwibot, now has 400 robots making deliveries on college campuses and in downtown Miami.
• Google was a surprise investor in autonomous driving platform Nuro during a recent $600 million Series D fundraising round, according to a Forbes report (Nov. 2).
• Serve Robotics, an autonomous sidewalk delivery company, announced a partnership with Uber Technologies. The on-demand robotic delivery service will be available to Uber Eats customers starting in Los Angeles early next year.

Foodservice

Robots are taking over restaurant kitchens, too.

Miso Robotics – a foodservice automation startup – unveiled the newest model of Flippy, its robotic kitchen assistant. Full Story

Based on learnings and feedback from White Castle, which deployed the original Flippy to a location the Chicagoland area in 2020, Flippy 2 takes over the work for an entire fry station and performs more than twice as many food preparation tasks compared to the previous version including basket filling, emptying and returning.

In addition to White Castle, Miso Robotics has several other pilot agreements with national brands in place, including one with Inspire Brands which is testing a wing-making version of the robot for Buffalo Wild Wings, dubbed "Wingy," at its Innovation Center in Atlanta, reported Restaurant Business (Oct. 21). Full Story

Wingy will be installed in an Inspire ghost kitchen before making its way into an actual Buffalo Wild Wings next year, according to the companies.

Agriculture

Iron Ox has unveiled a new robot for moving and monitoring indoor farming crops, reported TechCrunch (Nov. 2). Full Story 

The mobile robot, named Grover, is capable of lifting and moving up to 1,000 pounds of payload.

Dutch robotics company Priva unveiled Kompano, a pruning robot that can be deployed in a greenhouse alongside human employees, reported Fresh Fruit Portal (Oct. 19). Full Story 

The company says it is the first robot in the world that offers an economically viable alternative to de-leafing tomato plants by hand. The company plans to expand the Kompano line with a leaf cutting robot for cucumbers and picking robots for tomatoes and cucumbers. Food Institute Focus

November Sales Expected to Slow

Off-premises orders continued to drive sales growth in October, but sales are expected to slow in November, according to Black Box Intelligence. Black Box reported comparable sales were up 5.96% in October when compared to the month in 2019, but that comparable traffic dropped 6.36% during the period. Full Story

Meanwhile, The NPD Group reported total restaurant visits rose 5% during the year ending in September compared to a year earlier and dropped 6% from September 2019. While restaurant visits continue to improve overall, dine-in or on-premises traffic continues to struggle compared to pre-pandemic levels. Full Story

Additionally, lunchtime restaurant visits are recovering, according to new data from The NPD Group. Online and physical visits increased by 4% in the year ending September 2021. Full Story

Selected Results:

• Chipotle Mexican Grill reported quarterly earnings that crushed Wall Street's estimates as its menu price increases helped the chain weather higher costs. Net sales rose 21.9% to $1.95 billion, beating expectations of $1.94 billion. Same-store sales climbed 15.1%, topping StreetAccount estimates of 14%, reported CNBC (Oct. 21). Full Story
• McDonald's reported quarterly earnings and revenue that topped analysts' estimates as its international sales bounced back, despite Covid-19 resurgences in some markets. Net sales rose 14% to $6.2 billion, topping expectations of $6.04 billion. Worldwide, same-store sales climbed 12.7% from a year ago and 10.2% on a two-year basis, reported CNBC (Oct. 27). Full Story
• Yum Brands reported quarterly earnings and revenue that topped analysts' expectations, fueled by strong demand for KFC's fried chicken. Net sales rose 11% to $1.61 billion, topping expectations of $1.59 billion. Across all of its chains, same-store sales increased by 5%, reported CNBC (Oct. 28). Full Story
• Odd Burger Corporation, one of the world's first vegan fast-food chains, saw a 41% increase in sales over the previous month in October. The openings of new locations in Canada contributed to the success, according to the company. Full Story

Did you know that shipments of plant-based proteins to U.S. restaurants and foodservice outlets grew by +16% in April 2021, compared to April 2019?

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Source: The NPD Group, Press Release, June 9, 2021

State of the Restaurant Workforce 2021