Restaurant Sales Expected to Exceed Pre-Pandemic Levels in 2022

Things are looking up in the world of foodservice.

Restaurant industry sales are expected to hit $898 billion this year, up from $864 billion in 2019, according to the National Restaurant Association's State of the Industry report.

Notably, sales gains are expected to come from price increases, which are about 8% higher at quick-service restaurants and 6% higher at full-service restaurants versus 2020. At the same time, the industry is significantly smaller, by about 80,000 establishments, than in 2019.

"Restaurant recovery continues on a year-over-year basis, especially compared to last year," said David Portalatin, NPD food industry advisor, in a press release. "The industry's recovery isn't going to be a straight line moving upward based on the nearly two years of the pandemic so far; it's going to be bumpy. That said, restaurant traffic should recover 98% of 2019 visits by the end of 2022."

The majority of restaurant operators expect to maintain or grow their sales in 2022. Nearly half are forecasting higher sales than 2021 and 40% expect similar levels. Four in 10 operators expect their sales to surpass pre-pandemic numbers, the report said.

Gen Z Becoming More Influential

Meanwhile, the report also found that Gen Z consumers are far more likely to use modern innovations like alcohol delivery than other generations, noting that 70% of Gen Zers said the ability to add alcohol to a takeout or delivery order is a determining factor in their restaurant decisions, reported Restaurant Business (Jan. 31). Full Story

Additionally, more than half said they would prefer ordering and paying with a tableside tablet or mobile app, compared to service from a waiter. This is good news for Panera which just launched contactless dine-in, a new feature in the Panera Mobile App that allows customers to order on their own devices for dine-in service.

In general, four in ten Gen Zers said they think restaurants need to add more tech, but just a quarter of all adults agreed.

Labor Void Still a Challenge

Despite cash flow gains, restaurants are still facing labor pressures. About half of operators in all segments expect recruitment and retention to be their top challenge this year.

Total industry employment is expected to reach just under 15 million jobs in 2022, which is only about 400,000 above the previous year. The report also states that 80% of operators are paying more for labor versus a year ago, and combined food, labor, and occupancy costs now account for around 70 cents of every dollar generated in sales. Food Institute Focus

How Will Fast-Food Value Deals Look Different This Year?

Fast-food value deals are back, but they're not quite the same as before.

Over the past several weeks, brands such as McDonald's have returned to value messaging for the first time in several years, noted a report by BTIG. McDonald's is promoting a 2 for $6 deal, Burger King is offering a $5 Meal, and Sonic Drive-Thru is advertising a $0.99 Fritos Chili Cheese Wrap, just to name a few.

A recent report from foot traffic analytics firm Placer.ai, QSR Q4 Recap, noted that foot traffic to a number of major fast-food chains in the U.S. neared pre-pandemic levels as of December 2021, however, rising food and labor costs have caused them to adjust value deals, reported CNBC (Jan. 24). Full Story

Will Value Meals Attract Customers?

BTIG says value messaging is necessary to attract lapsed users and retain customers that are starting to feel the impact of heightened food inflation and lessened government stimulus.

That said, there is still concern that this could translate into a more aggressive value war between concepts, dampening margins further as commodity and labor costs rise.

Changes to Look For

With this in mind, here are some of the biggest fast-food deals that will look different this year, according to Eat This, Not That!:

• Little Caesars announced that it is increasing the price of its $5 Hot-N-Ready pizza to $5.55.
• Domino's $7.99 carryout will no longer include the option of ten chicken wings, but eight.
• The Big Box deal at Popeyes has gone from $5 to $6 since it was last on menus in 2018.
• Olive Garden's Never-Ending Pasta Bowl could be getting phased out for good, according to president and COO Rick Cardenas.
• Burger King is no longer offering printed coupons and is planning to reduce the volume of promotions it runs overall.

See more in the Food Institute Focus.

Analysts Expect Plant-Based Food Trend to Continue

As plant-based food continues to make inroads, industry observers expect the category to become a larger part of our diet in the years to come.

That was a key theme during The Food Institute's recent webinar titled "2022 Outlook for Plant-Based and Next Gen Protein."

Who Is Eating Plant-Based?

Presenter Darren Seifer of The NPD Group noted that 19% of consumers say they want to get more plant-based food in their diets – pandemic or not.

"Consumers actually still saw it as a way to continue to do the things they were doing," said Seifer. "Not to mention there were some supply shortages in the traditional meat markets at the beginning of the pandemic, so it filled a gap that consumers were facing."

Additionally, the majority of those eating plant-based foods are still eating animal-based products. Eighty-nine percent of plant-based users do not consider themselves vegan or vegetarian.

In fact, Seifer added that the number of vegans and vegetarians has not changed since the introduction of plant-based proteins.

When it comes to demographics, presenter Nik Modi of RBC Capital Markets emphasized that age is an important structural driver. "The younger generation is eco conscious, but the older generation is more health conscious," he said, noting that people are beginning to place a premium on what is going into their bodies.

The Importance of Variety

Unsurprisingly, plant-based burgers are still dominating the market, with in-home options having more variety than restaurants.

Here's a look into the top alternatives consumers are consuming at home:

• Burger alternatives: 39%
• Sausage alternatives: 12%
• Tofu/tempeh: 11%

What's Next for Plant-Based?

Both meat and dairy alternatives are expected to grow, according to Seifer. However, though dairy alternatives will remain a larger category, meat alternatives will see a higher growth rate.

The plant-based chicken category is also expected to grow in the future. "If some of these alternatives to chicken can capture even just a sliver of what's out there from the traditional market, perhaps the alternative chickens might rival alternative beefs," said Seifer. Food Institute Focus

Store News:

• McDonald's is expanding its test of the McPlant burger as part of its partnership with Beyond Meat, rolling out the burger at roughly 600 locations in the San Francisco Bay and Dallas-Fort Worth areas to learn more about consumer demand for the potential menu item, reported CNBC (Jan. 20). Full Story
• Meanwhile, McDonald's will sell four menu hacks popularized by its biggest fans for a limited time. It's the first time McDonald's has sold "hacks" by name, which have become prominent on social media platforms, such as TikTok, reported CNN (Jan. 26). Full Story
• Starbucks reversed course on its vaccine mandate for workers announced in early January after the U.S. Supreme Court shot down the Biden Administration's vaccine requirements for employers with more than 100 workers. The company will still strongly encourage vaccinations and booster shots, reported CBS News (Jan. 19). Full Story
• Meanwhile, Starbucks is set to open two new "Pickup with Amazon Go" locations, as the pickup-and-go concept continues gaining steam for fast food chains, reported The Street. Full Story
• Del Taco opened its new "Fresh Flex" prototype restaurant in Orlando, Florida. The tech-enabled venue features double drive-thru lanes, pickup lockers, and designated parking spaces for customers who want to park and eat in their car, reported Forbes (Jan. 19). Full Story
• Rise Southern Biscuits and Righteous Chicken announced a multi-unit franchise deal to bring its award-winning southern comfort fare to Florida. Full Story
• On The Border Mexican Grill & Cantina and franchise partner JRW have committed to expanding the brand's franchise presence in Southeast Asia including its 13th restaurant in South Korea. Full Story
• Panera has launched contactless dine-in, a new feature in the Panera Mobile App that allows customers to order on their own devices for dine-in service. Full Story
• Wendy's released two new hot honey chicken offerings with demand for hot and spicy food on the rise. From 2016-20, menu instances of hot honey grew by 187%, reported Forbes (Feb. 2). Full Story
• Ghost kitchen company Kitchen United is coming to more malls after securing a deal with the Simon Property Group. Kitchen United will appear at food courts at two additional malls this year, in Los Angeles and Long Island, but it could be the start of something much larger, reported Restaurant Business (Feb. 3). Full Story
• Wingstop launched its first a cash-free "restaurant of the future" in Dallas — joining chains like Chipotle and Jimmy John's that are experimenting with cashless locations, reported The Street (Feb. 3). Full Story

Executives on the Move:

• Red Lobster announced Patty Trevino as chief marketing officer. Full Story
• Pieology appointed Shawn Thompson as CEO. Full Story
• la Madeleine French Café has promoted Christine Johnson as its new CEO. Full Story
• Clean Juice announced the promotion of Quick Chadwick to the position of chief marketing officer. Full Story