Late-Night Fast Food Making a Comeback

After-bar snackers rejoice! Late night is back. With the resurgence of late-night activities, such as concerts and sporting events as the Covid pandemic eases, people are out and about later and looking to snack – which some restaurateurs are taking advantage of.

Several restaurant chains have reported a recovery of late-night business and, according to an article by Nation's Restaurant News, traffic during this timeframe has increased 7.5% in Q2 2023 versus a year prior.

"I'd argue that Americans' growing fondness for late-night snacks has spawned from remote work. Many jobs now offer hybrid or remote work options, which allow individuals to set their own working hours," Starr Douglas, the CEO of FrontHouz, a restaurant staffing solution, told The Food Institute. "Those who previously were limited to a 9-5 can now start their work later in the day and finish later at night."

Wendy's Seizes Moment

Wendy's has seen the potential for this daypart and recently started advertising its late-night business aggressively.

"We're very pleased with the opportunity that we see at late night," Wendy's CEO Todd Penegor said during a recent earnings call. First and foremost, we want to make sure that we've got our restaurants open till midnight or later.

"We now have 90 percent of our system's [restaurants] open midnight or later. What we really want to do is make sure there's awareness that we're open ... so we can build into customers' routines."

Positive Sign for Labor Shortage?

Does the success of late-night indicate that the labor shortage is coming to an end?

Not necessarily.

"Staff members willing to work those hours has declined," Neil Newcomb, CEO of Kelly's Roast Beef, shared with The Food Institute.

"The rise of this ‘late-night daypart' doesn't allude to any strong correlation with the labor shortage," Douglas contended. "In fact, QSRs are struggling more than ever to staff their late-night shifts, as they're viewed as less desirable and unsafe compared to daytime shifts.

"It goes back to a basic economic principle: demand doesn't directly affect supply, and supply doesn't directly affect demand," Douglas added. "There are way more factors at play here. Just because America wants more burgers at 2 a.m., it doesn't mean that more foodservice workers want to serve burgers at 2 a.m. And with more freelancing options available to this labor pool than ever before, the labor shortage for QSRs continues to persist." Food Institute Focus

Recent Spate of Restaurant Closures Confounds Industry

The pandemic was not kind to T.K. Pillan and his Veggie Grill, a small chain of 31 restaurants in the West and Boston. Now there are just 17 – and Veggie Grill isn't the only chain to deal with restaurant closures.

Blame the supply chain. Blame remote work. Blame fickle restaurant-goers.

"Our recently completed closures were a byproduct of reduced traffic patterns in high-density office trading areas," Pillan, co-founder and CEO of the chain, told The Food Institute. "As the shift to home offices and flex schedules has continued following the pandemic, restaurants across all segments have been forced to re-evaluate their location strategies, and Veggie Grill is no different."

Pillan called the restaurant closures a strategic move to "lay the foundation for future sustainability."

Small Chains Feel the Pain

Veggie Grill is not alone when it comes to restaurant closures. The situation was even more dire for Fatz Café, the Southern food chain founded in 1988. Fatz Café hit its peak in 2011 when it numbered 50 locations. Restaurant Business recently reported it has now closed its remaining 18 locations after years of negative sales.

The restaurant closures come despite increasing sales for the sector overall. Data from the U.S. Census Bureau shows eating and drinking establishments saw $91.1 billion in sales in July, up 1.4% from June and the third straight month of solid sales growth. The figure was up 11.8% from July of last year before adjusting for inflation.

"The recent upward trend in restaurant sales was even more impressive considering that it occurred during a period of slowing menu-price growth. In other words, sales growth wasn't primarily driven by higher menu prices, as it was for much of the past year," the National Restaurant Association noted in a statement.

The Associated Press reported large restaurant chains are benefiting from the increased spending with Darden reporting profit growth of 11.7% and Chipotle up 34.2%. Yum Brands and Starbucks also reported solid growth.

Underrated Factors at Play

Richard Goodall, managing director at Power EPOS, told The Food Institute a recent survey indicates restaurants overall chose to absorb the recent food inflation rather than raising prices and alienating customers.

"Power EPOS's recent study highlights a significant challenge: the intense food inflation which peaked at 19.2% in March 2023. Remarkably, restaurants and cafes have seen an inflation rate that's 78% less than food and non-alcoholic beverage inflation from July 2022 to July 2023," Goodall said.

"It's likely this is having an even greater effect on niche restaurants such as those in the plant-based sector as they fight twice as hard to compete."

Danielle Reid of the marketing firm DR and Associations said location and supply chain are big issues.

"Many business owners ... were not prepared for supply chain issues and didn't have contingency planning in place. Restaurants are having to find new vendors, deal with quality issues, and more from suppliers ranging from local/regional farmers to commercial cleaning services," Reid said.

This is particularly true of vegetarian restaurants like Veggie Grill, said Grant Gordon of Pure Greens in Phoenix.

"One reason why these types of restaurants are unable to succeed is the extent to which they must rely upon each of their main ingredients to serve their customers. Food Institute Focus

AI Chatbots Are Coming to a Food Delivery App Near You

The race to integrate AI chatbots into third-party food delivery apps is on, but major players like DoorDash and Uber Eats are holding their cards close to their chest, for now.

Neither company has publicly shared the full capabilities of their new AI chatbot feature, but software developers have uncovered some details via code hidden within the Uber Eats and DoorDash apps.

Your Personal AI Assistant

Uber's AI bot will offer food-delivery recommendations and help customers place orders more quickly, reported Bloomberg. According to wording discovered within the code, when a user launches the chatbot, they will see a message that says the "AI assistant was designed to help you find relevant dishes and more."

When it launches, the Uber Eats chatbot will prompt customers to enter their budget and food preferences to help them place an order. But while Uber CEO Dara Khosrowshahi has confirmed that the AI chatbot does, indeed, exist, it is unclear when the software will go public.

Meanwhile, Uber's biggest competitor, DoorDash – the leading online food delivery company in the U.S. with 65% of the market share – has its own AI chatbot in development.

The software, called DashAI, was first discovered in the DoorDash app and is currently testing in a limited capacity in some markets, according to Bloomberg. Presently, the system includes a warning message that the technology is experimental and accuracy may vary.

Like Uber's chatbot, DashAI is designed to provide customers with personalized restaurant recommendations based on simple text prompts. To demonstrate how one might interact with the AI chatbot, the code includes examples of questions that users could ask:

   -  "What's a place that delivers burgers that also has really good salad options?"

    -  "Can you show me some highly rated and affordable dinner options nearby?"

    -  "Where can I get authentic Asian food? I like Chinese and Thai."

Less Scrolling, More Ordering

With roughly 390,000 restaurants and grocery stores available to order delivery from via DoorDash, and some 900,000 partnered with Uber Eats, a massive appeal of AI chatbots would be the end of scrolling through this seemingly endless array of options. Instead, customers can ask for exactly what they want and AI will answer, almost immediately.

Think of these AI chatbots as an automated in-app concierge, available at all hours to make personalized recommendations.

Instacart, too, has its own chatbot powered by generative AI called Ask Instacart. The grocery delivery company began rolling out the AI-driven search tool in May of this year.

"Ask Instacart leverages the language understanding capabilities of OpenAI's ChatGPT and our own AI models and unique catalog data that spans more than a billion shoppable items across more than 80,000 retail partner locations," wrote JJ Zhuang, Chief Architect at Instacart in a statement.

Unlike the Uber Eats and DoorDash chatbots, Ask Instacart is less about deciding where to shop and more about deciding what to shop for. The search tool is intended to help discover new recipes and ingredients by fielding questions like, "What can I use in a stir fry?'"

The next time you ask "what's for dinner?," you may find yourself asking AI. Food Institute Focus

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What's Next in Precision Fermentation?

A growing number of food tech companies are using precision fermentation to create animal-free proteins in pursuit of a more sustainable future. Although still in its infancy, the market shows strong potential for future growth across multiple categories.

The global precision fermentation market is predicted to grow at a compound annual rate (CAGR) of 40.5% between 2022 – 2031, per Research Dive, with the North American market predicted to be the most profitable by the close of the forecast period.

The dairy sub-segment is expected to be the most dominant, due to growing utilization by the dairy sector for producing cheese products. The industry is also making significant strides in animal-free egg substitutes — a noteworthy trend at this year's IFT First expo — while increasing consumer preference for plant-based meat is anticipated to fuel growth over the long-term.

A Dairy Revolution?

In August, precision fermentation company New Culture reached a manufacturing milestone for its animal-free casein, enabling it to reach price parity on factory-farmed cheese within three years, reported The Spoon.

New research published in International Food and Agribusiness Management Review Journal suggests that even with a 25% price premium, a sizable number of consumers will adopt animal-free cheese, accounting for an initial 22% market share.

"The question of whether society will embrace the next generation of food has loomed over the cell-ag space for quite some time," Associate Prof. Peter Slade of the University of Saskatchewan told Green Queen. "As long as precision-fermentation dairy can achieve competitive prices, it is poised to revolutionize markets."

Key Challenges to Price Parity

At present, scale is the major limiting factor for precision fermentation.

According to Jack Ellis, Senior Associate of Agriculture & Food at Cleantech Group, many existing precision fermentation facilities have been designed with pharmaceutical production as a template.

"While such facilities can work for early-stage exploratory work and pilot-scale food production, they do not fit the cost structure for commercially manufacturing food products at mass scale," Ellis told The Food Institute.

Furthermore, contract manufacturing facilities that are optimized for food production are limited in number, "meaning that precision fermentation startups often have to compete for limited capacity."

Another key barrier to entry from the food industry side is cost of goods sold, says Monica Bhatia, a biochemistry PhD and co-CEO of food technology company EQUII.

"Precision fermentation-derived products would have a hard time creating ingredients at less than $25/kg in the next several years, whereas traditional food is for the most part using extremely cheap ingredients," Bhatia told The Food Institute.

Solutions and Outlook

To overcome scalability hurdles, Ellis notes that contract manufacturers have begun tailoring offerings for the industry, and in some cases, building structures into contracts to help startups with financing along the way.

Collaborative industry efforts and government support initiatives are also helping to create strategic partnerships and shore up funding. For instance, in February 2023, nine precision fermentation leaders across the globe united to from the Precision Fermentation Alliance, a trade organization created to serve as a voice and global convener for the industry.

But will precision fermentation technologies ever become accessible enough to curb escalating demand for animal-based protein across the globe?

Bhatia believes that the precision fermentation-derived products will most likely remain confined to highly niche or specialty ingredient categories due to overall cost of goods. "For EQUII, we have reduced cost of our protein to <10$/kg yet we face an enormous cost burden to navigate traditional retail."

To Ellis, reaching a level in which precision fermentation becomes more sustainable and economically efficient depends upon multiple factors.

"Expansion and modernization of manufacturing capacity is one part of this; feedstock availability and sustainability is another," said Ellis. "If all of this comes together then precision fermentation can certainly become a major part of the future food system alongside plant proteins and cellular agriculture." Food Institute Focus

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