Automation, Marketing to Gen Z Key Themes at Restaurant Show

Members of the restaurant industry gathered in Chicago last month at the National Restaurant Association Show for a closer look at the latest culinary trends. Major themes included automation, marketing to Gen Z, and plant-based protein.

Here's a closer look:

Automation

The coronavirus pandemic has, of course, amplified the challenges of hiring and retaining restaurant workers. As a result, in Chicago technology providers offered up multiple ways to improve customer experience and increase productivity.

During one event panel, speakers from Lenovo, Deloitte Digital, NVIDIA, RadiusAI, attn.ive, and Vistry discussed how artificial intelligence (AI) and neuro-linguistic programming (NLP) can be used to modernize the customer experience. "With AI, any automation capability you can do in physical space, you can automate" such as a drive-thru where the robotics arm can grab a cup of coffee and deliver it to a customer, said Deloitte Digital executive Mahesh Chandramouli.

He added, "AI is not a science experiment. It is tangible value to you guys."

Robotics companies at the show touted robots' ease of use, increased productivity, and reliability. The multi-cuisine robotic chef from Nala Robotics uses AI and machine learning to learn to cook nearly any cuisine.

Middleby's booth, meanwhile, featured L2F's FryBot that uses automation to streamline and improve safety in deep-frying. Numerous companies including Segway Robotics and Pringle Robotics offered autonomous serving robots that can serve and bus dishes. At PepsiCo's booth, Bear Robotics partnered with PepsiCo to feature Servi Blue robots that can work a 9-hour shift and log 19 miles.

SoundHound AI, Inc. launched its SoundHound for Restaurants voice assistant automated phone ordering system that uses conversational AI technology to answer phone calls with zero wait time and handle multiple calls at the same time.

Gen Z

Limited-service restaurants are courting Gen Z (those born between 1997 and 2012) as this cohort of consumers likes to eat out and sets culinary trends for others.

According to Coca-Cola Co.'s 2021 DINE360 study, Gen Z makes more restaurant trips than any other generation, with 22% of Gen Z visiting restaurants 4-6 times per week.

This digitally-native generation is more apt to place their takeout order through restaurants' mobile apps than other generations and is more likely to use drive-thru and delivery. Gen Z also values food indulgence and is more likely to choose beverages viewed as treats, such as iced coffee.

Gen Z patrons can buy made-to-order coffees (iced and hot) through Coca-Cola's new Costa Smart Café. The autonomous machine is designed to create over 100 drinks before human help is needed.

Botrista's DrinkBot creates consistently crafted cold beverages such as smoothies for Gen Z consumers through the use of an algorithmic dispensing technology.

Snackpass is a mobile order pickup app designed to bring repeat business to QSRs through its loyalty program and social features. Snackpass allows users to see what their friends are ordering, place group orders, and gift meal credits to friends.

One of Gen Z's favorite drinks is bubble tea. At the show, bubble tea specialists Possmei International and Bossen exhibited their full range of teas, tapioca pearls and popping boba juice balls. Pecan Deluxe Candy Co., meanwhile, introduced Popping Boba as "flavors that pop" with an edible transparent shell.

Additionally, Pocas International Corp. featured ready-to-drink Taiwan Classic Bubble Tea in a canned format. Food Institute Focus

Drive-Thru or Dining Rooms? QSRs, Casual Dining Going Different Routes

Hot dog stands and early hamburger joints had one thing in common besides fries and colas: They were walk up counters where customers would place their orders and stroll off with food to be consumed either in a car, along the street, or at home. There was no indoor seating.

That concept may be returning – with a twist: it looks like fast-food restaurants will be relying more heavily on the drive-thru.

At the same time, casual dining establishments are coming up with strategies to get diners to return to the indoor experience.

The pandemic shifted consumer behaviors while a tight labor market and rising real estate prices have forced restaurants to streamline operations.

Taco Bell Leads Innovation

Taco Bell announced its new restaurant design – dubbed Defy – earlier this month in Brooklyn Park, Minnesota, a purple, two-story building catering to drive-thru customers. Food will be delivered by a vertical lift system to customers who order through an app or through the traditional drive-thru process.

"It is a creative, technological solution for a faster, contactless experience for as many Taco Bell fans as possible and is poised to be the future of quick-service dining," said Lee Engler, co-founder and CEO of Border Foods, a Taco Bell franchisee headquartered in Minnesota.

Taco Bell is not alone. Portillo's is testing a drive-thru-only location in Joliet, Illinois, Jimmy John's opened its first drive-thru-only site in Florida earlier this year, and coffee-and-doughnut chain Tim Horton's has developed a drive-thru only prototype, Restaurant Business reported (June 8). Full Story

Schlotzsky's new prototype downsizes it's 3,300-square-foot eateries to just 1,000 square feet with a walk-up window and no indoor seating. Wingstop is not only eliminating indoor seating but cash too, and Chipotle is going one better, eliminating the counter.

Restaurant Business said McDonald's and Del Taco also are planning drive-thru-only concepts, and Subway is taking the unique step of testing vending machines as part of a broader "grab-and-go" strategy to use existing locations as bases for sales in multiple spots.

Risky Endeavors?

Eric Fernandez, R&D chef with The Culinary Edge, warned fast-food outlets to think twice before making drastic overhauls.

"It's telling that chains like Chipotle and Starbucks, known for years for their lack of a drive-thru, have begun to position themselves with this new style, and speed of service," he said.

"In a recent restaurant consumer insights survey performed by Revenue Management Solutions, 80% of respondents visited a drive-thru at least once weekly during Q1 of 2022, down slightly from 86% in Q4 of 2021," Fernandez added. "This, compared to 74% of respondents dining-in at least once, up from 70% in Q4 of 2021. Higher gas prices have historically had a negative impact on drive-thru sales and that is continuing to show moving into 2022 but can't be pinned as the only cause."

The Outlook for Casual Establishments

Justin Worster, vertical lead for restaurants and senior performance strategy manager at VDX.tv, said it's encouraging that casual dining establishments are doubling down on bringing customers inside.

"The bottom line is that casual dining brands should not look to mimic fast-casual competitors that have done away with their dining rooms and instead should be leaning into the quality of their service and their rotating food and drink options that fast-casual brands cannot replicate due to their smaller footprint," Worster said.

Applebee's announced it would try to lure late-night diners back inside with a half-price promotion on appetizers. Last month, the casual dining chain announced a $5 cocktail promotion. Both promotions are in-store only.

Chili's Grill & Bar is attempting to draw diners by shuffling its menu, adding new dishes and giving consumers the option of ordering a non-alcoholic drink, appetizer and entrée, starting at $10.99.

"Brands that focus on overall guest experience, the whole package, and differentiate their food offering from drive-thru, will have the advantage in the dine-in space. But they will have to be creative to succeed," Fernandez said.

Bo Peabody, co-founder and executive chairman at the restaurant discovery app Seated, said if a recession hits, dine-in restaurants may benefit.

"Casual dining was created to offer the full-service restaurant experience at a much lower cost, a luxury that could be enjoyed by the mass market weekly or monthly," Peabody said. "Nearly 12 years of a bull market and expansionary policy have led to that luxury being overshadowed by other more expensive items.

"We may be returning to a time when the average family considers a weekly night out at Chili's to be a luxury," he added. Food Institute Focus

Analysis: How Severely Will Inflation Impact Small Restaurants?

Half of all small business owners and nearly three-quarters of restaurateurs fear inflation will drive them out of business this year, the Alignable Small Business Inflation Poll indicates.

"It's the mom-and-pop diners and the small, family-run restaurants that were, and are running just above cost. Inflation and increasing costs are cutting their already tight margins to the bone, and they'll be the first to disappear when things really start to bite," James Watts, CEO of Own The Grill, told The Food Institute.

Bob Vergidis, founder of the multi-restaurant platform pointofsale.cloud, said restaurants that offer limited menus would likely be most affected.

"For example, the price of wings has soared recently. It's difficult not to pass those costs to your customers if your restaurant is selling primarily wings," Vergidis said. "Of course, the answer in those cases is product substitution, but it creates a lot of stress when restaurants have spent a lot of time marketing themselves as one thing and then having to tell customers that they no longer carry that item, or the price has increased significantly."

Consumer prices are running more than 8% above last year, with away-from-home food prices approaching 11%, the May Consumer Price Index showed. Real disposable income increased just 0.1% in April.

The result is consumers eating at home more.

Rising cost for labor, wheat, flour, proteins and vegetables all are squeezing restaurant owners. Add in supply chain issues that make some ingredients harder to get and a tight labor market, and you have a situation where staying afloat becomes all but impossible.

"People can't afford to go out to eat and the wages that restaurants pay aren't enough to live on, and with no customers, there are no tips," Watts said. "No one can afford to work in restaurants, and no one can afford to eat in restaurants."

During the pandemic, government assistance helped some restaurateurs. In April, the National Restaurant Association asked Congress to adopt the Small Business COVID Relief Act of 2022, which included $40 billion for the restaurant revitalization fund, noting restaurant industry growth in the first quarter was the smallest since 2020.

"With the looming threat of another [Covid] variant and growing challenges of inflation for both operators and consumers, the economic boost [the fund] could provide for ... 177,000 restaurants would reach far into our communities," Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association, said in a press release.

However, the bill died in the Senate May 19, with Republicans balking at Democrats' plans to treat the funds as emergency spending. Just 101,000 of the 278,000 restaurants that applied for funding from the original $28.6 billion emergency fund actually received funding relief.

"By leaving 177,000 without aid, the federal government essentially picked winners and losers, among direct competitors, based on chance, not need," the NRA said.

"For the longest time, the restaurant success formula had been to keep food costs at 30%, and labor costs at another 30%, leaving 40% on the table for fixed costs and profit," Vergidis said. "Looking at it from this perspective, it becomes clear where the pressure is, and it leads to some interesting decisions for operators. The choices are re-engineer the menu, use technology to bring down labor costs, and when nothing else will do, increase the cost to the consumer." Food Institute Focus

Store News:

• Wingstop is considering raising its own chickens. The wing chain recently said that it's actively exploring acquiring or building its own "poultry complex" within the next three years to mitigate pricing volatility in its core commodity, reported Restaurant Business (May 17). Full Story
• Chili's will soon start offering restaurant training to military members. It will be the first restaurant company to take part in SkillBridge, a program backed by the Department of Defense and the National Restaurant Association Educational Foundation, reported Restaurant Business (May 19). Full Story
• Arby's launched the Wagyu Steakhouse Burger, the first time it has had a burger on its menu, reported Restaurant Business (May 23). Full Story
• Wow Bao launched a rewards program for its network of 600+ virtual restaurants powered by Paytronix and DoorDash, reported Nation's Restaurant News (May 24). Full Story
• The Cheesecake Factory Inc. announced it will transition 75% of its pork supply to gestation crate-free production by the end of 2022, reported Meat + Poultry (May 24). Full Story
• Starbucks will sell its Evolution Fresh line of juices to Bolthouse Farms Inc., with the deal expected to close later in 2022, reported The Wall Street Journal (May 24). Full Story
• Wing Zone is partnering with Miso Robotics to make Flippy 2 a part of the chain's standard build for all future restaurant locations. Wing Zone is the first fast-casual brand in the world to spec food robotics into its operations at this level. Full Story
• Marco's Pizza signed a multi-unit agreement to open six stores in Lubbock, Texas. Full Story
• WaBa Grill expanded into Nevada with an eight-store development deal. Full Story
• Fat Brands announced the acquisition of Nestle Toll House Café by Chip from Crest Foods for an undisclosed amount and will begin rebranding the dessert shops as Great American Cookies, which FAT Brands also owns, reported Nation's Restaurant News (May 25). Full Story
• Subway is changing its franchising strategy. The sandwich chain, which has been shedding locations, wants more drive-thrus, non-traditional locations and bigger franchisees, reported Restaurant Business (May 26). Full Story
• Meanwhile, Subway has been testing vending machines as part of a broader "grab and go" strategy, reported Restaurant Business (June 13). Full Story
• McDonald's investors voted in favor of a proposal calling for an independent civil-rights audit, going against the company's recommendation, according to preliminary vote totals. The fast-food chain joins the ranks of other large businesses facing a wave of shareholder scrutiny regarding their environmental, social and governance stances, reported Bloomberg (May 26). Full Story
• Jack in the Box continued to struggle with labor issues in the second quarter, with about half of company-owned unit dining rooms remaining closed because of staffing issues, reported Nation's Restaurant News (May 26). Full Story
• Denny's has joined the Pathways Black Franchise Ownership program, reported Nation's Restaurant News (June 15). Full Story
• KFC partnered with musician Jack Harlow for a custom meal available at KFC restaurants nationwide. Full Story
• New Chipotle Mexican Grill restaurants will very likely include a drive-thru Chipotlane or walk-up window to speed throughput and add convenience. Now the fast-casual chain is looking at converting existing units to drive sales with these margin-boosting features, reported Nation's Restaurant News (June 15). Full Story
• Tim Hortons is offering two new models of its restaurants, including a 900-square-foot drive-thru-only version, reported Nation's Restaurant News (June 6). Full Story
• Odd Burger Corporation, a vegan fast-food chain, signed an agreement to open 40 new locations in Ontario. Full Story

Executives on the Move:

• Zaxby's announced that Mike Mettler has been named chief development officer, while former interim Chief Digital & Technology Officer Mike Nettles has been elevated to the position long-term. Full Story
• Lukas Schmid has been promoted to vice president of manufacturing at Panera Bread, reported Food Business News (May 27). Full Story
• Blaze Pizza named Ed Yancey as chief development officer. Full Story
• JBS USA appointed Karla Thieman as senior vice president of public policy and government affairs, reported Meat + Poultry (June 7). Full Story
• Josh Charlesworth has been promoted to the role of global president and chief operating officer at Krispy Kreme, reported Nation's Restaurant News (June 8). Full Story

Food Industry Automation Gaining Momentum Amid Labor Shortage

Amid the pandemic-related labor shortage, investment in automation continues to gain momentum, particularly in the restaurant space. In fact, the food automation market is expected to grow at a CAGR of 9.5% and reach $29.4 billion by 2027, according to Meticulous Research data.

"The reason to look at robotics is not just to look at robotics. It's because of this phenomenon where we're only achieving 90% of staffing levels at restaurants," Dine Brands CEO John Peyton said. "The responsible and strategic thing to say is ‘what if this is the new normal?' If that's the case, we have to figure out how to make front and back of the house more productive. That is the problem we're trying to solve and has led us to investments in technology and robotics," reported Forbes (May 6). Full Story

With that, recent headlines provide a glimpse into some of the innovations that businesses are leveraging to make up for the labor shortfall and boost efficiency.

Restaurants and Robotics

Fast casual chicken wing concept Wing Zone recently announced a partnership with Miso Robotics to make Miso's Flippy 2 kitchen automation tool a part of the chain's standard build for all future restaurant locations, making it the first fast-casual brand in the world to spec food robotics into its operations at this level.

"With over 100 new shops in our current development pipeline, our technology roadmap relies heavily on strategic partnerships with companies like Miso, a pioneer in the field of food automation, that has the knowledge, data and resources to design robotics solutions that maximize our efficiency and provide a better overall customer experience," Wing Zone Chief Operating Officer David Bloom said in a press release. "Our industry is in dire need of automation, and we are more than ready to deploy it at scale to continue growing our business."

Wavemaker Labs, the product incubator that initially launched Miso Robotics, announced the launch of Wing Zone Labs, an automation-focused franchisee in Southern California.

"Our goal is to build the restaurant or the franchise of the future," Kevin Morris, president of Wavemaker Labs, said in an interview. "So, what we're trying to do is take a growing food category ... that is very delivery- and takeout-focused but yet has ... a lot of labor issues ... [and] inject automation, so that we can allow our restaurants to have profitable margins and allow the employees that are in the restaurant to focus more on some of the higher-value things," reported PYMNTS.com (May 23). Full Story

Walmart and Symbotic

Walmart said it's expanding its partnership with warehouse robotics firm Symbotic to feature automation technology across all 42 of its regional distribution centers. The retrofitting of all distribution centers with Symbotic technologies is expected to take roughly eight years, reported Supermarket News (May 24). Full Story

The scalable system encompasses a fleet of fully autonomous robots and AI-powered software to improve throughput while boosting warehouse capacity, according to Symbotic, which said its solution will cut the time it takes to unload, sort and stock freight in Walmart stores. Food Institute Focus

Sales Growth Slows, but Still Up Y-o-Y

Black Box Intelligence's traffic/sales data shows restaurant sales resumed a slowing trend the week of June 13, reaching the second lowest growth rate this year. The industry continues to record positive sales over the same period a year ago. Full Story

Restaurant traffic set a new low level for the year and extended the streak to thirteen consecutive down weeks. Thus far, higher average spend per guest or transaction has been enough to offset weaker traffic, keeping sales growth in positive territory. 

The only daypart that achieved positive traffic growth during the week was breakfast, while the dinner daypart continues to see the most negative growth levels. In the beginning of June, segments with the lowest price points (quick service, fast casual, family dining) are growing check averages at the fastest pace.

Meanwhile, while consumers are dining out less because of inflation, about one-third are choosing to trade down rather than trade out, according to a new report from Acosta. Full Story

Additionally, food inflation and rising costs have increased the price of a foodservice meal over the past few years, up 9% in April compared to April 2019, contributing to a 4% decline in consumer visits to U.S. restaurants this April compared to a year ago, according to The NPD Group. Full Story