Milling & Baking News Corporate Profiles - 2019 - 46

INDUSTRY REVIEW: FOOD SERVICE

Food service
Technology and plant-based offerings seen as avenues for growth
he food service industry remains resilient despite considerable headwinds. While weak same-store sales and declining traffic continue to put
pressure on operators, U.S. restaurant sales were projected to grow 3.6%
to reach more than $860 billion in sales in 2019, by the National Restaurant
Association. Sales at full-service restaurants hit $285.3 billion, up 3.8% from
last year, while the quick service segment grew 3.2% to $246.7 billion.
Investments in delivery and technology continue to provide avenues for growth
in a market marred by fierce competition, tightening margins and labor shortages. Off-premise business now accounts for 60% of food service occasions, and
close to 80% of restaurant operators say it's a major strategic priority, according
to the N.R.A. and Technomic. More than one in three consumers used delivery
more this year than in 2018, and 79% used the service at least once a month.
Around half of food service operators now offer delivery through internal staff,
and 66% offer it through a third-party partnership, according to the N.R.A. A
growing number of food service operators are ending exclusive delivery agreements, looking instead to multiple platforms to gain access to additional customers. McDonald's, Dine Brands and Restaurant Brands International are expanding
delivery to more than one provider. Even restaurants that offer self-delivery, like
Panera and Pizza Hut, are getting into the third-party game.
The move toward hybrid delivery models comes as major restaurant chains
struggle to keep up with changing consumer expectations. Forty-three per cent
of customers want to order directly through a restaurant's app, for example, but
only 18% of operators offer the service, according to the N.R.A.
Integrating off-premise technology with existing point-of-sale systems is
another major challenge, as is maintaining food quality.
"Delivery still is not perfect overall," said Joe Pawlak, managing director
at Technomic. "Think about things like fried foods, keeping those products
with the food integrity that consumers expect when they go to restaurants,
or keeping hot foods warm through delivery. Think about delivery times.
There's still a lot of imperfections in the system."

With fewer people eating food in the store, restaurants are rethinking both
front- and back-of-the-house designs. McDonald's, Burger King, Firehouse
Subs, Dunkin', Pizza Hut, Subway, Caribou Coffee and others are rolling out
smaller formats to better accommodate delivery and takeout. Others, including
Starbucks and Chick-fil-A, are investing in ghost kitchens, or restaurants that
only handle delivery.
The technology push extends beyond off-premise business, with digital
menus, kiosks, mobile software and artificial intelligence emerging as major
investment themes.
"Tech appears to be the new battleground," Mr. Pawlak said. "Operators are
turning to tech as a differentiator, whether it's front-of-house for consumer
interface and revenue enhancement, or back-of-house for efficiency."
Restaurants also are doubling down on value to bring in more guests.
"Driving traffic is on the top of everyone's minds. 'How do we get more people in our seats, and how do we get them to spend more and come back?'" said
Pat Noone, executive director of business development at Technomic. "We're
seeing more deals out there, more L.T.O.s, more bundling offers."
More restaurants are embracing better-for-you and better-for-the-environment foods to align with changing consumer preferences. Nowhere is this clearer
than in the rise of plant-based foods, which saw a 30% year-over-year sales
increase in the food service channel this year, according to The NPD Group.
While meat alternatives have been well received in the full-service segment,
the bigger story in 2019 was the explosion of plant-based foods in the Q.S.R.
space. Hardee's, Subway, Dunkin', Carl's Jr., Del Taco, KFC and Taco del Mar are
just some of the companies that partnered with Beyond Meat, while Burger King,
Little Caesars, White Castle and Qdoba have teamed up with Impossible Foods.
The alternative meat strategy so far has proven successful for fast-food
chains. Burger King saw sales in its test market grow 28% when it rolled
out the Impossible Whopper, and KFC sold out of its plant-based chicken in a
matter of hours during its one-day test. Strong performance by several chains
CONSUMER TRENDS

RESTAURANT

by the numbers

IN BILLIONS

62% 61% 55%

industry sales

Consumers who say the
availability of locally sourced
food would make them
choose one restaurant over
another.
$43

1970

$120

1980

$239

1990

Source: National Restaurant Association

46 \ November 2019

$379

2000

$590

2010

$863

2019*
*projected

Consumers who say they
order more healthful options
at restaurants than they did
two years ago.

Consumers who say they
would order breakfast items
more often if restaurants
offered them all day.

50% 44% 41%
Consumers who say the
availability of a customer
loyalty and reward program
would make them choose
one restaurant over another.

Consumers who say they
placed a food order for
takeout or delivery using a
restaurant app or web site
during the past year.

Consumers who would
buy meal kits to prepare
at home if their favorite
restaurant offered them.

Source: National Restaurant Association

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