Off-Premises Growth and the Addition of New Streams of Revenue
In mid-April, Kinetic12 published a piece titled: 10 Reasons why Curbside will be the Next Big Thing. We stated, and still believe, “For all types of restaurants, from [quick service] to fine dining, curbside pick-up has allowed us to order and pay through apps or websites, make a quick stop, pop open the trunk and bring our dinner home. It is convenient, no-touch, safe and hot.”
Despite the opening of some dine-in options, growing off-premises sales has continued to be a focus for service and menu improvements aimed at drive-thru, curbside, delivery, pick-up, meal kits, and more. This investment in off-premises will be continue to be one of the driving forces in restaurant design and operation. Consumers will always want convenience and now that more operators have learned how to be successful at off-premises, this will continue into our post-COVID environment.
Expanding dayparts has been another important new COVID-driven stream of revenue for many operators. Off-peak hours are wasted hours. Carefully expanding a menu to stay true to a brand’s essence is a logical way to grow with limited investment. Fringe meal periods offer a whole new world of opportunity and we will continue to see operators maximizes their businesses in this way.
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In a previous article, we reviewed the innovative idea called “Curbside Delivery for On-Premises.” In effect, this is the opportunity to have an off-premises solution that is delivered to an on-premises dining area. This allows consumers to bypass the server, minimize their touch-points, yet still eat on-premises. Consumers have invented this on their own but savvy operators have recognized it and are promoting it.
The “virtual brand,” or an online-only menu, is another growing idea. Although not invented in the COVID-era, it has gained traction as a new revenue stream. Existing brands can add a second virtual brand or take on the production of another brand to maximize their kitchen utilization. Adding virtual concepts for delivery or pick-up only during unused dayparts makes total sense to not only keep concepts afloat but also to drive new revenue. This virtual-brand idea is something we predict will continue to gain traction post-COVID.
This is only a sampling of several new revenue drivers that innovative operators have introduced. We expect many of these to influence the design and operation of the Restaurant of the Future.
“If a menu item is not portable and does match up to your dine-in standards, don’t offer it for off-premises.”
Menu Simplification & SKU Reduction
In late March, off-premises became the only revenue stream available. Pre-COVID, operators were dealing with intense competition and extremely high expectations from consumers to stay current and to do that menus became bloated, messages fuzzy and ingredients being purchased were one dimensional. COVID forced operators to re-boot and simplify to cut costs. Simplification involves fewer moving parts and the ability to be significantly more productive—which requires less labor, fewer deliveries, lower waste, and improved execution. It also eliminates some of the emotional decisions that create broad and complex menus that are too big for restaurants to execute profitability and consistently and result in too many ingredients that only have one use.
Over the past six months, many brands have gone back to basics and are promoting the menu items that their customers love and want to come back for. Using those as the base, they have then carefully innovated. It is simply not prudent to offer menu items that muddy who you are as a concept and that are mediocre in quality, hard to execute, require one-use ingredients and in general, will only drive quick short-term revenue streams.
As we look to the future, simplification will continue to evolve. The added complexity of adhering to safety and sanitation requirements along with providing the multitude of options that customers demand will be the challenge to keeping it simple so operators can execute flawlessly. In-house versus off-premises menus will vary based upon the portability of a product. During fringe times of the day menus will get smaller but the items on the menu will be what the consumer wants. Simplification does not mean lowering standards. Simplification results in improving standards.
“If a product is not good enough, don’t sell it.”
Smaller Overall Footprints and Smaller (Flexible) Kitchens
For months, it has been agreed upon that smaller footprints provide better efficiency and flexibility. Flexibility of the physical space will be crucial as operators navigate the evolving new normal. What operators have learned is that just because it worked before does not mean it will work forever. There is risk to putting anything in the operation that does not have the flexibility to be adjusted. That includes kitchen equipment, furniture and in general, how the flow of a restaurant works.
Maximizing space is a must. Casual and fine dining, for instance, must make sure that their kitchens are cranking throughout the day. Creative approaches to off-premises and the ability to lean their menu toward quick-service and fast-casual during currently slower or non-existent dayparts is a big part of the Restaurant of the Future. Many casual-dining brands are developing new prototypes that incorporate successful elements of quick-service and fast casual, including drive-thrus and more efficient curbside services.
In addition, rather than having large dining rooms that often sit partially empty, innovative outside seating provides a more flexible approach which limits the build out cost of a restaurant. There are many creative approaches to using under-utilized space as outlined in the Restaurant of the Future 2.0.
Flexibility in the evolving new normal means first sticking to your roots and what your brand is known for and building on those successes while, at the same time, having an open mind to anything that can create the next version of what the consumer is looking for. We believe that the future of restaurant footprints requires collaboration between strategic partners. There is a lot to learn and not a lot of time to learn it.
“If you are not flexible, be prepared for difficult and costly changes in your future.”
Cross Functional Staff and Greater Productivity
Most concepts have been battling to get their revenue numbers back to as close to pre-COVID levels as possible. While doing that, they have had to lower their costs and eliminate labor while at the same time making the staff they have more productive. In the evolving new normal every team member that is brought on must have the ability and desire to be part of a team that is cross-trained, certified and adheres to a winning culture.
As we previously outlined “Segmentation of staff throughout the restaurant will be changing. Some positions will remain specialized, but most will require the need for multiple competencies. Imagine a fast-casual restaurant with double drive-thru pick-up, curbside pick-up and limited dine in. Multi-faceted team members pass food through a window, bring food out to curbside or deliver pre-ordered items to a table.”
Operators are rebuilding teams to be cross functional as they adjust to continuing consumer behavior changes. We predict that the Restaurant of the Future will have a heavy focus on improved productivity, less turnover and being able to run the operations more efficiently and with less staff. This assumes that operators will not revert back to bloated menus that are overly complex.
“A team of specialists in the new normal will be costly and inefficient. Winning requires a do-what-it-takes mentality and that is done with team members working in the trenches”
Food Hygiene, Safety, and Sanitization Practices
It was very clear to everyone when COVID hit that safety and sanitation would be first in the eyes of the consumer. Providing the right message to the consumer was deemed critical, but what operators have learned is that execution is really the hard part. In some cases, as restaurants got busy with outside and dine-in business, their safety and sanitation standards began to relax. Quality of food and service have always been the key components of a guest experience, so it was easy to make that the priority. In today’s world, if the restaurant is not safe, and perceived to be safe by guests, nothing else matters.
“Food hygiene” is a phrase that has gained traction through COVID. It means “the conditions and measures necessary to ensure the safety of food from production to consumption.” Once guests have confidence that the food that comes into the restaurant from the source is safe, the consumer’s focus is on what happened to “their” food from the point of production in the kitchen to the point that they receive it from an employee. The journey taken by the food has become more complicated, but those brands that can provide comfort to their customers will be the ones that build greater loyalty and frequency. Some customers have dropped their guard because of their desire to be out socializing, but as we move forward, most are going to stay focused on the environment that restaurants are providing to them.
“How do I know that the food that I am consuming was handled and prepared properly so that I will be safe?”
Emergence of Technology in a “No-Touch” World
Consumers, pre-COVID, were being trained to order using digital pads and kiosks and, as a result, operators were able to cut back on cashiers for placing orders. The conclusion in April was that we needed to quickly move to a no-touch world and digital ordering solutions needed to evolve to allow this.
The process of going from a touch everything to a touchless world accelerated as a defensive move to support new consumer behaviors and drive as much off-premises business as possible. In reality, no-touch conversation has been bantered around for a while. Robotics and voice and facial recognition were looked at as the future, not as practical solutions for today. The future quickly became the present. It is now time to pivot to the offensive and embrace this technology.
The Restaurant of the Future will continue to require new technology to make the customer experience safer, faster, and more efficient. The future may not have anyone taking orders or payments but the customer will still have option to choose what they want, when they want it and then how to pay for it. Restaurant brands have made it easier for the guest to order and pay. With that, the consumer is spending more and frequenting those operations that execute this well.
Of course, technology will continue to evolve. Consumers will not only want to order and pay digitally but receive notifications on the status of their order and have the restaurant know when they are arriving. These are crucial elements of the Restaurant of the Future.
“I am 85 years old and I get curbside every other night for two nights of dinner. Once I learned how to order and pay, I only had to open my trunk and pick-up my orders.”
Community Outreach and Adapting to New Consumer Behaviors
In pre-COVID times, consumers would travel to try new restaurants and experiences, and this is still clearly their preference. In the evolving new normal, consumers have been staying closer to home and frequenting restaurants that they are comfortable with and where they can have a consistent, quality experience in a safe environment.
In Restaurant of the Future 2.0, we saw great potential to drive increased visit frequency and significant revenue by creating an outside seating experience which includes a small stage showing movies, individual entertainer, culinary presentations and more. The ideal outdoor dining room includes flexible seating with tables that can seat six or multiples of two. Guests can order and pay at the table with the table number acknowledged. Orders are brought out to the tables via “curbside delivery.” Touchless trash, handwash and sanitizer stations makes guests comfortable. Heaters and misters are added to make this area usable most of the year. We see this creative approach to using outside spaces and providing customers with a great “new experience” expanding in the future.
Supporting local community business will also continue to gain traction. There is great potential for long-term success through community outreach and connection, but only if restaurants flawlessly execute and adjust to consumer behaviors and requirements.
“Most of my guests come from a 3-mile radius around my restaurant. They need to be my focus.”
Evolution of Strategic Partner Relationships
It is not just operators that have felt the brunt of COVID. This environment has put tremendous pressure on the entire foodservice value chain. Operators are turning to their distributors and suppliers for more than just help on supply chain management. In many cases, trading partners are more effectively working together during the crisis to their mutual benefit. Clearly this will have longer term ramifications, as crises typically do uncover who your true friends are.
Driving new revenue streams, decreasing costs, continuing to be innovative and adhering to safety and sanitation protocols has taken a toll. Manufacturers and supplier partners have been working to support their operator partners, but they first needed to know how they could help. That requires communication. The future will require everyone getting better at virtual engagement. It has become part of our world and those suppliers that have used it to solidify and enhance relationships will see great future benefits. Virtual product cuttings, plant tours, operator kitchen tours, new product ideations and much more have made the communication process nimbler. By understanding where operator opportunities are, suppliers have been able to provide the right solutions.
“In many cases, when you pay more for a product, it will save you money.”
We believe these eight drivers of change will shape the future and savvy operators looking to redesign their units, or open new ones, must adopt these elements into their Restaurant of the Future.
THE RESTAURANT OF THE FUTURE 3.0
FOUR FOODSERVICE DNAs THAT WON’T CHANGE
Here are four foundational expectations that must be part of the Restaurant of the Future’s design and operation.
- The Desire for Value
- A Great Customer Experience and Great Service
- The Expectation of Quality & Consistency of Food & Beverage
- A Commitment to Sustainability