Some changes are temporary. Others are not.
There has been a seismic shift across all industries in what we would once consider normal operating procedures. One of the most affected industries—hospitality—has been forced into an unimaginable position by the COVID-19 pandemic.
Time and necessity eventually lends way to innovation and change. From localization initiatives driven by technology, reskilling employees and complete transformations of current business models, the hospitality industry—especially restaurants—are finding ways to adapt and remain viable.
According to Statista, the year-over-year decline of seated diners in restaurants in the U.S. was a staggering 65.2 percent in the middle of June, while states struggled with re-opening among a rise in COVID-19 cases. The restaurant industry alone lost 5.5 million jobs in the month of April. This massive loss caused many businesses to shutter, while others looked to adapt their business models in order to keep their doors open.
While some of these changes are certainly temporary, others might speak to a total shift in how these businesses will operate in the future.
Conversion to a Grocery Store Model
One constant during the pandemic is the status of grocery stores. People still need to eat, deeming this sector essential without hesitation. This wasn't without its own issues. From supply chain lags to panic buying and long lines at grocery stores, there was an opportunity here for restaurants to step in and provide an additional service to customers. Since restaurants already have a readily available supply chain to source ingredients for their menu, this became a quick and easy pivot for restaurants to make at the onset of the pandemic.
Restaurants can easily source local ingredients and produce and offer them to customers at bulk or wholesale pricing. For instance, Panera expanded into grocery services (outside of bagels by the dozen), offering milk, eggs and fresh produce. Even Subway started selling groceries at many of its west coast locations. Frisch’s Big converted some of its locations to grocery and leveraged its online ordering to include groceries and drive-thru pick up.
Some restaurants were even able to offer specialized ingredients outside of regular groceries, including spices and other delicacies that were originally sourced by the Chef for food preparation, providing consumers with access to hard-to-reach items.
Offering Meal Kits
The Los Angeles County Department of Public Health came up with specific guidelines to enable L.A. restaurants to transform dining rooms into ad-hoc corner markets while maintaining health guidelines and safety. Coupa-Cafe, (a well-known hub for tech leaders with locations across California) completely shifted its model from cafe to restaurant-market, offering produce, herbs, coffee, dairy, as well as general household supplies (toilet paper, etc.) meal kits and meal delivery partnerships with services such as DoorDash.
Many other restaurants adapted the meal kit model. While still being forced to trim staff, restaurants pivoted to a 100 percent to-go model while adding the DIY appeal of meal kits. The advantage here is that customers could buy completely ready-to-prepare kits that can be stored in the refrigerator until needed. This leads to larger orders with a longer shelf life. Even juice bars such as Nékter started to offer smoothie kits with pre-proportioned servings.
Switching to an Off-Premises Model
Since customers still want to purchase food from restaurants, many (including fine dining establishments) have pivoted to take out and curbside pick-up. Many chains that already offered their own delivery partnered with services like DoorDash and Grubhub in order to expand their service area.
Companies like Wingstop found themselves well-prepared for this pivot. In recent years, it invested heavily in improving its mobile ordering infrastructure to support a total off-site offering. Olive Garden also quickly pivoted and has stated that off-premises servicing would continue to be a central building block of its growth strategy going forward. Focusing on on-premise to off-premises through delivery makes catering and pick-up a viable model for restaurants in the future.
Naturally, this takes work and time. Not all restaurants are prepared for this pivot, but it can be achieved. According to a National Retail News Analysis of recently released same-store sales results, restaurants that have fared the best thus far already had a few structural pieces in place before the pandemic: drive-thrus, core menu items suitable for delivery, and a strong digital infrastructure. While it's not tenable to build a drive-thru, quickly building a customer-friendly digital interface and rebuilding a menu can be a relatively light lift.
Altering the Menu
On that last point, and to put a cap on current restaurant industry innovations, restaurants are making menu alterations to make the move to an off-premises business model easier. Darden, one the larger operating chains (Darden properties include The Capital Grille, Yard House and Bahama Breeze, to name a few) has optimized its menu for both on-premise (under local restrictions) and off-premises servicing. This is to keep staffing and supply costs at reasonably sound operating numbers.
Whether through training employees to suddenly become delivery drivers, focusing on building a digital interface to support delivery, pivoting to grocery or stepping up the off-premises offering, restaurants are finding a way to survive this pandemic and adapt their business models for future success. Most of these innovations are moderately simple and fairly cheap to implement in order to keep businesses running in the green. After all, we need to eat and supporting local business is a great win-win.
Praveen Kanyadi is co-founder & VP Products at Groupe.io. Praveen has over 20 years of experience developing enterprise and consumer products for startups and Fortune 500 companies. In his previous role at Yahoo, he built social experiences that reached over 750 million end users. Praveen also holds a patent publication in the social space. Praveen has deep expertise in building SaaS and mobile based solutions.