Texas Roadhouse CEO Kent Taylor
Condado Tacos
In 1996, Texas Roadhouse Unveiled Its New Store Prototype
Inflation Graph
Glasses On A Restaurant Table
Exterior Of Twin Peaks Restaurant
First Watch Exterior Of Restaurant
Exterior Of An Olive Garden Restaurant
Exterior Of Flip'd By IHOP
Stock Photo Of Waiter And Customers
Buffalo Wild Wings Exterior

A Year in Review

In terms of how COVID-19 fluctuated, there wasn’t much promise when 2021 started. 

New caseloads reached past 200,000 per day throughout January, discouraging diners from entering dining rooms and causing governments to keep restrictions intact. But COVID soon relented, and by late spring, the CDC even announced that fully vaccinated individuals no longer had to wear masks in public places. 

However, as the year ends, two new variants have entered the fold, Delta and Omicron. With their introduction, cases have once again skyrocketed, forcing major markets like New York City and San Francisco to implement vaccine requirements to dine indoors. And as if COVID wasn’t enough, restaurants nationwide have suffered through immense cost pressures, particularly commodities and labor. 

Amid those challenges, restaurants still managed to innovate, whether it was through new items, technology, or an entire store layout. 

It was a busy year, and nothing less should be expected in the coming months. Here are FSR’s top stories for the full-service restaurant industry in 2021. 

Image credits:COURTESY of Texas Roadhouse

NextGen Casual

This year, FSR decided to identify a key group in the casual-dining segment that’s separating itself from the pack. 

Inspired by fast casual, NextGen Casual is a game-changing movement accelerating among full-service restaurants that’s changing experience-driven dining. Think streamlined menus. Clean, fresh, and craveable food. Adaptable, flexible, and dynamic footprints. Entrepreneurial cultures. Tech-ready and off-premises savvy. Hybrid models unafraid to cross segments.

WATCH: NextGen leaders chat about the future of the full-service dining

And less emphasis on standard menus, consistent décor and designs, deals and discounts, extensive menu offerings, large store footprints, and pre-prepared food. Some of the chains that fit this mold include True Food Kitchen, First Watch, Eggs Up Grill, and Condado Tacos. 

“I think for so long in the restaurant industry, the experience was about providing service, which was really kind of similar, although executed differently, across the spectrum. And great food,” True Food Kitchen CEO Christine Barone told FSR. But I think what this next generation of concepts offers, and how I would think of ourselves, is we’re doing awesome food, awesome service, and we’re taking that experience to a really different level.”

Image credits:Condado Tacos

The Passing of Kent Taylor

Kent Taylor, the former CEO and founder of Texas Roadhouse, took his own life in March after a battle with post-COVID symptoms, including  “severe tinnitus.” He was 65.

The news floored the restaurant world and left a prodigious hole at Texas Roadhouse, a chain that couldn’t be more like its founder if it tried. Few brands and founders, perhaps only KFC and Colonel Sanders, are more closely tied than Texas Roadhouse and Kent Taylor.

Taylor founded Texas Roadhouse in 1993. He worked at casual-dining icon Bennigan’s from 1983–1989 before heading over to KFC. At both venues, Taylor earned a reputation as a rule breaker with an entrepreneurial itch. He would experiment with recipes and stray from the blueprint—traits that followed him throughout his career. He was labeled a maverick with a preference for the unorthodox. And his decisions worked out far more often than they didn’t.

“He didn’t sit back, and he wasn’t driving a $200,000 car,” Travis Doster, Texas Roadhouse’s vice president of communications, told FSR. And he wasn’t just showing up occasionally. He was always moving.”

Image credits:Texas Roadhouse

Inflationary Environment

Nearly every restaurant felt the impact of commodity inflation and labor shortages throughout 2021. According to the Bureau of Labor Statistics, beef and veal costs rose 40.6 percent in November year-over-year. Prices of shortening and cooking oils (43.6 percent) and grains (38.4 percent) soared during the month, as well. In terms of labor, the industry still remains 750,000 jobs short of where it was at the start of the pandemic, gaining only 11,000 jobs in November. 

Brands sought to improve retention and recruitment with wages increases. For instance, starting in 2022, Darden Restaurants is boosting the starting wages of tipped and nontipped employees to $12 per hour, including tipped income. The increase will raise Darden’s average pay to $20 per hour. Some are going to even greater lengths; The Twelve Thirty Club in Nashville wants to pay lead servers at least $100,000 per year. 

To mitigate cost pressures, brands increased menu prices to levels not seen in decades. The index for food away from home in November rose 5.8 percent year-over-year, the biggest change since the period ending January 1982. That includes a 6 percent rise in full-service meals. 

Image credits:Adobe Stock

Depleted Restaurant Revitalization Fund

The $28.6 billion Restaurant Revitalization Fund was hailed as a major lifeline to restaurants when it was established in the spring as part of the American Rescue Plan Act. Restaurants, food stands, food trucks, food carts, bars, bakeries, and other entities were eligible to apply and receive grants that cover payroll, operating expenses, supplier costs, construction of outdoor seating, utility payments, maintenance expenses, and more. 

But a lot of restaurants have suffered, and the billions of dollars in the fund weren’t enough to cover everyone. The Restaurant Revitalization Fund closed its application portal in July, leaving some 177,000 restaurants and bars on the outside looking in. The $28.6 billion grant program offered support to less than a third of the businesses that applied, with more than 370,000 submitted applications asking for $76 billion.

There have been calls to replenish the fund with $60 billion, such as the Restaurant Revitalization Fund Replenishment Act and ENTRÉE Act, but neither have gained traction in Congress. 

Image credits:Unsplash/Michael Browning

Acceleration of M&A

Multiple brands found opportunities to expand their reach via financial transactions in 2021. In the casual-dining sector, the largest purchase was FAT Brand’s $300 million agreement to acquire sports bar Twin Peaks, a brand with roughly 85 stores. About 18 are scheduled to open by next summer and more than 100 are within the pipeline. CEO Joe Hummel told FSR in late July that Twin Peaks should top the 100-unit mark sometime in late summer 2022, and by the beginning of 2027, he expects the brand to reach more than 275 stores. FAT Brands would later add 23-unit Native Grill and Wings for $20 million, bringing its year-end total to roughly $893 billion ($442.5 million, Global Franchising Group; $130 million, Fazoli’s). 

The next largest purchase was Logan Roadhouse parent SPB Hospitality’s $220 million deal to get fine-dining concept J. Alexander’s. At the time, the company operated 47 upscale restaurants across five concepts, including J. Alexander’s, Stoney River Steakhouse and Grill, Redlands Grill, Overland Park Grill and Merus Grill. And J. Alexander’s entered the agreement with momentum on its side; in April, sales lifted 5 percent compared to 2019, the first time the company saw growth since the pandemic began.

Famous Dave’s parent BBQ Holdings was also busy, buying Village Inn and Bakers Square for 13.5 million and Tahoe Joe’s for $5.2 million out of bankruptcy.

Image credits:Twin Peaks

Flurry of IPOs

Multiple restaurants made a push to go public in 2021, more than what the industry has seen in years. 

Breakfast concept First Watch reached the stock market in October, raising $170 million in its IPO. It was the first full-service brand to do so since Kura Sushi did it in August 2019. Before that, it had been four years since Fogo de Chão did so (it returned to the private sector with a $560 million sale in February 2018). Despite 2020’s setbacks, First Watch opened 42 restaurants, more than the second, third, and fourth fastest-growing full-service chains combined (Texas Roadhouse, 19; Walk-On’s, 12; LongHorn, 8). The chain now has more than 400 stores, most of which are corporate. 

About a month and a half later, Fogo de Chão announced that it would return to the stock market with its 60 locations, including 46 domestically across 21 states, Washington, D.C., and Puerto Rico. The company believes it has long-term potential to reach at least 300 restaurants in the U.S. over the next two decades. Monthly U.S. same-store sales, compared to 2019, have been positive since March, with growth of 28 percent, 37 percent, and 39 percent in August, September, and October. 

There were also reports that bartaco and Barcelona Wine Bar owner L Catterton was weighing the idea of going public. 

Image credits:First Watch

Change in Leadership

A handful of new leaders are spearheading major brands as the industry heads into 2022.  

During the summer, Red Lobster announced that CEO Kim Lopdrup was retiring after serving 14 years in two different stints. The first came in 2004-2011 when he served as president under the guidance of Darden Restaurants. In 2014, Golden Gate Capital purchased Red Lobster for $2.1 billion and took the company private. Lopdrup returned that year as CEO, and helmed the chain until this year. Kelli Valade, the former CEO of Black Box Intelligence, took over in August. She spent more than 22 years at Brinker International, most recently as brand president of Chili’s.

In September, eatertainment chain Dave & Buster’s said CEO Brian Jenkins was retiring after joining the company in December 2006 as CFO. He remained as a senior advisor until November 30. The chain’s board of directors engaged Heidrick & Struggles to conduct a search process to find Jenkins’ permanent successor. 

The biggest shift arguably came in December, when Darden Restaurants CEO Gene Lee announced that he was retiring in May. He was named interim CEO in October 2014, and moved into the role permanently in February 2015. He will be replaced by Rick Cardenas, Darden’s president and COO. 

Image credits:Olive Garden

Restaurants of the Future

One of the notable ways casual-dining brands are preparing for the future is pivoting to fast casual. Buffalo Wild Wings, Hooters, and P.F. Chang’s have all made the move. In 2021, IHOP introduced its version, called Flip’d by IHOP. The first location came in Lawrence, Kansas, featuring 3,500 square feet and 55 seats. The breakfast fast casual serves made-to-order, on-the-go breakfast, lunch, and dinner that can be ordered either through a digital kiosk, at the counter, or via online for takeout or delivery. A second location recently opened in New York

Friendly’s, an 86-year-old concept on the comeback trail after bankruptcy, is planning to test a fast-casual version, as well, in Westfield, Massachusetts. CEO Craig Erlich told FSR the company was able to reposition a restaurant within the community and find better use of real estate. 

The new layouts are in response to customers’ growing call for convenience. Smokey Bones recognizes this trend as much as anyone, considering its investment in virtual brands. The concept is taking its off-premises commitment a step further by opening a casual-dining restaurant with a drive-thru. There will be a preview board featuring the items Smokey Bones wants to focus on. And then, consumers will approach a three-paneled digital drive-thru system with integrated audio for ordering and confirmation.

Image credits:IHOP

Change in Tipping Regulations

In November, the Department of Labor clarified that restaurants can only use the tip credit when employees spend less than 20 percent of hours worked or less than 30 minutes continuously on non tip-producing work. Otherwise, they must pay the full federal minimum wage. The new rule is scheduled to go into effect on December 28. 

During the Trump administration, rules were relaxed on restaurant operators enforcing the 80/20 rule, meaning side work was generally counted as tip-supporting. But the Biden administration brought back the regulation from the Obama era.

In response, the Texas Restaurant Association and The Restaurant Law Center, an entity under the National Restaurant Association, filed a lawsuit challenging the rule

“Because restaurant employees often move rapidly from one task to another throughout a shift, there is no practical way for an employer to keep the task-by-task records the administration’s regulations would demand to avoid potential liability,” Emily Williams Knight, the Texas Restaurant Association’s president and CEO, said in a statement.

Image credits:Adobe Stock

Advancements in Tech

While restaurants struggle to reach pre-COVID staffing levels, some are investigating ways to lower the number of bodies needed, specifically through technological innovation. 

Buffalo Wild Wings is testing a new robotic chicken wing frying solution called Flippy Wings. The machine, created by Miso Robotics, is equipped with an AutoBin system that provides kitchen staff with multiple food-safe bins where products are dropped for cooking. After the robot’s AI vision automatically identifies the food, it pick ups the items, cooks them, and then drops them off into a hot holding area. In the mean time, back-of-house staff is able to cook more and spend much less time attending to the deep fryer. 

For Chili’s, it’s more about the front of house. The brand has worked to expand its “Team Service Evolution” labor model, which comprises iPad minis with POS software for each server, new kitchen display screens in the bar and beverage area, and a fresh labor model with a runner position to assist servers on the floor. CEO Wyman Roberts noted that because servers remain on the floor and not as many are required, waiters can take a bigger section, resulting in higher wages.

Image credits:Adobe Stock
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