Inflation is soaring. So are menu prices. There’s a new variant. Third-party delivery companies can’t find drivers (either can distributors), and restaurants are asking support-center staff to join the line. The fate of the tip credit. Robotics. QR codes. The fact it takes months to order a walk-in cooler or freezer, or much of what’s needed to equip a kitchen. Elevated spot markets and purchasing mazes. Americans quitting at record rates. Gig and remote work (on-demand jobs are up 183 percent compared to pre-pandemic norms, according to Black Box Intelligence). Influencers, streamers, TikTok marketers, IPOs, and consolidation galore.
Does this begin to cover what awaits restaurants in 2022? Maybe. But if the past 19 months has illuminated anything, it’s a new definition of what a dynamic operating environment truly looks like. Anybody with a crystal ball should sell lottery tickets, too.
While everything can change at the flip of a mandate, here’s a look at what industry operators expect this coming year. Hint: Another complex, transcendent stretch is on deck. And that’s something we can all bank on.
One of the many ways COVID differs from any prior event to challenge restaurants, namely recessions, is the reality dining out became a cost-risk analysis for some. It isn’t solely a question of spending money or getting off the couch. Personal safety entered the debate.
So really, experience can’t live within the parameters it did before COVID. It’s not just texture, taste, and ambiance any longer. Derek Simcik, the director of culinary operations at Sage Restaurant Concepts, a hospitality group with more than 50 restaurant, bar, and coffee shop locations in 13 states, says “experiential dining” is going to be a ticket to entry for brands. “Dining experiences as a whole will become more transformational—think restaurants that transition guests to new spaces throughout each part of the meal, differing music tempos to accompany each course and more,” he says.
Adds SRC’s VP of marketing and brand integrity Heather Dratler: “I think we’ll continue to see creative settings and themed menus—2020 was a big year for greenhouses and igloos out of necessity, and we’ve taken them a step further at SRC this year by partnering with beverage brands for themed experiences.”
For instance, SRC’s ninetwentyfive in Wayzata, Minnesota, created events like “Clicquot in the Snow” and “Woodinville in the Wilderness” where consumers dined in private igloos full of wintery décor. They were served six-course, prix-fixe menus with beverages that changed by the igloo (hoping to inspire repeat and nuanced visits), with add-ons, such as caviar bars.
“Consumer-facing cocktail classes and cooking classes, whether online, in-person or executed in retail outlets, will continue to trend as well, as more and more people seek to learn how to create restaurant-grade experiences at home and for friends,” says SRC’s Director of Beverage John Stanton.
Stephen Blevins, Fleming’s Prime Steakhouse & Wine Bar’s director of wine and cocktails, sees a return to experimentation as well. “During COVID, many diners purchased things that they were comfortable with and didn’t stray too far from what they were familiar with,” he says. “Coming in to try something new will be a priority for diners as people get more comfortable interacting with one another and enjoying new, interactive experiences.”
Something else to consider—Dratler believes the days of advanced planning are gone. You can thank a year-plus of failed plans and last-minute cancellations. “In the height of the pandemic, reservation trends skewed toward last-minute, with guests booking tables less than 24 hours in advance,” she says. “That’s continued even a year later, as walk-in business has also increased.”
SRC’s Stanton says cocktail kits and to-go drinks enjoyed the limelight in 2020/2021. Like plenty of COVID survival tactics, though, necessity created a consumer habit. And what once was a novelty offering spread to every corner of the business. Generally, when that happens (just ask delivery) expectations rise alongside adoption. “Cocktails with Instagrammable packaging—in jars, vacuum sealed bags and boxes—could continue to see life in 2022, especially when paired with full take-home meal kits,” Stanton says.
“We’ll continue to see appetite for to-go offerings, and restaurants will adapt their menus to meet demand—likely in the form of large-format options that families can prepare at home,” Simcik chimes in. “Think a cross between takeout and meal prep kits like Blue Apron.”
Akin to how the pandemic accentuated experience in dining rooms, Jessica Werner, the EVP of Stage Studio, expects off-premises execution to come under similar pressure. “More than ever before, guests are craving—and often demanding—experiences,” Werner says. “Driving experiential dining in our restaurants and on patios is critical, but that should also extend to off-premises. We’ll start to see an increase in QR codes leading to restaurant playlists, creating on-brand ambiances at home, and cooking kits with high quality content and photo-worthy packaging.”
Chef Tony Mantuano and Cathy Mantuano, food and beverage partners at The Joseph, a Luxury Collection Hotel in Nashville, as well as Yolan and Denim, say more personal, intimate dining experiences are becoming a popular draw at their venues. “We’ve seen this ring true through Yolan’s limited-capacity wine tastings, pasta-making classes and white truffle dinners where guests are involved in the making and learning of different ingredients and wines,” the pair note. “Guests will continue to look for these one-on-one experiences with chefs, sommeliers, and front-of-house staff. Our guests enjoy feeling they are part of an exclusive experience tied to their interest, and we enjoy it as we get the opportunity to know our guests better.”
Peter Merriman, chef/owner at Merriman’s Hawaii, adds social responsibility will join the experience conversation, too. Curated menus that steer away from high emission production, such as dairy and meat, which contribute to a large amount of the world’s greenhouse gases, are gaining in preference, he says.
So how do deliver an experience worth the price of admission? Jamon Harper, pastry chef at Mugen Waikiki in Honolulu, suggests restaurants pay attention to even the smallest service details, like customizing a small confection for guests to take home after dinner, “which continues the culinary experience well after the meal has ended and leaves a sweet afterthought.”
And Harper says he’s found success evoking nostalgia through sophisticated renditions of old-school favorites and childhood classics (like Neapolitan ice cream) that create a sensory experience beyond the palate. Anything to stand out from the at-home occasion, even if it’s food eaten at home from a restaurant.
“Build menus based on memories inspired by generations rich in culture identity and practice,” he says.
The menu won’t avoid supply chain issues, either, as restaurants try to make the most of what they have in kitchens and adapt to soaring commodity prices (in ways other than just raising prices, which will undoubtedly continue). “Due to the supply chain issues in 2021, I think 2022 will bring a return to more in-house or scratch-made product,” says Chef Chris Madsen of Amway Grand Plaza in Grand Rapids, Michigan. “The supply chain availability made operators rethink convenience or speed-scratch items and have found a way to replace them with in-house solutions. There will also be more emphasis on local growers, including urban farms, and producers for meat, produce, beverages and dry grocery. Local suppliers are less susceptible to transportation issues and contribute more to the local economy,” he says.
Furthering the supply battle, expect to see brands, especially on the counter-service side, start to leverage customizable digital menus that can update in real time. Items that aren’t available can be removed rapidly and at the local level because supply chain shortages in the Southwest can be very different than shortages in the Northwest, points out customer arrival platform Bluedot. Digitalization also offers brands the opportunity to preemptively communicate with customers, offer alternative items, or even compensate them for any inconvenience.
According to the National Restaurant Association’s Economic Impact Survey, fielded in September, 75 percent of restaurants changed menu items due to supply chain issues. Ninety-one percent of restaurants paid more for food this year; 84 percent forked up for labor; and 63 percent spent more for real estate. There was a 69 percent increase in cost per item on catering orders, per BentoBox, and a 38 percent increase in COVID surcharges applied to online orders.
All of this only stirs the ghost kitchen movement further. They typically present lower operating costs and more operational flexibility, which is why growth has sustained far beyond early lockdowns. Euromonitor believes the ghost kitchen industry could reach $1 trillion by 2023.
The number of ghost kitchens on BentoBox is up 100 percent, with Florida (500 percent) and burgers (400 percent) carrying the growth banners.
Additionally, while prices climb, coupons and deals remain an effective way for restaurants to create loyalty and attract diners that decide to eat out on a whim, according to the Vericast 2021 Restaurant Report.
The report found 1 percent of guests indicate coupons, discounts or promotions are influential in their decision on where to order from; 54 percent will spend more at a restaurant when they have a coupon; coupons, deals, and discounts tip the scales on restaurant decisions (47 percent) over recommendations from friends and family (46 percent).
From sidewalk extensions to patio investments, outdoor dining proved another heartbeat of the pandemic. Yet, in line with preference shifts like order ahead and drive-thru, it’s more likely restaurants will continue investing here than it is they’ll abandon fort. Meaghan Goedde, chief operating officer of SRC, says, “Using parking lots and sidewalk spaces in innovative ways—in areas that were not previously permitted—will continue to trend, as will igloos, tents, canopied dining, and other ways to extend these features through the seasons.”
It’s a straightforward shift. Guest expectations of comfort, when it comes to outdoor dining, aren't falling by the wayside. “When dining al fresco, guests naturally prefer to be under an umbrella on a hot day, and near a heater on a cold day. It’s more important than ever to take this need into consideration when designing exterior spaces, as the bar has been raised across the industry,” says Adam Olland, SRC’s director of growth and business development. “Restaurants that incorporate items such as heaters, fans, misters, shade, and the ability to shield staff and guests from the elements—like wind and rain—in outdoor spaces will have a leg up.”
However, he adds, the longevity of expanded outdoor dining will, by and large, be at the mercy of city regulations that inform operators what they can and cannot build outside of their four walls. “Many outdoor areas popped up without consideration to long-term impacts of things like parking and street closures, which are now being revisited,” he says. “In most jurisdictions, cities are updating the requirements to allow these activations to remain, but in what form and to what extent is widely variable. Ultimately, operators will have to determine if these additional requirements make this type of activation worth it for their business. I would expect that the opportunity to add seats at relatively low cost will see many of them do as much as they can to maintain them to a degree that works for them.”
The industry has moved well past the “pivot” stage and this worn-out idea of a “new normal.” Technology is now as much a part of the in-store experience as it is outside, making digital infrastructure as critical as physical for most brands (although there are some pitfalls to consider). “Guests want to book and order online—calling creates too much friction in the guest experience,” SRC’s Dratler says. “Restaurants with up-to-date web presences and online options for sourcing accurate menus, hours and online booking info will rise to the top.”
Per BentoBox, restaurants saved $38.5 million by switching to direct online ordering last year. The company saw more than 1,000 new restaurants adopt direct online ordering. By moving away from third-party marketplaces (and fees of 30 percent) restaurants saved substantial sums, the company says.
BentoBox reported a 50 percent decrease in diner preference for third-party ordering apps over the past six months, while direct online order volume hiked 54 percent, year-over-year. “One way diners are supporting restaurants is through direct online ordering,” the company says. “In a span of six months, the percentage of diners who prefer third-party ordering apps was cut in half.”
The premise of “owning the digital guest relationship” has never surfaced more often on the desk of restaurateurs, and it doesn’t end when a diner places an order. Brands can use automated emails and digital loyalty programs to court lifetime value. It’s a strategy third-party ordering apps have deployed for years.
Restaurants are starting to catch up.
On BentoBox, there’s been a 200 percent increase in monthly revenue from digital loyalty programs. Quarterly revenue from email marketing campaigns is up 193 percent.
Olland says the acceleration of consumer adoption of tech platforms that focus on “smooth mobile ordering,” whether that’s via QR codes, apps, or websites, has allowed restaurants to more easily serve expanded dining rooms and evolve their “to-go” models with less labor. “Whether their chosen service style is truly hands off [something SRC is currently testing] or a hybrid model that provides guests more control when viewing menus, booking reservations, ordering in-store and processing payments, these systems have been a lifeline to businesses who are caught trying to cover more ground with less than ever before,” he says. “The good news is, to everyone’s benefit, guest sentiment on this change has been overwhelmingly positive.”
At this juncture, it’s clear guests embrace tech as a tool to empower experiences, if it works toward that promise. “There has been a shift in the industry from thinking that technology hinders hospitality to understanding that it can enhance it and extend it outside of the restaurant’s four walls, creating a more seamless guest experience between their online and physical interactions with the restaurant,” Drattler says.
And it’s becoming less fragmented along the way. BentoBox observed a whopping 484 percent increase in share of restaurants licensing four-plus tech features in the past year. “A snowball effect occurs when restaurants begin to leverage connected technologies,” the company says. “The benefits are clear and obvious, which leads the restaurant to license more and more features [online ordering, event management, gift cards, etc.] from the same vendor. This group of integration ‘super users’ has grown substantially in the past 12 months, and will continue to grow in 2022.”
A potential niche to emerge as well? Subscriptions. Think wine and make-at-home dinner clubs. “It’s about more than simple convenience, and has become a mechanism to build a deeper, trusted relationship with guests,” Werner says.
Chef Madsen also notes restaurants should anticipate further use of technology in the kitchen in all forms, including advanced cooking methods like sous vide or combi-cooking and even robots, to help supplement the labor force or improve working conditions for cooks. Regarding technology, e-ordering and online ordering will also remain part of restaurant culture in 2022, he says.
In 2022, restaurants will have access to more capital as investors are attracted by the M&A activity and IPOs (eight of them so far in 2021), says Emil Davityan, co-founder and CEO of Bluedot.
“As a result, substantially increased tech budgets will allow brands to focus on transformative off-premises strategies, with a hyper focus on the customer experience as a differentiator," he says. "Market consolidation also opens up a massive opportunity for cross promotion of loyalty programs, deals, offers, and rewards across brands. As restaurant app usage continues to soar, brands will have far more access to consent-based customer and location data than before, providing actionable insights into the customer journey end-to-end which is critical to future brand loyalty.”
A surge in app usage (something that can’t be debated at this point) means restaurants have access today to data they simply didn’t before. This wealth of data will enable brands to make data-driven operational and marketing decisions based on quantitative consumer buying behavior with a focus on the customers’ physical journey, including when they visited, for how long, where an order was placed on-premises, and if an order was picked up in the drive-thru, inside or at curbside, Davityan says.
Investments in off-premises or “over-the-store” solutions (including mobile technology) will, in turn, take precedence over in-store legacy systems that require more time and resources to modernize, such as static menuboards and back-end kitchen technology. With more emphasis on off-premise solutions, Davityan says, like mobile apps and loyalty programs, brands can create a better customer experience by offering real-time communications regarding current deals and promotions, menu changes or limited items, and more.
Davityan also expects this inflection point between ordering and customer engagement to evolve the role of restaurant CMOs and CIOs. The idea being CIOs will be involved in providing access to data to multiple teams within the organization while CMOs are asked to exert larger influence over IT budgets as insights into customer behavior drive strategic marketing decisions. Success will be measured and optimized using data, he adds. Richer data fuels more robust and customizable programs such as loyalty campaigns, deals and offers, and menu items.
And don’t expect automation to disappear. If anything, labor hurdles have only stamped the movement’s place in foodservice. In Bluedot’s latest State of What Feeds Us report, 60 percent of consumers said they preferred using their mobile phone or kiosk when placing orders. To complement existing processes, we’ll see automation evolve with apps, orchestrated messaging, kiosks, and digital menuboards that offer easy and more convenient ways to join loyalty programs, redeem rewards, find deals, and other brand interactions that traditionally required staff, Davityan says.
The fight to staff up isn’t ebbing. In fact, this is as much an issue today of restaurants recruiting employees from each other as it is trying to lure back old workers, or target people entering the workforce or shifting from another. Somewhere around 6 and half percent of employees have left the industry in what pundits dub “The Great Resignation.” The country’s quit rate climbed to a record 3 percent in September, meaning 4.4 million people handed in their notice. In October, there were 10.4 million unfilled jobs. For restaurant and hotel workers, the number was 863,000, or the aforementioned 6.6 percent of the total hospitality pool. The closest sector was retail, at 4.4 percent.
Michael DeGano, VP of operations at SRC, says potential employees have either left the industry or just don’t want to work the way they did before COVID. Plus, hospitality schools are seeing declined enrollment, “which will impact recruitment well into the future.”
“Fewer applicants and more open positions will provide employees more options and impact the industry further with the need to increase benefits, salaries and work-life balance,” DeGano adds. “Additionally, culture is very important to Gen Z—the generation now entering the workforce—and thoughtful, community minded-goals and strategies are important to millennials. As an industry, we will need to rethink how we create experiences to balance the needs of our guests, team members and investors.”
Goedde says a “culture is king” mindset shifted restaurants’ top aim from recruitment to retention. “While the need to be creative to attract new talent is important, taking care of existing talent is even more so,” she says. “Flex schedules, individualized benefit programs and an actively inclusive environment are all ways to demonstrate employee appreciation.”
Jason Westhoff, president of Cousins Subs, says the brand moved forward with daily pay and automated shifts so people can switch automatically, which offers exposure electronically to parents dealing with childcare schedules. And it gives free meals, not discounts, as well. It’s simplified the application process, creating a one-stop shop on its website and pushed retention bonuses, as many brands have.
“Trying to set yourself apart from everybody is not easy,” he says. “What we try to do is focus on retention instead of re-staffing, and the best way we can retain is to create a good culture and good culture happens in 1,000 different ways, but the biggest way is to create touchpoints for every single person in the organization down to the newest hourly employee.”
For the first time, Cousins has an internal recruiter to “breathe culture into the stores and make the onboarding experience as pain free and enjoyable as it can be.”
“I think the best thing you can do is really impress your employees on their first day of work,” Westhoff says, adding Cousins is trying to beat the industry turnover rate by an average of 10 percent.
Typically, labor should account for 30 percent of a restaurant’s revenue. It's becoming increasingly muddy.
Black Box’s Workforce Intelligence platform recently showed the number of employees per unit in quick service continues to drop as operators navigate this labor shortage. It’s sitting at 23 after coming in at 24 in 2019 and 26 in 2018. Sales per labor hour are 56.
Turnover at the management level, amid pandemic conditions, is 70.6 percent. In non-management, 169.9 percent. The average for the category chimed in at 100.6 percent, well higher than fast casual’s 86.5 percent.
In June 2021, full-service turnover was 106 percent. It was 102 percent in 2019.
When restaurants closed early in the pandemic, 51 percent of workers cited higher pay or the need for consistent schedules and income as their top reasons for switching industries, according to a Black Box and Snagajob report.
Other points: In the second half of April a U.S. census survey found that nearly 1 million households had at least one adult who could not look for work because they needed to look after their children. In May, 78 percent of workers (Black Box) said their mental health had been negatively impacted in the past 12 months.
Of surveyed employed hourly workers, 15 percent said they had changed industries in the last year and another 33 percent wanted to. The reasons they were leaving—higher pay (28 percent); needed consistent schedule/income (23 percent); lack of professional development and promotion opportunities (17 percent); work hours (16 percent); work environment/company culture (15 percent).
Black Box data also noted GMs are making base salaries of $51,089 and assistant GMs $36,606. These numbers are likely to climb, with brands like Portillo’s forking up six-figure salaries.
A shade over 20 percent of the quick-service workforce is under 18, while 18–24 made up the largest swath at about 33 percent.
Seismic changes could be in store for sit-down brands thanks to shifting regulations around the “tip credit.” Essentially, the DOL, starting in late December, plans to set a more specific limit to the amount of time tipped employees can spend on “non-tipped activities” when the employer collects a tip credit. The tip credit has long been a convoluted subject, but, dressed down, it’s a rule that allows restaurants to pay certain workers lower wages so long as their tips cover the gap to minimum wage.
Earlier this month, the DOL clarified employers may only take a credit for the hours when an employee is doing work that can produce tips or tasks that directly support that work. This will remain the case as long as the tipped worker does not spend a substantial amount of time doing “tip-supporting” work. That’s the gray area. The new rule defines a “substantial amount of time” as more than 20 percent of the hours worked during an employee’s week or a continuous period of time that exceeds 30 minutes.
Preparation work, like stocking a bar or rolling silverware, would be included under tip-supporting work and would count against the time limit rules.
“This rule that they've now published is making it nearly impossible and impractical for employers to comply with the strict regulations,” says Victoria Vish, an associate attorney at Ogletree Deakins. “The ultimate goal is likely for people to just pay full minimum wage.”
The “80/20 rule,” where employers cannot take a tip credit for any time that exceeds 20 percent in a workweek, is nothing new, but now that it’s published in the Federal Register with strict definitions and an additional 30-minute ruling, restaurants may be expected to strictly monitor the exact amount of time employees spend on specific types of work. In practice, this could be rather difficult for restaurants to achieve, meaning many might abandon the tip credit altogether in favor of just paying minimum wage.
Is it good for employees? With tips, an average server may make close to $25 an hour, Vish says, far surpassing the federal minimum wage of $7.25. (The median server’s wage in the U.S. is $11.42 an hour, according to the BLS). And even though the rule provides some examples, like rolling silverware, the distinction between tipped duties and non-tipped duties is a challenging one to make. The clarified rule leaves some questions surrounding this that will ultimately have to be litigated, Vish says.
Steve Pockrass, a shareholder at labor and employment law firm Ogletree Deakins, agrees the new rule is too narrow and will toss chaos into the field. “Those terms are ambiguous because when you think about your experience at a restaurant, everything goes into that experience,” he says. “The quality of the food, the cleanliness of the table, the overall environment and atmosphere as well as what that server may do to help you or assist you. So there are lots of things that they may be doing that really are tip-producing work, even when they're not right at your table talking to you or assisting you.
What could happen, in some restaurants, is a move toward QR codes and other digital systems that evolve the service model. Bartaco, for example, shed the waiter position and no longer has a tipped employee standing in front of guests. It allows customers to use QR codes to order food online and pay digitally. The result being more support and salaried staff, and a tip pool shared across the restaurant. Employees are now paid at least minimum wage, CEO Scott Lawton says, with the average wage at restaurants climbing to $23 per hour.
Eighty-seven percent of respondents in Black Box and Snagajob's study said they would rather have a set livable wage than tips.
SRC’s DeGano adds restaurants haven’t found a universal solution. “Prior to the pandemic, restaurants had already begun to increase the price of menu items to include gratuity or add surcharges as clever ways to increase compensation by way of the guest for those not eligible for traditional tips,” he says. “Tip pooling also became more common. While there are many different viewpoints on how best to address, there will continue to be a shift in how restaurant operators view compensation and what constitutes a living wage.”