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I am pulling out my crystal ball and making restaurant industry predictions for 2020!
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Today, we are talking about the state of the restaurant industry in 2020. This is my once a year opportunity to make predictions about the future: where things are going, what I’d be focusing on, and where I’m taking my one-on-one clients. As we go through these you’ll start to see some trends for sure, but the one thing I want to remind everybody of is I am the back-to-basics guy and you’re going to hear a lot of this if your restaurant is struggling.
The first part of this talk about technology isn’t going to be the thing that’s going to save your restaurant. If you’re struggling right now, chances are you’re spending too much time chasing shiny objects or you’re spending too much time in the weeds doing the work. As we get further in the talk, the subject matter is going to apply to everybody, especially those of you that are struggling. I want to preface this whole shebang by saying that at the end of the day with no matter what we talk about here, there are going to be restaurants that buck all of these trends and are crushing it out there because they are so good at the basics.
Whenever I take on a new client or helping someone out, if they are not where they want to be in their restaurant – it’s because of the basics. It’s because of operations, controlling finances, systems, processes, procedures, etc.
I. Technology in 2020
Again, let me preface that you shouldn’t get caught up in chasing shiny objects. Technology is going to play a big role in 2020 in these areas:
- Online ordering. Even if you don’t take advantage of third-party delivery apps, people are wanting to order online. They’re wanting it to be easier than calling and it’s better for you anyway because your people don’t have to pick up the phone. Make sure that you’ve got a solid online ordering app for if you do any pickup, to-go or delivery.
- Self-service kiosks. For those of you that are in quick service or counter service restaurants, the technology has advanced dramatically. And when the big guys are starting to do it, you need to get into the game. If you have not been to McDonald’s lately, check out the self-serve kiosks they have – they are fantastic. A year ago I hated kiosks, but the technology has improved so much that when I go to a McDonald’s I would rather order from the kiosk than from a person.
- Curbside Pickup. If you haven’t been to a Chick-Fil-A lately, order from their app for curbside pickup. I know Chili’s and Applebee’s have been doing this for a long time, but it was always kind of clunky. It’s getting better and there’s technology to help if you don’t have your own app. I love that customers can just hit a button or send a text message to let you know they’ve arrived.
- Custom Apps. For those of you that are in a situation where you can afford to have a custom app built, work on that. You can get custom app white labels from third-party companies. I would highly consider some kind of app that ties your ordering, curbside, pickup, loyalty and push notifications all into one. You are no longer too small of a restaurant to have your own app.
- Third-party delivery is absolutely huge right now and it’s becoming even bigger in 2020. For some of you this is a good thing, for others a bad thing, but you can no longer fight it. The way that I suggest you take best advantage of third-party delivery is to use it as a marketing tool. In order to do that you need to have a method of converting a customer to your own. Use third-party delivery companies to find new customers, and then put a postcard or something in their order with a coupon/discount that they can use on your own online app so they directly order through that rather than the third party app. The customer will then create an account with you, give an email address or phone number. Yeah you give a discount, but hopefully you can own that customer rather than the third party delivery. Unless you don’t offer delivery of your own then you have to consider using the third-party delivery companies.
- Ghost restaurants or virtual restaurants. I put this in my 2019 address and we have opened up multiple ghost restaurants with clients over this past year – very successfully. If you are not sure what a ghost or a virtual restaurant is, this is a restaurant where it doesn’t exist publically. There’s two ways to do this: 1) You literally just open up a kitchen somewhere in an industrial area with low rent, no storefront, and rely 100% on third-party app or a third-party deliveries. 2) Take your current restaurant and add some extensions to it. For example, I worked with a client that was mostly a pizza restaurant. He added three different concepts – a hamburger concept, a poutine concept, and a fish-and-chips concept – to third party delivery apps. Each look like they’re different restaurants but it’s coming from the same kitchen. He was able to pick up over $1000 a week in sales from each of those individual restaurants without having to do anything. One of those concepts was doing a couple of thousand dollars a week and it was food that was already on his menu but he just branded it a little differently. Do your research this is definitely becoming a thing.
II. Staffing in 2020
Unfortunately staff is going to become a bigger problem than it already is. I know for many of you, staffing is the biggest challenge that you’re facing in the industry right now. Finding staff, training and getting your staff to do what you need them to do. Here’s the reality and forgive the honesty, staffing is not going to get any better or any easier. We have to stop blaming Millennials, Gen Y’s, Gen Z’s or Gen X’ers or whatever it is because it’s not their fault and they are not bad people. Some of your restaurants have just not adapted to modern technology to the way that the new generations work.
There are restaurants out there that are crushing it in this area. Companies like Uber are having no problem hiring people and keeping them. I know it’s a different type of job, but that’s your competition right now. The reality is in this modern economy you are going to have to fight to find your staff and keep them. The days where you just put up a ‘Help Wanted’ sign or post ads on Craigslist where 30 or 40 qualified people apply are gone.
Your ability to succeed in this new economy is going to be directly dependent on how good you are at finding, hiring, training, maintaining, leading and developing your staff. If you are not the best in the world or in your community at these things, you are going to struggle and have issues with everything you try to do in your business.
There are some people who are arguing that when this economy slows down staffing might be better. I believe we are going to have a slowdown coming soon, and it might not be this year. I said it was going to happen in 2020 last year, but who knows since It’s an election year and it happens a lot in election years. Even if we do have a slowdown it’s not going to get better, staffing issues are here to stay – you have to be the one that gets better.
One key thing you should do is start looking at Daily Pay apps or Daily Pay processes. More and more big companies are starting to implement these, however I don’t think the technology is there yet for small independents on a large scale. If you’re not familiar with this technology, it’s literally where your staff gets paid daily at the end of their shift. Money will get transferred to their phone via an app for their paycheck. This technology is kind of crazy. Honestly, I’m not a hundred percent sure how it works. I’ve interviewed a few of these companies and it’s quite interesting.
Keep an eye on Daily Pay because I think it is going to be a way to motivate your staff a little bit more, but it is not the best answer to staffing problems. The answer is better training, hiring, systems and leadership – all of the things that I talk about in my videos and my training courses.
We are no longer looking at generic things in this world. Look what’s happening to department stores and large retail and look at the food truck revolution that changed the restaurant business. There will always be the Cheesecake Factories of the world that have huge menus and do well. But if you look at the restaurants in your community that are doing the best, or the newest restaurants that are succeeding at the highest levels, they are very specialized at something.
If your menu is incredibly wide, I would suggest that you start looking at narrowing your menu and going deeper. Specialize at something, be the best in the world or the best in your community at something. Think about the example I just gave you about the virtual restaurants (ghost restaurants). My client opened up three restaurants even though he’s selling the same food that’s on his regular menu. If people are searching for fish and chips, they’re going to have more confidence in a restaurant that only sells fish and chips rather than a restaurant whose focus is divided on so many items.
IV. Food Safety
Why is food safety becoming more important? Just like everything else, social media technology is allowing news to spread faster. Therefore, talk of dirty restaurants and challenges at restaurants spreads faster. There was a terrible accident at a Buffalo Wild Wings a couple of months ago with some chemicals that got mixed improperly. The debate is still going on about what happened there, and I have my opinions, but the point is food safety is on my list as something that you have to start taking more seriously than you have ever taken before.
Now with digital temperature logs and digital thermometers, in the next couple of years, I think we are going the implementation of temperature logs, or something similar, being required by law. They’re recommended and I teach this, but they’re not required as of now.
Consumers are more advanced and educated than ever before and they know how to look for better quality and better sourced. Sophistication in general is not reserved for high-end only. I’ve been working with a client who is literally having to-go containers custom-built just for their type of food because they are seeing delivery as a huge trend. Delivery is taking 50% of their business right now and it’s probably going to grow more, so we need more sophisticated tools and everything that goes along with it better.
Ask yourself: How basic is everything we’re doing? Where can we become more sophisticated?
You are going to need better quality all the way through because your consumer is more sophisticated than ever before.
What I mean by polarization is we’re moving more to the extremes, so on the health side we want healthy food that’s even healthier. We want more plant-based food, natural, organic or local ingredients. That is going to keep going but here’s the crazy part, we’re also going extreme on the other side with giant over the top milkshakes that have fudge, caramel and things coming down the side.
I was on the phone with a client earlier today and we were looking at some of his competition in the breakfast area. One of his competitors does these insane iced coffee drinks with whipped cream, scoops of ice cream, sprinkles, and cookies, and they come in these huge mugs with giant straws.
There is polarization of everything in the world right now. Look at politics, you’ve got the extreme left and the extreme right. Nothing is happening in the middle and nobody’s interested in being in the middle. Same thing is happening with food. I’m not telling you what side you should be on, but don’t be in the middle. Don’t try to be a little bit healthy, that is not what people want. If you’re going to do healthy, do healthy. If you’re going to do unhealthy, do unhealthy.
Get yourself away from the middle a little bit more than you probably are right now. I know the middle feels safe but it’s not where people want to be, the middle is not exciting.
VII. Subscription Services
My big prediction for the year: subscription services. I’ve been saying this for a while and I haven’t quite figured this out yet to be honest with you. If I do, I will be the first to let you know, that’s why I haven’t written about it much. A few brands have been experimenting with subscription services: Amazon Prime, Target, and I think Walmart has one. Movie theaters have subscription services now for $15 a month, you get like one movie ticket plus 20% off of popcorn and drinks, etc. Start thinking about a way that you could include a subscription service in your restaurant.
One of my clients has a wine bar and we started a ‘Wine of the Month’ program where people pay $29 a month and they get a bottle of red or white wine. Then once a month they come in to a party at the restaurant where they can pick up their wine. This has been a massive success for him and he’s had hundreds of people sign up. It even got to a point where he has to do it twice a month now and divide his list in half because he can’t fit them all in his restaurant. Not only has it created this incredible pass of revenue, but it brings people into the restaurant on a more regular basis. That kind of subscription service has worked incredibly well for him.
Katz’s Deli in New York is experimenting with a program where it’s all-you-can-eat pastrami sandwiches. A barbecue place here in Austin called The Salt Lick is experimenting with an all-you-can-eat membership.
I don’t know how to do this yet in the restaurants, but start thinking about subscription services. Here are two suggestions for how you can implement this: 1)You can either do it on your own or 2)There’s an app out there called Meal Pal, that is available in a few cities. I think you’re going to start to see more of these third-party apps where they’re going to negotiate pricing with you and in exchange they’re going to bring business to you. Meal Pal does $8.99 or $6.99 per meal, you basically pay on a monthly plan and I think you get like 10 or 12 meals a month that are pre-paid for and you could pick from any of the restaurants in the city that they operate. So very similar to what UberEats or GrubHub are on the delivery side.
Final thoughts on 2020:
In 2020, we are going to see more and more of these third-party applications. The companies that have the money, the technology or the ability to develop these – big tech companies like UberEats, DoorDash, GrubHub, Meal Pal and Amazon – are going to continue to eat away at your margins. But you’re going to need to rely on them more and more because people are looking at food more differently than we’ve ever looked at it before. With so many good restaurants out there, we’re looking at food from the standpoint of either “I want an experience” or “I just want food”.
The polarization, either ultra fine dining or some kind of experience. There’s all these bocce-ball places that are opening up, there’s axe-throwing places, there’s a restaurant called Culinary Dropout by Fox Restaurant Group that are spreading like wildfire. They’re opening up all over the country and they have ping pong tables, cornhole and live music. They’re these huge fun restaurants and bars that we love going to as a family. My kid loves to play cornhole, we have fun, we sing and dance and just have a great time while we’re eating. We’re moving more toward experiences or utility.
The problem is if you’re on the experiential side that’s great. But if you’re on the ‘just food’ side and you aren’t unable to produce very good quality food at a very controllable and reasonable price, you’re in the middle and you’re going to get squeezed out. The restaurants that are going to make it through this shift are going to be the ones that can turn out a lot of food really effectively and efficiently at really good prices, because they can take advantage of all of these third-party apps without their margins getting squeezed too much.
The ones that are getting squeezed the most are the ones that don’t have those experiences, the playgrounds and the ultra fine dining. The good old everyday family style restaurant, QSR’s, etc. where you’re still relying on a lot of staff with a complex menu – it’s difficult to execute, operate and need a lot of management. But then as you start losing business to these other companies or subscription services, they’re all going to chip away at your margins
This is what happened in the retail world. Look at Amazon, they came along as a book company and now they sell everything. But they’re so big that most companies have to sell their products on Amazon even though they sell them on their own websites because that’s where people are looking to buy stuff, but then the problem is they have to give so much margin to Amazon.
Amazon’s the one making all the money in this, so what the retail companies are doing to fight this is they’re getting very specialized. Retail companies whether brick-and-mortar or online are getting very specialized, focusing on customization focusing on one narrow area where if someone wants your product they have to go direct to you to get it. They’re not going to go to Amazon because they can’t customize it and things like that so they can maintain their margins.
What I really want you to be thinking about is where are you going to fit into this new world that we’re creating. Where are you going to be distinct, unique or original at. Are you going to be utilitarian, are you just going to turn out one type of food as fast as you can at the best price possible and make the most money off volume or are you going to be in that very specialized world or that very exponential world.
The places that I’m afraid are going to struggle the most are the ones that are kind of in the middle, those that are just providing good food at a good price but has a lot of staff. The ones that haven’t taken advantage of automation or technology. The ones that have a complex menu that needs a lot of kitchen, management and training issues. Your margins are going to continue to get squeezed.
I hope this hasn’t gone too somber! What’s crazy is that I’m actually more excited about 2020 than I’ve ever been because I think the rules of the game are getting clearer. The only question now is who’s going to adopt or open up to this kind of new world and who’s going to continue to play by the old rules and you might struggle.
Here’s the thing, this is going to be a great year and I’m here to help with anything you need. That’s my overview on the state of the restaurant industry in 2020, I think it’s healthy, I think it’s strong, I do think we’re going to see a slowdown in the economy and I think that’s going to be good for most restaurants. Those of you that do a great job, those of you that are excelling, those of you that are kind of following some of these rules you’re going to do better in an economic slowdown because you’re going to pick up on some of that business that was going to those other restaurants. But there’s going to be that bottom 10% of restaurants that are just going to disappear when this economy slows down that’s just the reality of it.
I hope you enjoyed today’s video regarding my vision for the state of the restaurant industry in 2020. Have a wonderful day!
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