Restaurant Consumers Will Call the Shots

February 10, 2021

While few are expecting a Roaring Twenty-Twenties-like return to restaurants and bars — with the modern equivalent of flappers and bathtub gin — a post-vaccine restaurant industry shows signs of being more profitable with a consumer who will be, literally, calling the shots.

After a year of dealing with on-and-off restrictions and up-and-down sales, restaurant operators have sliced and diced their balance sheets to make them profitable. And consumers are expressing a giant bubble of pent-up demand that bodes well for the topline when COVID-19 pandemic vaccines roll out in large numbers.

“The consumer is telling us more and more they want to get back inside the restaurant,” said Gene Lee, CEO of Orlando, Fla.-based Darden Restaurants Inc., which has 1,850 casual-dining brands that include Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen and others.

Gene Lee, CEO of Orlando, Fla.-based Darden Restaurants Inc., .jpg“They are tired of eating restaurant food in their homes,” Lee said at a January conference. “They want to get back out and socialize with their friends.”

A National Restaurant Association’s recent survey of 1,000 U.S. adults found that pent-up demand was intense, with about 67% of consumers saying they were not eating on-premise as often as they would like.

“Baby Boomers really want to return to restaurants,” the survey found, “beating out Gen Z adults and Millennials when they say they aren’t eating on-premise at restaurants as often as they’d like.” Women, at 74%, were more likely than men, at 60%, in saying they wanted to dine in more often.

Lisa Miller of Dallas-based Lisa W. Miller & Associates, who has been working on a “Journey Back to Joy” research study since the pandemic was declared in March 2020, said consumers are emotionally connected to restaurants.

Roaring_Twenties_-_Lisa_W._Miller_&_Associates_LLC.png“The reality of it is, the anxious people and the very anxious people — about 45% of the people in my study — want to take the shots ASAP,” said Miller, who works with restaurant brands. But among the very anxious people, 64% of them will not change their behavior even after getting a vaccine.

Restaurants still need to be focusing on the experiential aspects of why consumers love to come to the brand in the first place. I call it: ‘Leading with joy and then reassuring with safety,’” Miller continued.

Restaurant operators will also need to retain ways to make dining out a joyful occasion, such as not paring menus too far down to remove items that consumers expect will make them happy, Miller said.

Mintel, the market analyst agency, expects the restaurant business to battle with stagnation for the remainder of this year.

“Even as dining rooms reopen on a state-by-state basis, consumers are likely to have concerns about dining out and have limited budgets to do so,” Mintel said in a January report. “Heightened by safety and sanitation practices and value-based promotions will be vital to gain consumer trust and woo back diners,”

Mintel suggested that operators this year, at least, will need to make their meals so convenient that customers can’t resist them.

Mintel, the market analyst agency.jpgIn a recent consumer research study, Mintel found more Americans said they were always on the lookout for things that make their lives easier (76%) than those who stuck to a budget (69%).

“Operators of all types, from fast casuals to fine-dining concepts, should consider making their meals hyper-accessible by adding drive-thru lanes and digitally enhanced curbside pickup options,” Mintel recommended.

The pandemic’s impact on U.S. foodservice sales was deep and significant in 2020. The National Restaurant Association estimated the total food and beverage sales fell 23.8% between 2018, when it was $864.3 billion, to 2020, when it dropped to $659 billion. The association predicts that will rise 11% in 2021, to $731.5 billion, but still far below the 2019 peak.

Operators are bracing for the more parsimonious consumers with new expectations.

Wyman Roberts, CEO and president of Dallas-based Brinker International Inc., parent to the Chili’s Grill & Bar and Maggiano’s Little Italy brands and the It’s Just Wings virtual brand, said in an earnings call in late January that restaurant consumers were “fundamentally changed” by the pandemic.

COVID-19 and its restrictions “fundamentally changed us as consumers,” he said. “We were forced to use technology to enjoy our favorite restaurants in new ways like third-party delivery, curbside takeout, QR code menus and mobile payment.”

Wyman Roberts, CEO and president of Dallas-based Brinker International Inc..jpgThat will change consumers forever, Roberts said. “Now that we’ve experienced greater convenience and control over our experience, we’re not likely to give it all back,” he said.

James O’Reilly, CEO of the 61-unit Miami-based Smokey Bones, said, “Dining in restaurants is one of the most missed and eagerly anticipated activities among all things that consumers have had to sacrifice during the pandemic.”

While Smokey Bones has a virtual brand with The Wing Experience, O’Reilly said his company anticipates far ranging changes in the consumer experience.

“In a post-vaccine world, we expect to see: No. 1, a permanent shift to higher levels of off-premise requiring investments in packaging, technology and asset evolution to maximize this experience,” he said. “And No. 2, better dine-in experiences, which for many guests will become more of a special occasion than they were pre-COVID.”

Independent operators anticipate further changes in consumer behavior as the pandemic eases.

Robert Hall, CEO of Dallas-based Refined Hospitality Concepts, said his company has opened three locations of Primo’s MX, a casual-dining Mexican concept, during the past year, with two additional locations announced in North Texas. The company also launched Sfereco, a meatball and pizza concept, during the pandemic, and it has two additional locations with more in the works.

James O’Reilly, CEO of the 61-unit Miami-based Smokey Bones.jpg“We’ve been able to revise our business model to adapt to the lower capacity limitations currently facing our industry,” Hall said. “By creating a lower cost structure with lower inventory requirements, we’ve been able to more aggressively grow. While reduced capacity in restaurants has slowed the trajectory for restaurant growth, using those limitations in the business plans for new outlets allows for planned, slower growth. With new locations, we’re not trying to find shifts for a full restaurant, because we’re only hiring new staff to accommodate the numbers currently allowed by law.”

Because of pandemic restrictions, Refined Hospitality has changed its openings to phased-in schedules.

“Like many restaurant operators, we’re using the opportunity to offer ghost kitchen options to more fully utilize our spaces. However, that strategy requires a very tactical look at area maps,” Hall said. “We’re literally working on growth models in North Texas built around creating concentric service circles so that we can maximize the number of households available to serve.”

In the long term, Hall said he saw “a real reason for optimism.” For example, catering and special events are beginning to return.

“During the last several weeks,” he said in late January, ”we’ve seen consistent growth in catering requests of 8% to 10% week over week.”

Hall said he expects to see several trends for the remainder of this decade.

“Smaller footprint stores will be the trend,” he said. “Virtual concepts and ghost kitchens will continue to support revenue models. The traditional large chain model will evolve and change.”

The pandemic has also changed attitudes and governmental restrictions on what people are eating and drinking at home, Hall said, especially with many states modifying cocktails or mixes to be delivered.

For the rest of the ‘20s, Hall said he’s seeing an evolution toward healthier and more environmentally friendly expectations from diners.

“The use of vegetable proteins is becoming more mainstream and in demand,” he said. “Becoming decadent and playful with these products while maintaining a focus on a healthier lifestyle and environmentally conscious evolution will be critical for long-term success.”

Robert Hall, CEO of Dallas-based Refined Hospitality Concepts.jpgHall said he expects steakhouses to offer items like cauliflower steaks and eggplant steaks prominently, “not just buried in the menu.”

“We’re excited to be a part of the changing dining landscape,” he said, “and believe that adaptability and awareness will lead smart operators to a very successful decade.”

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