Future-Proof: How COVID-19 Will Change the Restaurant Industry
The Outlook for Restaurants in a Post-Pandemic World
While the pandemic has hit hospitality hard, innovative entrepreneurs seek new opportunities in the food service industry.
COVID-19 has changed the world in numerous ways, and we’ve yet to see its full impact on the U.S. economy. While many industries have been able to adapt (with employees working from home, etc.), others rely on face-to-face interactions and large congregations of people. Gyms, bars, and restaurants are examples of businesses that have been hit hard by the pandemic. Some have recently reopened, but new safety protocols have changed the landscape — and going out for a pint is definitely not what it was just a few short months ago.
This is the first article in our Future-Proof series looking at how specific industries will be changed for the short- and long-term due to the pandemic. Today, I’ll be looking at America’s most popular small business enterprise: the restaurant. We’re all tired of the lockdown and anxious to get back to life as we knew it, but the current and future state of the hospitality sector will likely look different for a long time.
Lockdowns Take A Toll
According to a report by the National Restaurant Association, the restaurant industry employs 10% of the U.S. workforce, and there were more than one million U.S. restaurants operating in 2019 (Smallbizgenius). Economists project that more than 100,000 small businesses (or 2% of the U.S. total) have permanently shut their doors since March — and the toll has been even worse for restaurateurs, with 3% closing up shop.
Due to social distancing measures and general caution in public spaces, U.S. consumers have been dining out less and less. Year-over-year decline of seated diners in restaurants was a staggering 72.5% on July 4, 2020, as seen in the following chart from Statista.
The Payroll Protection Program has given hope to some small business owners, but according to John Barker, President of the Ohio Restaurant Association, “What we hear over and over again is the federal stimulus isn’t really working for the restaurant industry.” (The Washington Post)
The Current Reality
With social distancing rules likely to be in place for some time, restaurant owners will need to adapt to survive in the short term. Businesses will need to focus on drive-thru or curbside pick-up options, and integrations with 3rd-party delivery platforms like Postmates and Grubhub (QSR). Many smaller operators are streamlining menus, pivoting to takeout and delivery, and even offering premade cocktails and craft beers to go (Restaurant Business).
There will also be a rise in outdoor seating, as many cities are cutting red tape and allowing restaurants to seat customers on patios, parking lots, and sidewalks. These new alfresco dining arrangements have helped the restaurant industry bounce back, and they also appeal to customers who want a sit-down restaurant experience but are still wary of venturing indoors. In a recent survey from Slate, 36% of respondents said they would eat at a restaurant outdoors, while just 15% said they would eat at a restaurant indoors with reduced seating.
The Future of Restaurants
Every industry is likely to experience permanent changes and restaurant owners should begin planning for that immediately.
New restaurateurs will need to focus on concepts that reduce the dining room footprint. (QSR) Experts predict a rise in “cloud kitchens,” which were already growing in popularity before the pandemic hit. These virtual restaurants are purpose-built to produce food for delivery only, and are ideally suited to a post-COVID reality. According to Ashley Colpaart, a writer for Food Corridor:
The barrier for entry is far lower for cloud kitchens compared with traditional restaurants. Ghost kitchens theoretically incur lower costs by eliminating the need for any front-of-house operations, floor space for seating, or high rents for storefronts with high foot traffic in prime locations. (Food Corridor)
Unfortunately, we’re also looking at a future where the largest of chain restaurants, such as McDonald’s and Little Caesar’s, will emerge with an even more dominant position in the industry than they hold now. This is due to simple economies of scale. Large chains have access to more cash and credit lines to help them weather the storm, and these businesses were already set up to serve customers with drive-thrus and delivery-based business models (Restaurant Business). This certainly isn’t the death knell for small, independent restaurants — but they will have to get creative to survive. Restaurants that can successfully switch to a mostly takeout and delivery model will fare well in this new landscape. As seen in the following Statista chart, 41.7% of survey respondents said they were likely to purchase food delivery online in March of 2020.
The good news is that America has long been a place of innovators who overcome challenges. Mary Sue Milliken, Chef at Socalo and Border Grill in Los Angeles, puts it this way:
“I vacillate between being paralyzed/terrified by the uncertainty our industry is facing and being thrilled by the opportunities for improvement. We are a creative bunch and I know many of us will find new and interesting ways to feed our communities. I’m excited to see what restaurant innovations spring out of this disaster.” (Food & Wine)
Like the old English proverb says, “Necessity is the mother of invention.” The entrepreneurs of today and tomorrow will come up with new restaurant concepts that address coronavirus concerns, while steering the restaurant industry in new and exciting directions. While no one knows for certain what the restaurants of tomorrow will look like, creative entrepreneurs will study new trends while developing innovative concepts, ensuring that their restaurant is future-proof.
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