Foodable's 2019 Predictions for the Restaurant Industry

Predictions are always a love-hate thing for me each year, it means I have to look deep into the industry and into my past 20+ years of reporting, indexing and analyzing with the leading foodservice operators in the world. Sometimes this analysis reveals the good times to come for the industry and sometimes it does not.

Last year, six out of eight of my predictions were right, most of which were easy to consider, but if you think about the timing in 2017 to detect these market shifts you have to be somewhat of a fortune teller and very lucky to get these right.

I was right on with plant-based menu items taking off, coffee trends ramping up infusions and even the beverage industry taking a hit in spirits, wine, and beer, the most troubling was the 8 percent overall drop in the industry prediction that turned out to be pretty accurate at 7.8 percent, according to our Foodable Labs data.  

2017 was not a great year for many, but the few emerging brands that excel did so in double-digit fashion.  

Unfortunately, I don't think this can continue. The bigger concern I have for 2019 is the overall health of our industry. Closings will continue like always but we will see some closures of brands we may have thought to be bulletproof just a few years ago.

Without further ado, let’s move on to my 2019 Predictions

Check the video above for more of my commentary on these predictions, but this will give a quick read on where I think the restaurant industry is going in 2019.

Plant-based is on a maverick of a wave that I don't see slowing down anytime soon, in fact, my recommendation to any protein producer is diversification and to double down on quality and animal welfare.

Facebook is in real trouble with the foodservice and foodie crowd with continued falling engagement levels to that of 2014. I don't see this turning around for the platform at all and the move to Instagram ads and destroying that platform may be their only hope before the feds scoop in with regulation.

I fear the ultimate breach will occur with foodservice, If I were Starbucks, I would Fort Knox that mobile app before we see a big hit on what could affect as many as 1 billion consumers. Big tech will continue to get pushback from consumers and though 2019 won't be the year for deregulation 2020 will be a campaign trail mantra for sure.

Airbnb, Amazon, and Uber will all reach a new level of innovation in food, and not in the ways you might think.

Amazon will take a new role as a ghost restaurant operator, Airbnb will take up restaurant reservations, and Uber will have to go head to head with the industry to win out in the delivery game

The emerging 150 brands will continue their trek on obliviating the competition. Watch out for a few of them that will dominate in the regional game like never before.

And unfortunately, the small craft beer makers will start to fall with a downturn in drinking trends and craft beer consumption falling. We will instead see a new landscape of how craft brewers will go to market, let the brew mergers begin.

Like every year, some of my predictions are outside the box and thinking in ways that others don't. What I have found is that if you follow consumer science, technology, and food you have some insights to a crossover matrix that starts to provide early indicators to trends that go unnoticed even in today's always on social media barrage of information.

If you're in the business, this will either be your best or worst year in the last decade. Think of it like this– to quote one of my favorite sayings by Louis Pasteur, “Chance favors the prepared mind” see ya on the backside.

2019 Brings Minimum Wage Hikes, How Will This Impact Restaurants?

The $15 minimum wage movement has morphed into a force to be reckoned with.

The Fight for $15 worker movement, that started in 2012, led to 20 cities initiating minimum wage increases in 2018.

In mid-February, thousands of fast-food workers gathered in protest in almost 50 cities in support of the $15 wage bump.

In the last few weeks, 20 states have passed legislation increasing the minimum wage, some of which included a tipped wage increase.

In Missouri, the new hourly wage increased from $7.85 to $8.60 and will be raised 85 cents per year until it reaches $12 in 2023. In Arkansas, the minimum wage has been raised from $8.50 to $9.25 and in 2021, it will hit $11.

Although most states are far from the $15 an hour minimum wage, California and Washington are at $12. In Washington D.C., the minimum wage has been increased from $13.25 per hour to $14.

Washington also requires employers to pay tipped employees the full state minimum wage before tips.

Find out what other states increased the minimum wage and the tipped wage in 2019 at "Toast" now.

So what does this ultimately mean for the restaurant industry?

Well, the average 5-6 % profit margin is tough enough for restaurant owners. When the minimum wage increases, the less profitable restaurants will be.

Many operators have argued that increases in labor costs, especially large ones like $15 an hour, like this would not only be detrimental to their business, but the employees would ultimately suffer from weekly hour cuts and even may lose their jobs entirely.

Not to mention, it encourages operators to invest in technology like self-ordering kiosks to cut labor costs.

Watch The Barron Report episode above where Host Paul Barron discusses how this affects the restaurants and that other changes will operators will make to counteract the increase in labor costs.

Why You Should Forget About Improving Your Restaurant

Your restaurant is a composition of thousands of details. All those details contribute to what your restaurant is today. The good and the bad.

Here’s the problem: With the New Year comes new plans to improve your restaurant. Usually, it's the same plan. You start off strong and around March the best designed plans start to fall to the wayside.

By June, those plans are pretty much forgotten. In November, you start to make plans for next year and the cycle goes over and over, again and again, year after year.

Perhaps it time to get off this masochistic treadmill and get some real results?

The first thing to do is stop trying to improve your restaurant. Wait? Did that last sentence say stop trying to improve my restaurant? Yes. It’s not a typo. Improvement to a thing is like throwing new paint on a rusted out car. It looks nice on the surface, but underneath is still a rusted out piece of junk. Instead of trying to fix temporary issues, how about we dig down to inspire real lasting change. That starts with you as the leader.

Your restaurant is a direct reflection of who you are as a leader, owner, operator, or chef. When you’re the one who is driving the brand you have to know where you want to go!

Too many leaders focus on temporary solutions that just compound the real problem lurking under the surface...you might just suck at running your restaurant.

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But here are a few things that lead to this situation of mediocrity:

You Focus on the Wrong Things

There are probably days when you think that your restaurant would be awesome if it wasn’t for those other people just messing things up day after day. You know it’s all their fault. Let’s just invite a few more people to this pity party and turn it into a total bitch fest! Get a bunch of unhappy people together and it ramps up pretty quick.

There was a restaurant owner who said to me the other day, “My cashiers are a bunch of idiots!” My reply was rather calm, “Well, who hired them?”

“I did”, he said.

“Well, maybe the real issue is who allowed them to work here in the first place?”, I said.

Yes, the truth will set you free. Yes, it’s going to piss you off. After a minute of silence, the owner replied, “Yeah, I haven’t done a very good job of screening people. I get desperate and hire anybody with a pulse!”

I said, “When you panic hire you only solve a temporary issue and create a long term problem in the growth of your culture.”

What are you doing to improve yourself to become a better leader?

What are you doing each week to recruits and search for better people to join your team?

The answer to these questions will lead you to start focusing on the one thing you truly have control over and that is you. Restaurants get better when the people in them become better people. You don’t tolerate mediocrity in others, so why do you accept it for yourself?

You Don’t Schedule Time to Work on Your Plan

Let’s talk about being busy. You’re busy, I get that. The question is what are you busy with? Are you blocking time out of your day to move your brand forward? It’s easy in the restaurant world to fill a day up with minutia tasks that have little long term impact on growth.

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Growth is not just about increasing sales. It’s about becoming better. Better at marketing. Better at guest relations. Better at cultivating a team that lives your mission. Better at being a better person.

Time has the ultimate “I don’t care what you do” attitude. Seriously. Time does not care what you do with the 14,400 minutes you get gifted with each day. Waste it or invest it, it’s always your choice.

Remember that...you choose all day what is important by where you place your attention. So, the "I’m too busy excuse" is really a bunch of BS. You should be honest and say that it’s not important to you.

Taking small blocks of time and putting them on your calendar is the one sure way to ensure your agenda (your life) moves forward. Take a tip from the most successful people on the planet...use your calendar to schedule EVERYTHING! Don’t take random meetings. Don’t allow people to control your day by not having your calendar booked. White space on your calendar is the lazy person’s life. Multimillionaire Grant Cardone is found of saying, “If you want to meet the devil, have white space on your calendar.” Your productivity will come to a halt when you have too much idle time on your hands.

So, what do you scheduled? Everything! Gym time, breakfast, time with family, meetings, phone calls, pre-shifts, computer time, reading time, meditation, and whatever else is important to you. I do block off open time for things that might need my attention. I tell clients to contact me during this scheduled blocks of time. If you want to really improve the quality of your restaurant and your life, then take control of your calendar and schedule everything!

You Get Discouraged and Give Up

Life loves to throw curve balls at you. Persistence and perseverance are required if you want massive success. Hey, things are not going to work all the time. Even if your restaurant started out with a Big Bang, as the time goes by (and more restaurants move into your market) you’ll start to become a little less appealing to the shiny new restaurant brands popping up.

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You’ll try something new to get your brand back on top. Maybe some video marketing on social media. You’ll get a few likes and then it seems to die off. You throw in the towel and throw out the excuse that your guests don’t want that. You could be so wrong.

Marketing is not a one time thing. It’s a consistency thing. Throwing out that video and then not really promoting it is your downfall. You made a half-ass commitment and the results show. If you want to play the social media marketing game, you will need to put in the energy and effort to get the results you want. Is everything you put out there going to stick? Of course not! Then you try something else. If that doesn’t work, you try something else. If that doesn’t work, you try something else. If that doesn’t work, you try something else. If that doesn’t work, you try something else. If that doesn’t work, you try something else. If that doesn’t work, you try something else. Get the hint?

You keep working and refining your message until you hit the nerve that gets a response from your guests. Then you market it relentlessly! Marketing is about keeping your brand in front (top of feed) to your market. If you don’t want to spend the time and invest in promoting your brand, your competition will.

I think it’s safe to say that almost everyone reading this know who McDonald’s is. Do you see them backing off on the amount they market? Hell no. They keep their foot on the marketing accelerator all the time! When you see McDonald’s slow down on marketing is the time you should slow down. Until then keep your brand at the top of social media feeds to keep your name top of mind.

Stop throwing caution to the wind. Stop playing it safe. Stop playing small in your market. Stop trying to improve things that won’t really improve your restaurant. Focus on becoming the best version of yourself. Control your calendar. Keep your marketing fresh and frequent. Refuse to surrender to complacency and mediocrity!

Want more tips from Donald Burns on how to create a better restaurant? Check out the recent episode of The Barron Report below where Burns breaks down some of the psychological principles that get in your way from building the restaurant and life you truly desire.

15 Restaurant Brands to Watch in 2019

When looking back on 2018, it was apparent that there were a clear group of concepts that were starting to separate from the pack in the restaurant industry. Restaurant closures topped at 50K closed locations in 2018– so the market seemed to have some correction.

While we did see some closings of lower performers in casual dining with Applebee’s alone closing over 250 locations in the past two years, the good news was the emerging brand's sector saw significant growth. This sector showed better performance in 2018 than any other brand groups.

These emerging brands consist of about 250 total brands that have multiple locations and are starting to take control of categories. Make sure to check out our 2018 Emerging Brands Report and to be on the lookout for our 2019 list.

sweetgreen-logo

All that said, my 15 brands to watch for 2019 are led by a group of leaders that I think have some unique and interesting aspects that put them in the limelight.

For example, Sweetgreen is setting a new standard of what it means to be a restaurant. The restaurant has morphed into a lifestyle brand or platform that will prove to be a new strategy for several brands that have the following.

lemonade restaurant logo

Lemonade is one of these as well and what separates the brand from the pack is its quality and the brand connection that is prevailing in a big way with guests. If they continue on a growth strategy this could be a player in the healthy halo sector very quickly.

Mod Pizza logo

Mod Pizza is another in this group that has clearly won the fast-casual pizza wars, now with over 400 locations and a management team that is geared toward people and culture this brand could be one to bet on.

Cava restaurant logo

My special mention would be Cava, while not on my 15 brands to watch, their acquisition of the Mediterranean fast-casual chain Zoe’s Kitchen creates both opportunities and challenges that I think are worth mentioning. They also have a rockstar group of investors that are a good reason to keep an eye on them.

Don't miss the episode of The Barron Report above where I break down why these brands have that X-factor.

Ghost Kitchens, Abandoning Third-Party Delivery Partners and More Challenges Operators Will Face in 2019

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While there is a lot of discussion surrounding cannabis within the restaurant space in addition to new spotlights on fermentation, craft ‘tea bars’, farm-to-table (2.0,) breakfast day-parts, and plant-based food – there are also some ‘trends’ we should expect to see from the operations side as we celebrate the beginning of 2019.

Each individual venue, whether it is a restaurant, bar, cafe, food truck, or lounge etc. has their own distinct problems to solve, but the one constant among successful operators that we see today is their ability to adapt to change.

This means adapting to a change in consumer behavior, cost structure, supply chain dynamics, labor dynamics, and their hyper-local market & competition, to name a few.

Striving to manage the ‘unknown’ within these categories, however, can be quite scary for many new or seasoned, independent restaurateurs.

Operators must innovate to adapt efficiently to the ever-changing external & internal economic conditions – something that is incredibly important, and is arguably more important than ever, as we shift focus into this New Year.

Let’s have a look at the most critical changes operators should be adapting to:

Third-Party Delivery Pushback

There’s no question, delivery, and off-premise dining has disrupted and caused havoc on much of the restaurant industry over the past couple of years – and more so in 2018. The economic models and regulations surrounding third-party applications have recently come under scrutiny by consumers, restaurateurs, governments, and even the delivery drivers themselves.

While delivery and off-premise dining as a revenue channel shows no signs of slowing down – expect independent restaurant operators to change focus and develop their own strategy (online ordering + delivery) to effectively control costs and improve profitability (no more 20-30% commissions) while protecting their brand (through better quality control and customer service) and keeping that invaluable consumer data in-house.

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The Rise of Ghost Kitchens

While independent operators are adjusting to the change in delivery logistics and off-premise dining – they also need to keep in mind another ‘disruptor’ that is starting to emerge. It is what’s referred to as the "ghost kitchen."

These ‘restaurants’ (we use that term loosely) are delivery only and have no typical restaurant venue; where guests can walk in, sit at a table or even pick-up their own takeaway order.

What’s the business model? Their food is only accessible online or through a mobile app, and is exclusive via home delivery.

Thanks to the data that has been made available now to tech giants such as Amazon and the leading third-party delivery platforms (UberEats, Foodora, Skip the Dishes etc.) – expect to see more of these ghost kitchens serving unique dishes with flexible menu options that they know guests will be eager to buy and pay more for due to its level of convenience.

Smaller Foot Prints

Coinciding with the increase in delivery, off-premise dining, and on-demand consumers, expect to see both traditional restaurant start-ups and even already established brands looking to operate out of a smaller footprint.

To maximize a small space that will also drive a high-profit percentage per square foot, restaurateurs need to truly understand their concept inside and out. Operators need to create a variety of financial scenarios and menu choices (and sizes) and determine the absolute minimum needed to execute the concept in terms of space and financial projections.

Smaller spaces utilize minimal expenses in rent, staffing, and other fixed costs - however, smaller spaces often bring in a smaller portion of customers in relation to its size. This is where the right balance in menu prices, menu options, productivity, and the understanding of one’s concept, demographics, and potential flow of traffic throughout its dayparts, is crucial; whether dine-in, take-out and/or delivery.

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Tablet Hell

How many restaurants are operating with the view of a cockpit at its point-of-sale? It seems every data provider, mobile ordering system, and POS solution provider needs to have their own tablet or screen, creating a nightmare for both front-line staff and management alike.

To ease operations as we roll into 2019 – expect to see further partnerships and all-in-one solution providers to hit the scene, consolidating all of the technology into one, easy-to-use platform.

As we know, communication is fundamentally important in the restaurant space, so it only makes sense that operators should be looking to combine their accounting, inventory, sales reports, labor management, vendor management, online ordering, catering, and delivery logistic communications into one database.

Every operation has a different way of doing business with different uses for data. That being said, while having consumer & restaurant data might seem like the goal, finding ways to turn analytics into actionable items for a restaurant should actually be the mindset; something that needs to be a focus in 2019 to remain scalable, sustainable, profitable, memorable, and consistent!

Labor Consolidation

With smaller spaces in addition to the ongoing changes in how we operate today, and not to mention the always increasing wage structure within the industry – it only makes sense for operators to consolidate their labor. This doesn’t mean burning out employees or giving them more tasks then they can handle. It means finding ways to maximize efficiencies.

As you can see so far, smaller is becoming better. With the increase of open concept kitchens in the smaller foot-print restaurants, why can’t cooks cross-over to be service staff when the meal is ready? Why can’t mixologists and bartenders help out in the kitchen and also close out food orders?

Expect to see more of a blended FOH & BOH operations or a ‘one-house’ approach in cross-training to control labor costs, lower turnover, and maximize efficiency.

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With all of this said, are dine-in restaurants or your neighborhood pub a thing of the past? Not necessarily, if the operators create differentiation and memorable experiences while they focus on their own branding.

Restaurants today have to compete with supermarkets, food halls, food trucks, meal kits, ghost kitchens, and other third-party applications. The time is now for operators to innovate and adapt to the ever-changing external & internal conditions of this cut-throat industry.

It is possible to be profitable with a strategic mix of dine-in, take-out, delivery, and catering revenue channels if they’re in fact - open to change!