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.

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.

Restaurant Traffic is Down by Almost 30 Percent

2018 has not been kind to the restaurant industry.

You may have noticed multiple headlines announcing the closure of stores of restaurant brands you thought were doing well in today's market.

We recently reported that even honeygrow is closing three stores in Chicago and then Taco Bueno filed Chapter 11 bankruptcy. Both these announcements were somewhat of a surprise considering both chains have grown wildly popular.

These restaurants aren't alone.

According to Foodable labs data, the number of restaurant closures is a record high. Social Restaurant Visits (SRVs) are down significantly, meaning restaurant traffic is slow.

With fewer customers visiting restaurants, fewer restaurant reservations are being made. The space is becoming even more competitive for not only restaurants but also for third-party services like restaurant reservation apps.

Resy is making a major play to compete with OpenTable.

The restaurant reservation service announced last week that it is acquiring another reservation company Reserve. OpenTable is being used by 50,000 restaurants currently. While Resy will soon be serving 14,000 restaurants after the acquisition. Resy has aggressive growth plans in the works too.

But will the recent restaurant slump take a bite out of Resy's business?

Customers aren't only visiting restaurants less but they are ordering pizza-less.

According to Foodable labs data, Pizza delivery is down by 18.5 percent year over year.

This is partly because the quality of the pizza being delivered most of the time isn't up to customers' standard.

However, there is a company that has come up with a solution to this problem– Zume Pizza.

Zume has transformed how pizza is being delivered. Zume is store-less and has a team of six different robots that assist in making the pizzas. The concept's delivery vehicles are also equipped with pizza ovens, so pizzas are ready for fast delivery. The company's innovative technology ensures that the pizza is always warm and fresh.

Last week, the automated pizza delivery company announced that it has raised an additional $375 million from SoftBank. It looks like the tech-focused pizza brand is about to take off with this massive investment.

Watch out UberEats, Zume could change the food delivery space forever.

Listen to The Barron Report above to learn more.

The Restaurant Industry Downturn Looms

Shutterstock

Shutterstock

Today's restaurant market is so saturated that it gives guests so many options to choose from. But from an operator standpoint, it's wildly competitive.

Even Emerging Brands, like honeygrow, are struggling in certain markets. The fast casual salad chain will be closing three locations in Chicago next week.

Honeygrow entered the Chi-town market less than a year ago but has already determined that it's not the right time to keep some of the stores in the city open.

According to the fast casual's founder Justin Rosenberg, the Chicago stores “didn’t see the sales take off.” Honey is closing three locations, one in the Fulton Market neighborhood and downtown and then a Minigrow concept in the Loop.

One location in Schaumburg, a northwestern suburb of Chicago will remain open.

But the chain is going to try to expand in the city in the future.

“It’s a total bummer,” said Rosenberg on Thursday. “Like any market, it’s very competitive and we need to come back with our A-game.”

Back in 2017, we visited the tech-focused concept to see what sets this restaurant apart from the others in the market. Watch the episode of Fast Casual Nation below to learn more about honeygrow’s growth plan.

The fast casual segment continues to appeal to operators looking to cater to today's consumers which are looking for affordable yet high-quality food options.

However, not every concept is able to survive in a market with a lot of competition.

“The fast-casual segment attracts a huge number of startup brands that try to capitalize on the next big trend by attracting a lot of investment and saturating markets early,” said Mike Kostyo of Datassential. “It's inevitable that some brands are going to survive and others won't.”

Taco Bueno, a Southern taco fast-food chain, just filed Chapter 11 bankruptcy but isn't giving up just yet.

"We are implementing this plan through a court-supervised financial restructuring, and I want to emphasize that during this process, your local Taco Bueno restaurants are open and eager to serve you," said Omar Junjua, Taco Bueno CEO.

The chain was also acquired by Taco Supremo. Learn more about the taco chain's announcement at "Business Insider."