Despite higher grocery inflation, consumers continue to splurge on their favorite restaurant brands at retail, fueling a trend that has gained significant momentum in recent years.
“Restaurants are looking to exploit brand loyalty that really reignited during the pandemic,” Jennifer Bartashus, senior analyst with Bloomberg Intelligence, told The Food Institute. “It is a way to ensure steady incremental revenue through licensing agreements or product sales at retail.”
But with foodservice on the road to recovery, how long will this momentum last?
Key Drivers
Restaurants have been dabbling in CPG space for decades, but in the past three years the restaurant CPG sector has exploded, reported Restaurant Business. Noteworthy launches include signature sauces from Chick-fil-A and Whataburger, Panera Bread’s refrigerated and bakery offerings, and desserts, drinks, and cereal from Cinnabon.
When indoor dining shut down in 2020, many restaurants pivoted to grocery products to stay top of mind for consumers, said Joan Driggs, VP of thought leadership at IRI in the same article.
Now, with inflation high, restaurants are staying agile with their business models to cater to more occasions and consumer needs.
“Increased interest in restaurant-brand grocery products tends to coincide with recessions,” said Driggs. “When budgets are pinched, consumers feel they can’t afford to dine out as much, but they like recreating the restaurant experience at home with familiar products and flavors they spot at the grocery store.”
Trend Outlook
With foot traffic gradually increasing across the foodservice sector, many restaurant operators have less incentive to leverage the direct-to-consumer channel as a matter of survival. In the year ahead, however, operators may continue to utilize CPGs to combat inflationary challenges
“As restaurants grapple with balancing price increases to offset higher costs, revenue from CPG sales can help,” said Bartashus. “Even with high food inflation that started at the end of 2021, consumers have been surprisingly loyal to brands at retail. Private label product sales have risen, but not as fast as many would have expected.”
With the return to normal continuing to progress, the industry may also see the reversal of this trend — direct-to-consumer (DTC) brands showing up in restaurants — coming to life, noted Filip Pejic, co-founder at Pearly Drinks.
“Brands selling condiments, beverages, spices, and other products will start to appear in select restaurants as a new unique marketing channel,” Pejic told The Food Institute. “This will provide both restaurants and DTC brands a new and unique way differentiate themselves and attract customers.”
In July 2018, Melissa Sheeder, a visually-impaired person, attempted to use the self-checkout lane at a Maryland Walmart. After struggling to scan some of the items, Sheeder’s friend, who is also visually-impaired, asked a nearby employee for help.
But instead of helping them check out, the Walmart employee canceled the transaction, helped put the merchandise back in their cart, and directed them to a cashier lane.
A few months later, the National Federation of the Blind (NFB) sued Walmart, arguing that the company violated the Americans with Disabilities Act by “excluding blind people from using the service in the way that it was intended – independently and privately,” as stated in court documents. Sheeder was one of three plaintiffs in the suit. Last year, a federal judge in Maryland ruled in Walmart’s favor.
Since then, self-checkout lanes have continued to cause issues for disabled customers.
Unequal access to privacy
From a consumer perspective, the merits of a self-checkout lane are speed and privacy. During the 2018 lawsuit, Walmart maintained that its self-checkout system is accessible because staff are trained to help. But if disabled customers have to ask for assistance, not only will the transaction likely take longer, they also lose the option to keep their purchases private.
“When it comes to the self-service checkouts in retail stores, we all understand that there are certain items we might want to purchase which are of a personal nature,” said Nicky Shaw, U.S. operations manager at Storm Interface, a company that creates assistive technology products used at both Taco Bell and McDonald’s, in an interview with The Food Institute.
“Having the option to check out independently is unfortunately not available to all customers because of inaccessible POS,” Shaw explained. “By denying some customers this option, what message is the retailer sending to those customers?”
Meanwhile, self-checkout has only become more ubiquitous in the last few years. In 2018, self-checkout represented 18% of all grocery store transactions. By 2021, when the Walmart ruling came to pass, that figure had increased to 30%, according to FMI.
Walmart, Kroger, Dollar General and Albertsons are all piloting stores that consist entirely of self-checkout lanes.
“Having the option to check out independently is unfortunately not available to all customers because of inaccessible POS. By denying some customers this option, what message is the retailer sending to those customers?” -Nicky Shaw, U.S. operations manager at Storm Interface
Working toward new regulations
As a result, the Walmart case is “probably not the last you have heard of this type of suit,” said Craig Allen Keefner, executive director of the Kiosk Association. Keefner said the Kiosk Association works closely with the U.S. Access Board, a federal agency currently in the process of proposing new guidelines for self-service machines.
From September through November, the public was invited to submit comments to the Access Board on new regulations for self-checkout machines and ordering systems.
“The first step in proposed rulemaking, which would create scoping and technical standards for touchscreen devices used in commercial facilities just closed on November 21,” explained Bruna Pedrini, an attorney who specializes in accessibility and anti-discrimination law.
Pedrini added that as the regulatory process unfolds, businesses can “address the very real concerns of their customers with disabilities by considering some basic issues. For example, the spacing between self-service kiosks and check out aisles needs to allow for a wheelchair to properly maneuver and to turn about. Similarly, the reach to the touch screen from the seated position of a person in a wheelchair must be at the correct height and accessible.”
The role of retailers moving forward
The U.S. Access Board’s proposal is already supported by the NFB and the National Association of the Deaf. If an agency with enforcement powers adopts the new guidelines, the proposed regulations could become official rules, changing the standards that retailers and self-checkout manufacturers must comply with.
“Our self-checkout systems and their components such as payment device location, touch screen, scanner location and bag racks are designed to meet or exceed industry guidelines for accessibility,” said Dan Kelaher, senior human factors engineer at Toshiba Global Commerce Solutions.
But ensuring that self-checkout machines are actually accessible once they’re placed in a store requires close collaboration between manufacturer and retailer.
“Retailers must also follow building guidelines and requirements to ensure that adequate space is provided around the self-checkout system so all individuals can access and use all the available features,” Kelaher said.
From Nicky Shaw’s point of view, if retailers want to know what shoppers with disabilities need, they should ask them.
“I believe that retailers should work more closely with disability advocate groups when developing their POS,” she said, “because it’s often small tweaks that can make a big difference.”
Ultimately, it’s in the retailer’s best interest to ensure an equitable shopping experience for every customer.
“I read about ‘customer engagement’ and the importance that retailers seem to place on this,” Shaw noted, “but then at the point of sale any customer who cannot see, or read, or interact with a touchscreen is completely forgotten.”
HungerRush, a restaurant tech company, also found digital visibility is significant factor in driving new customer visits, with 85% of consumers saying it’s important to them to find reviews and other information about restaurants online.
Sixty-five percent of respondents under the age of 30 reported ordering online, 62% order by phone, 51% through a restaurant’s app, and 38% through third-party apps or at the restaurant counter, per the survey.
Dive Insight:
Online ordering is the most frequently used ordering technology covered by the survey, especially among younger consumers. But younger consumers (18-29 years old) are actually less likely to use some tech-heavy ordering channels compared to customers aged 30-39. Only 8% of the younger consumer set said they would use text ordering, compared to about 18% of customers in their 30s, according to the survey.
Other findings from HungerRush’s study show macro-economic pressures are changing consumer behavior, as well. Forty-four percent of consumers are consciously opting for local restaurants as a way to save gas money, and 50% are limiting their frequency. Despite falling gas prices, HungerRush found that inflation still outpaces wage gains, meaning most consumers have seen their disposable income shrink even as some price shocks ease.
Recent data from the National Restaurant Association reinforce HungerRush’s finding that consumers are cutting back. The NRA found diners are trading down for value, even as large majorities of customers want to eat out during the holiday season.
Still, savvy technological investments that drive convenience may still entice customers experiencing economic hardships, the survey suggests. Seventy-two percent of consumers feel it is important that a restaurant personalizes their communications to them.Casual eateries can achieve personalization with a range of applications, from tailored email promotions to surveys that collect diner information, such as birthdays and menu item preferences, that can be used for targeted offerings.
The restaurant industry is in a revolution—or evolution—in its relationship to technology. Operators are looking for tools and systems to give them a competitive advantage, whether that’s by meeting customer wants or getting your labor numbers just right.
However, as the number of tools available to restaurateurs expands, and the capabilities of technology also grow, it’s critical to be thoughtful about what software you select and how you implement it. Here are seven common mistakes you should avoid when looking at new restaurant technology.
Not Planning Ahead
It’s easy to become so excited about a new initiative that you jump into looking at various vendors without a plan. This is a recipe for disaster. Plan carefully before contacting vendors and getting swept up in a sales cycle. Make lists of your must have and nice to have features and understand who needs to be involved. Once you’ve selected your vendor, work collaboratively with them to create a realistic rollout plan to ensure you get the value out of your investment.
Not Engaging the Right People
We know the old “too many cooks in the kitchen” adage, and, while that’s true, neglecting to include key teams when making decisions about technology will also make for a frustrating implementation. If you never had an end user walk through how the product should be used, you may have missed a crucial step in their process and will now need to find a workaround. So, think carefully about including people along the spectrum that will be affected by this change. This includes end users, IT, internal managers, and whoever else may have a stake in the change.
Choosing Based on Hype Instead of Need
It can be easy to get caught up in the hype around a hot name but take a step back and think about whether the vendor you’re considering actually has all the features you need. The last thing you want is to get halfway implemented and realize a critical tool is missing. Refer back to the list you made when planning and stick to the list you know you need.
Neglecting Integrations
As you build out a fuller tech stack, you must have your solutions integrated. No software is able to do everything you want, but the solutions should be able to “talk” to each other to give you a holistic look at your data and performance. Piecing together vendors and hoping they’ll work will end in frustration. Find out ahead of time that each system talks to the other systems it needs to.
Avoiding Change Management
Although change is inevitable, it’s also inevitable that your employees will drag their feet about it. So, don’t leave change management up to a hope and a prayer. Explain to your employees why you’re changing or adding a new technology, emphasizing ways in which it positively affects their day-to-day jobs. Understanding what’s in it for them—such as faster closing, easier schedule management, or better staffing—goes a long way toward convincing reluctant employees.
Not Thinking About Training
It doesn’t matter how great your new platform is if employees can’t use it. Ask if your potential vendors offer training and what that looks like and prepare internally for how you’ll roll that out to the end users. Whether you use an internal or external team, training is critical to ensuring user adoption and getting the most of the investment you just made.
Assuming Security Is Strong
A whopping 108.9 million accounts were breached in the third quarter of 2022, a 70-percent increase vs the previous quarter. Therefore, you can’t afford to take security for granted. Restaurants are handling transactions, processing payroll, transmitting information between systems, and more on an hourly basis. Even the information you don’t store is processed through these vendors and you must know their security is strong.
The restaurant industry is in the midst of major technological changes, which is good. The vendors available today will make work easier for your employees, better meet the needs of your customers, give you strong data with which to make decisions, and more. However, to get the ROI you think you’re getting, you also need to use care when selecting and implementing new vendors. Planning ahead to avoid common pitfalls will pay dividends in the long run.
It’s been another disruptive year for the restaurant industry. While the pandemic is thankfully over, its ramifications – product shortages, supply chain interruptions, and stiff competition for workers – continue. In 2022, we’ve also experienced food production challenges, stalled exports out of Ukraine, and extreme weather destroying crops. Plus, inflation is soaring, with the price of consumer goods hitting a 40-year high.
But there is some good news. Trends for 2023 look positive, with the restaurant industry prioritizing sustainability, transparency, safety, quality, and accuracy. Also promising: technology solutions will help brands of all sizes elevate their operations in the new year.
I predict the following trends for 2023:
A bigger focus on sustainability.Shuggie’s, a climate-friendly restaurant in San Francisco, passionately prioritizes sustainability. They pride themselves on “rescuing” ingredients that would have gone to waste, including irregular or surplus produce, food byproducts, and meat offcuts, using these items for their “upcycled” menu. The National Restaurant Association predicts that zero waste, sustainability, and upcycled foods will trend in 2023, and I agree wholeheartedly. Technology will be instrumental in driving sustainability, helping us develop more sustainable ways to produce food (like vertical farming), find better ways to reduce waste, and reduce our dependence on foreign exports. In 2023, we’ll see forward-thinking restaurants boosting sustainability in creative, new ways.
Adoption of smart tech solutions. Many restaurants implemented tech solutions out of necessity during the pandemic. In the coming year, more restaurants will feature paperless menus, touchless payment, self-service kiosks, and other tech conveniences. It will also be exciting to see brands implementing AI, machine learning, and automation to elevate the customer experience.
Loyalty programs will grow. It costs five times as much to recruit a new customer as it does to retain an existing one. Therefore, we’ll see a growing emphasis on increasing customer loyalty. Many brands have already implemented loyalty programs – e.g., buy 10 sandwiches and get the 11th free – but now they’ll leverage technology to boost customer engagement, incentivizing customers to visit and buy. Additionally, implementing gamification strategies will make rewards even more enticing.
Staff retention is essential. After years of staff shortages, brands will prioritize their employees in 2023, working diligently to keep them happy. For instance, more operators will use scheduling software to ensure their employees are getting their preferred shifts – and aren’t being overutilized, which could lead to burnout. Brands will use competitive wages and attractive benefits packages to maximize staff retention. And they’ll look for other ways to show their appreciation for employees, including tuition reimbursement, advancement opportunities, and more PTO. Increasingly, restaurants will move away from “the customer is always right” and will opt to close early or take other measures to deal with rude, inappropriate guests, standing in solidarity with their workers.
Restaurants will take delivery in-house. The popularity of delivery soared during the pandemic when consumers were unable (or unwilling) to dine out, and that trend will continue. However, expect to see more brands taking delivery in-house vs. relying on third party delivery companies. If your restaurant uses external delivery services, you have no control over the safety, quality, or customer experience once the orders leave your premises. Considering that a recent study found that eight in 10 food delivery drivers ate part of their customers’ orders, taking delivery in-house may be a wise move! Expect to see more brands manage their delivery to ensure high quality and exceptional customer experiences.
Accuracy is king. Incorrect orders are a top complaint among customers. One wrong order can prevent customers from returning, and one unhappy customer can spread scathing reviews across the Internet, damaging customer loyalty, sales, and your reputation. Tech tools help identify critical components that impact accuracy, including number of employees per shift, whether special requests are being properly identified, etc. Be sure that all employees know how to use your ResTech correctly and are leveraging these tools to maximize accuracy.
Increased transparencythroughout the supply chain. Even if your restaurant is prioritizing safety and quality efforts, are all your suppliers aligned? You could be following proper protocols, but if a supplier brings you contaminated products, you’re at risk for a foodborne illness outbreak. Use tech tools to manage supplier certifications, so you can clearly see which suppliers prioritize safety and quality – and avoid the ones that don’t.
Train differently (and better). It’s common to train employees by telling them what to do and how to do it. The trend for 2023 will be to train employees differently. Instead of just telling employees what to do, explain why the rules are in place, and they’ll be more likely to comply. Also, transform from a punitive culture – where employees fear punishment if they ask questions or point out infractions – to a collaborative one, where everyone works together to uphold high safety and quality standards. Use tech tools to provide information in bite-sized chunks, amplify training efforts, and reinforce knowledge.
Utilize a “combination approach” for auditing. The pandemic meant an end to in-person, third-party audits as we knew them. But restaurants found alternative ways to audit during COVID, including remote audits done via Zoom and more frequent self-inspections. Brands will continue using this combination approach of in-person and remote audits plus more frequent self-assessments to ensure their locations are compliant. This means they can protect locations even if travel or cost restrictions prohibit regular onsite third-party audits.
Improve the hybrid model. Consumers have become accustomed to the hybrid of in-person, pickup and delivery models, so restaurants must offer – and excel at – each of these models. Implement proper quality and safety protocols whether your guests are dining onsite, picking up their orders, or having meals delivered. Ensure that all your employees understand your safety protocols and inspect each meal all along the production line to ensure safety, quality, and accuracy.
The Consumer Price Index declined in November, but restaurant menu prices continued to increase.
Inflation slowed in November as consumer prices on items from potatoes to apparel declined last month, providing some hope that a months-long run of historically high price increases is at an end.
One exception: Menu prices at restaurants.
The Consumer Price Index declined 0.1% in November, the U.S. Bureau of Labor Statistics said on Tuesday. It remains up 7.1% on an annual basis, still more than three times the target rate the U.S. Federal Reserve sets to guide its interest rate decisions.
But food away from home, which includes restaurants, bars and noncommercial foodservice providers, was up 0.5% for the month and remains up 8.5% for the year.
Some of that is due to the end of free school lunch programs in many states. Yet full-service restaurants raised prices 0.4% in November while limited-service meals rose 0.6%. For the year, prices are up 9% and 6.7% at full-service and limited-service restaurants, respectively.
The overall data generated some hope that the Federal Reserve could temper its interest rate decisions over the coming year—perhaps enough that the economy can avoid a recession.
The inflation data helped send stocks higher on Tuesday. The S&P 500 Index was up 0.72% through late afternoon trading.
Restaurant stocks, however, were mixed, with roughly half of the publicly traded companies declining.
Restaurants may be keeping their foot on the price-increase gas a little too long.
Prices for food at home were flat last month. While grocery prices are up 12% over the past year, menu prices have increased faster of late. As such, restaurants could lose one advantage that has kept customers coming in and paying high prices despite historically high inflation.
Easing inflation could help consumer spending, however. Gas prices were down 3.3% last month, continuing a months-long slowdown. A gallon of gas is now less than 10% higher than it was a year ago. At times during the summer, it was up well over 50%.
Consumer prices for meats, meanwhile, were down 1% in November. Potatoes were down more than 8% last month. The prices for women’s outerwear were down 6.3%.
Other prices were still up, such as gift wrap, wireless phone services and personal care services.
If food waste were a country, it would be the third-highest greenhouse-gas emitting nation behind the US and China. That’s because 40% of all food grown in the world goes uneaten each year, according to a World Wildlife Fund report from last year. And when food ends up in landfills, it produces huge amounts of greenhouse gases.
So it’s no surprise then that apps designed to combat food waste – by giving consumers the opportunity to purchase leftover, expiring or misshapen food at discount prices – have become increasingly popular in recent years. Some of these apps have millions of users in the US, and are growing internationally. TikTok users often post videos of the food they have salvaged from restaurants through the apps, and a Reddit community with more than 12,000 members shares photos of their hauls.
“For me, the most impactful way to make a difference was really to enable every one of us to make a difference,” said Lucie Basch, co-founder of the app Too Good to Go. “The idea of the app, of technology in the digital world today, is that it connects each other to one another, and that’s your chance to really make a difference.”
Food waste happens at many points along the supply chain – from spoilage on semi-trucks to overproduction on the farm – and food waste experts note that those losses are only compounded the further food gets from its source. While developers hope that their apps will give consumers – who are responsible for about half of food waste – an opportunity to signal to retailers what they’re willing to buy – experts warn that true change will require systemic policy changes.
“It takes a village to solve a problem like this. And it’s not going to be one solution that does it,” said Josh Domingues, founder and CEO of the Flashfood app. “It’s going to be a collective combination of people that have really good intentions that work together.”
Basch agrees, adding “our only competitor is the bin”.
Users of the Too Good to Go app can search for local restaurants, bakeries and grocery stores – and purchase surprise bags filled with whatever remaining bagels, pad thai or groceries were left over at the end of the day. The bags range in price from about $3 to $5, but they’re stocked with food about three times that value – so customers are also getting a steep discount.
Too Good to Go first launched in Europe in 2015 and opened in the US in October 2020. Today it’s available in cities including Austin, Chicago, Los Angeles, Seattle and Philadelphia, and Basch says the app saves 300,000 meals a day from ending up in landfills around the world.
Deformed produce, like this bruised apple, is sold on the app Too Good to Go at a discounted price.
Besides saving meals from ending up in the trash, Too Good to Go’s primary aim is to increase awareness of food waste, eventually encouraging consumers to effect policy change in their local communities.
“The whole food chain is wasting food. So we need to help,” said Basch. “But for us, starting with the consumers and raising awareness with a super simple app that anyone can download and start using today was really the opportunity to make a difference for us.”
Other apps focus more specifically on food waste that occurs at grocery stores.
Shoppers can be picky – reaching for only the reddest apples or the largest onions. But Misfits Market has staked its name on the hope that they can also be whimsical – appreciating an oddly shaped squash or a fasciated tomato. While grocery stores often toss out, or decline to even purchase, “deformed” produce, Misfits only sells ugly fruits and vegetables that others might not want. Buyers can select from a variety of primarily certified organic and non-GMO products, which Misfits sources directly from farmers and then mails out in subscription boxes at 30% to 50% less than retail price.
One of Misfits’ main aims – besides combating food waste – is helping shoppers who live in food deserts access fresh produce, by mailing it to their door. Although Misfits doesn’t yet operate in all 50 states, it announced earlier this summer that it would be acquiring the similarly named Imperfect Foods, allowing it to reach customers in more regions.
Staff with Misfits Market demonstrates the app to people at a pop-up in New York City. Photograph: Jared Siskin/Getty Images for Misfits Market
Meanwhile, Flashfood is an app that allows customers to buy expiring food from local grocery stores at reduced prices. Domingues, who launched the app in 2016, started researching food waste when his sister called him after catering an event where she’d had to throw out $4,000 worth of food at the end of the night. At the time, Domingues was living in a condo above a supermarket and wondered: how much food did it throw out every week? The answer, he learned, was on average $5,000 to $10,000.
There’s something about Flashfood that’s not unlike digging through the discount bin. The aim, Domingues said, was to make that process more accessible to today’s shoppers by putting it on their phone. To date, Flashfood has partnered with more than 1,500 stores in Canada and the US – mostly in the north-east and midwest – and has diverted 50m lb of food from landfills.
“What we wanted to do was give consumers the ability to show the change they wanted with their wallets, and that’s had a huge impact,” said Domingues. “We’ve saved shoppers tens of millions of dollars in grocery bills.”
But some experts warn that apps alone won’t solve the food waste problem.
Although food waste apps “do facilitate increased connection and communication”, they don’t “address the root causes of wastage and the need to change inefficient practices”, Tammara Soma, assistant professor and research director of the food systems lab at the School of Resource and Environmental Management at Simon Fraser University, said in an email.
“It’s hard for apps to tackle serious issues around poor policies and practices,” she said. “These apps can help with reducing or diverting food waste at one stream,” like at the farm, store or restaurant, “but it is not clear whether or not the final product will always be fully consumed by consumers or if they will end up going to the bin anyway.”
Heaps of rejected carrots and potatoes that do not meet the criteria for supermarket vegetables at a farm in the UK.
When scholars talk about food waste, they’re really talking about two things. “Food loss” – waste that happens upstream, from the farm all the way to the front door of the grocery store – and “food waste” – losses that occur downstream, from the grocery store shelves to the kitchen (or restaurant) table. The “true cost” of food loss and waste doesn’t just include the food itself, Soma said, but all the labor, transportation, water and other resources that go into getting it to consumers.
That’s why, “the consensus by food waste scholars is that we need to target prevention”, she said, minimizing food loss at the source so that it doesn’t have the chance to waste more resources later. “However, prevention is not easy because this is where we need to challenge the current food system that results in inefficiencies and overproduction.”
In a paper published last month, Soma analyzed a different kind of app – one that attempts to reduce food loss from the farmer’s side. The open access farm management app, called LiteFarm, was designed to help farmers better track their harvest and sales, to get a basic sense of how much food they were losing. But Soma and her co-author found that farmers were actually able to use the app to plan their plots and schedule workers, thereby not only tracking but preventing food loss. Other apps, like Crisp, are working to collect similar data to help retailers lower their waste.
Soma hopes that food waste app developers consider ways their software can stem losses at the source. “It would be interesting to explore opportunities to use these apps to better facilitate local food procurement and direct markets in general,” she said. “Shortening the food supply chain and connecting producers and consumers may help transform our relationship to food and those who grow our food.”
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There are many ways to tackle rising costs and a slowing economy – but automatic gratuity is not one of them.
A restaurant in Hyde Park, Ohio, called Dutch’s has this on its bills: “We offer living wages to our employees partially funded by a 20% automatic gratuity.”
The reason behind this? Profitability, of course.
“Restaurants are behind the eight-ball, and we are taking a lot of the costs on and are trying to figure out kind of again reactively,” the owner of Dutch’s told a local news station.
I get it. It’s not easy to run a restaurant nowadays, what with lingering supply chain issues, rising costs, labor shortages and a slowing economy. But adding an automatic gratuity to a customer’s bill is not a great way to address these issues. Why?
For starters, it’s deceptive. Getting an unexpected charge (and yes, it’s unexpected, because regardless of how many signs you hang on the wall notifying your customers, people aren’t used to this practice and don’t pay attention) is off-putting. Customers see it, and feel like they’re being duped into paying for something they didn’t agree to. I’m betting the owner at Dutch’s hears this once in a while.
It’s also counter-cultural. You can pontificate as many times as you want that tipping isn’t done in Europe or Australia (the owner of Dutch’s of course pointed this out) but this is not Europe or Australia. This is the US, and it’s a tipping culture. Will that change? No one knows. Many restaurants – even well-known restaurants – have tried tinkering with tipping policies in the past and failed. For now, American restaurant customers expect to leave tips. That’s not going to change anytime soon.
Not only are customers in the US expecting to tip, many of us feel like it’s our opportunity to show our gratitude, our largesse, or even our disappointment in the services we received. It gives us a perceived control over the buying process. By taking that away, you’re taking away our freedom to do this. It’s as if you’re saying: we’re not capable of judging the value of a service and you’ll do it for me.
It’s also counter-motivational. My daughter and many of her friends worked as servers in various restaurants throughout college. And trust me on this: they were all about the tips. The prospect of a busy night got them out the door and into work on time. Taking this away takes away their motivation to do this, and as a consequence will ultimately hurt the restaurant.
It’s potentially short-changing. By forcing a tip on a customer you’re risking that the customer doesn’t tip any more than what’s on the bill. I almost always tip 20%, but sometimes I’ll tip even more if the service is really good. If I get a bill with 20% added on I feel less motivated to add even more. There’s more math involved, and it throws me off my game a bit. I have to make more of an effort. These factors may disincentivize a customer to tip more than what’s on the bill, even if they originally intended to.
Finally, there are other ways to make sure your employees are properly compensated. Make sure your point-of-sale system prompts for tips. I get this all the time, even at retail stores where I don’t normally tip. Next, raise prices. But be strategic about it. Most restaurants raise prices directly in correlation to material cost increases. The price of ground beef goes up, so the price of a burger goes up. As an accountant let me say this: that’s not the way to do it. Work with a good accountant and spread the increase of prices across all of your products, not just the specific one affected.
Make your place a better place to work. It’s not always about tips. Do you offer three- or four-day workweek schedules? Are you flexible with your paid-time-off? Is there free food for the staff? Fun music? Do you have a health insurance plan or can you offer a few bucks to help pay down student loans for a staff member with some tenure? Do you treat your staff with kindness, respect and gratitude?
There are many affordable benefits you can provide that makes your restaurant a really great place to work. Given a choice to spend the day in front of the TV or hanging with workmates at the restaurant bussing tables, you might be surprised at how many of your staff would choose the latter if you provide the right environment.
Automatic gratuities are a bad idea. But that doesn’t mean you can’t afford to attract and retain the best people possible for your restaurant. And still profit. It’s not easy. But very achievable.
… we have a small favour to ask. Millions are turning to the Guardian for open, independent, quality news every day, and readers in 180 countries around the world now support us financially.
We believe everyone deserves access to information that’s grounded in science and truth, and analysis rooted in authority and integrity. That’s why we made a different choice: to keep our reporting open for all readers, regardless of where they live or what they can afford to pay. This means more people can be better informed, united, and inspired to take meaningful action.
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Food-at-home inflation, which has risen significantly over the last year, has meant regular price increases from brands to retailers, which hasn’t sat very well with the latter – or with consumers – but, for a few major food and beverage companies, has resulted in bumper revenue and profits.
Most other CPG businesses, though, particularly emerging brands, have had a much more difficult time both increasing prices and holding on to their pre-food inflation gross margins. Consumer demand for these companies isn’t as robust as for the big brands, which means there’s far less scope when it comes to raising prices with wholesalers and retailers.
As we look ahead to 2023, there are five areas that warrant particular attention from CPG companies operating in the US because of their potential large-scale impact.
Inflation moderates but continues
Food-at-home (products bought at retail stores) inflation isn’t going away anytime soon. The good news is the rate of growth has moderated slightly over the last couple of months. The bad news is it’s still far too high.
Expect to see continued moderation in the rate of growth of food-at-home inflation for the rest of this year and into next year. However, don’t expect to see a serious drop until at best the end of the second quarter of 2023.
An economic recession in early 2023 is still possible. If that happens, inflation will likely go away sooner rather than later because of the decline in consumer demand that a recession usually precipitates.
CPG companies are going to have a much harder time raising prices to retailers and wholesalers in 2023 than they have this year because of increased scrutiny by both retailers and elected officials.
Walmart and a couple of other major retail chains have already exerted some pressure on companies when it comes to what these retailers believe are too frequent price increases, while politicians from President Biden to Senator Bernie Sanders have recently been making public comments, suggesting some major packaged food and beverage companies are price gouging with their price increases.
US to see food-away-from-home comeback
Food and beverage companies have had a far less competitive three years than has been the case at any time in recent memory because of the huge drop in food-away-from-home sales.
It started with the 2020 shutdown when restaurants were either closed entirely or forced to operate in a limited way. The surge in Covid-19 cases in 2021 continued to dampen restaurant sales and this, along with high food inflation, has allowed food-at-home sales to continue to dominate this year.
Food-away-from-home sales have been steadily rebounding and, even with continued inflation, foodservice is going to exert a much more competitive force on brands doing business in grocery retail than it has for the last three years.
Prior to the 2020 pandemic, food-away-from-home sales were greater than food-at-home sales by a slight percentage margin. That reversed over the last three years. Look for food-away-from-home to gain steam in 2023. Barring an economic recession – and even with continuing food inflation – expect to see the two gain parity next year. If there is no recession, food-away-from-home could eclipse food-at-home once again.
More DIY, fewer acquisitions
Major food and beverage companies will make fewer acquisitions of emerging brands in 2023 than in the past few years and what deals there are will be larger in size (higher revenue brands) than has been the case in the recent past.
Instead – and this trend has emerged in the latter part of this year – big CPG companies will instead focus more on line and brand extensions, along with organically launching more brands of their own in 2023. Companies like Mondelez International and Hershey, which have been on a line- and brand-extension frenzy this year, are two examples.
The key reason is big brands, buoyed by a strong 2022 due to the growth in food-at-home sales, along with the gains made through inflation, have added confidence in their own innovation and brand power and are looking much more strategically at emerging brand companies than before when it comes to acquisitions.
When they see a big one they like, like Mondelez did this year with Clif Bar, they will strike. But I see the practice of acquiring emerging brands with annual revenue under $200-$250m declining significantly in the US food industry in 2023.
Line and brand extensions are also generally inexpensive ways for major food and beverage companies to increase sales. Hershey, for example, has extended its Reese’s brand in myriad ways this year, resulting in significant growth for the brand with very little expense, resulting in a good return on investment and an overall strengthening of the brand.
The transaction is likely to gain approval since Kroger has indicated it’s willing to sell off up to around 600 stores (and if pushed it will sell off more) in order to satisfy regulators’ anti-competitive concerns.
Expect to see other retailers, particularly regional chains, talk of consolidation in the wake of the Kroger-Albertsons combination. There are already discussions among retailers in certain regions about needing added scale in order to compete not only with a combined Kroger-Albertsons but also with the growing power of retailers like Aldi, which is the fastest-growing (in new store-count) grocery chain in the US. Aldi USA has over 2,000 stores and plans to double that number.
Consolidation on one end of the supply chain – in this case, the tip of the spear, retail – has a tendency to breed consolidation on the other end of the supply chain. Looking to 2023, it’s likely that we’ll see a big merger or two between major CPG companies.
The Kroger-Albertsons deal has set a tone in both the retail and CPG industries and the previously unimaginable is imaginable. In September, for example, a General Mills-Kellogg merger might seem too big to imagine or to get passed by federal regulators. But that isn’t the case two months later in November. Might Mondelezreignite its interest in Hershey from six years ago?
In the retail space, big deals like Amazon acquiring Target sounded unrealistic a few months ago. Not today. The US has both a vibrant and independent grocery retailing sector, as well as an entrepreneurial emerging brand universe, which makes the concerns over consolidation less critical than in many other countries. There are, though, legitimate concerns of an anti-competitive nature and they should be considered by not only regulators but by those of us in the US food industry as well.
Plant-based meat sanity
The last five years have been a wild ride for plant-based meat in every sphere possible except for the one that matters most – sales.
Despite all the attention given to plant-based meat by investors, the press and even retailers, the segment only represents 1.4% of total meat category sales as we close out 2022.
To say plant-based meat has been hyped – and I said just that in my April column – is a totally fair statement. Much of this hype was generated by a single brand, Beyond Meat, which over the last couple of months has been receiving the opposite type of press to what it’s been getting over the last few years, which had been overwhelmingly positive.
In 2023, we’ll see a return to sanity when it comes to plant-based meat. It will return to its rightful place in the US food industry – as a niche product that offers an option for consumers and retailers in the giant meat category, where animal meat accounts for over 98% of category sales. At retail, plant-based meat will also return largely to the same place it’s been merchandised since veggie burgers were launched over four decades ago: centre-store and meat-department frozen-food cases.
The big unknown for 2023 is the economy and while I’m willing to take out my crystal ball in an attempt to shine some light on what I think some of the key macro trend and issues will be in the new year, I’m not going to venture a prediction when it comes to the economy, except when it comes to food inflation.
Economic recession has been in the air for months but job growth remains strong and, when it comes to groceries, consumers have kept on spending, only trading down to less-expensive brands, including private label, in a limited way.
Either way, I do predict an exciting year for the US food industry, which has proven its resilience over the last few years, through a pandemic, a supply chain mess, and inflation. As such, might 2023 be more of a walk in the park?
One thing is for sure—no off-premises channel can beat the overall satisfaction your customers experience when dining in.
What a Billion Data Points Reveal About the Restaurant Industry
One thing is for sure—no off-premises channel can beat the overall satisfaction your customers experience when dining in.OUTSIDE INSIGHTS | NOVEMBER 18, 2022 | ALEX BELTRANI
Each restaurant can no longer be treated as one uniform entity.
Rather, today’s hospitality businesses are essentially juggling multiple operational models under one roof: from providing hospitable on-premise dining experiences to delivering speedy off-premises orders. 60 percent of Americans order delivery at least once per week, and fast food chains report nearly two-thirds of their sales coming through drive-thru, which generates billions of dollars for the industry each month.
Needless to say, it can be incredibly challenging. From the overnight shift into off-premises ordering to now the return of dine-in experiences, what consumers used to value the most—yes, food—sometimes can take a backseat depending on how they order.
It’s therefore absolutely essential for restaurant managers and operators to add one thing to their ammunition: data. Specifically, customer experience and satisfaction data. It is the single source of truth that keeps you on track to providing what your customers uniquely want.
Over the last 12 months, over 200 restaurant brands across 9,000-plus locations have collected 10-plus million customer feedback survey submissions using Tattle—that’s over 1 billion feedback data points on guest satisfaction. We’ve summarized some key insights and trends in Tattle’s latest 2022 Annual Restaurant Report, and wanted to offer a bit of insight into what we found.
Dine-in is here to stay.
Data shows that total off-premises orders are only 9 percent higher than their pre-pandemic levels as a share of all restaurant orders.
Does it mean the off-premises craze is over?
One thing is for sure—no off-premises channel can beat the overall satisfaction your customers experience when dining in. The overall CER (Customer Experience Rating, what Tattle uses to assess a brand’s overall guest satisfaction) is by far the highest in the dine-in channel compared to off-premises channels. It’s leading the next best channel, takeout, by about 7 percent, and leading the lagging channel, delivery, by 16.3percent.
In addition, dine-in shows the most consistent performance over the year, fluctuating within just one percentage point. In comparison, drive-thru has the biggest fluctuations within 6 percentage points.
Consumers are increasingly unhappy with the value they’re getting.
The most dramatic deterioration in performance goes to — value.
This graph highlights trends in guest satisfaction across the most commonly surveyed operational categories. Value plummeted since May, dropping 5 percentage points over the past year. (As a side note, “ordering process” has typically been the top performing operational category across all ordering channels.)
Customer satisfaction is ultimately a function of reality minus expectation. When a guest gives a low satisfaction score to an operational category, it could be the experience was objectively less than ideal, or the customer holds high expectations, or both. In the case of “value”, we can easily find lots of macroeconomic explanations: inflation leading to both a lower consumer purchasing power and higher menu prices; labor shortage; the pandemic … the list could go on and on. However, it could also be that customers are expecting more from their meals—maybe they’re now comparing the value of a restaurant order to that of a grocery run; maybe they’re expecting a higher quality and better services for the same amount of money they spend.
Either way, there’s a shift to an emphasis on value as a result. For example, Papa Johns recently started pushing value this summer, offering any two from a selection of menu items for $6.99 apiece, a pivot from the company’s previous focus on convincing consumers to order more expensive items.
Be it the inevitable occurrence under the current economic climate, or a shift in consumer mindset, it seems that restaurant brands can’t simply ignore the topic of value anytime soon.
Order accuracy remains a big problem in off-premises channels.
Besides “value,” “order accuracy” tends to be one of the lowest-performing operational categories across off-premises channels (takeout, curbside, delivery). This graph shows that dine-in is leading the next best channel, drive-thru, by at least 0.5 points (on a 1–5 point scale), and delivery is lagging far behind all the other channels.
Accuracy is a tricky area that’s hard to perfect, and has long been a challenge for many brands—even a quick-service giant like Wendy’s. The secret here is to understand exactly what’s going wrong in the “accuracy” equation of a restaurant. Sometimes it could be the preparation of a single item (e.g. “build-your-own” menu items tend to be a leading source of accuracy issues), whereas other times it could be a failure to follow special instructions given by the customer.
For example, Blaze Pizza uncovered that their accuracy issues are related to “uneven topping distribution”, and implemented a “triple check policy” to ensure every slice of the pie has all the toppings required. In addition, they use the accuracy score as a key indicator of which menu item should be allocated more marketing budget—because they know that those items would be of a consistently high quality.
What can restaurants do today?
While macro-level data trends are great, what can each restaurant start doing today to ensure a consistently high guest satisfaction?
There are three steps that operators almost can’t avoid:
The reason is simple: you won’t be able to understand what your customers need and want without hearing from them first. High-quality data refers to structured, specific and accurate feedback data, rather than rants or ambiguous reviews on social review sites. On top of that, a high quantity of data is also necessary to paint a 360* view of the guest experience across different ordering channels.
2. Identify the lowest-hanging fruit and prioritize.
It can be overwhelming to receive hundreds and thousands of pieces of feedback from customers. Therefore it’s important to analyze and correlate the top improvement opportunity that will most likely improve overall guest satisfaction. Make sure to set that as an objective for location-level teams to follow, so that everybody is aligned on what matters.
3. Monitor any changes closely.
Collecting and acting on guest experience is not a one and done initiative. It requires restaurants to build it into their operational processes and consistently monitor, adjust and improve. Make sure you set regular meetings and review sessions with each General Manager and continuously benchmark each location’s performance across operational categories, ordering channels, dayparts and more.
