U.S. restaurant industry expected to pass $1 trillion for the first time

Restaurant Tech Editors
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U.S. restaurant industry expected to pass $1 trillion for the first time

The National Restaurant Association is forecasting a record $1.1 trillion in sales in 2024 and the addition of 15.7 million jobs.

The National Restaurant Association released its annual State of the Industry report today with the sales forecast as its top headline; the association expects to exceed $1.1 trillion in 2024. Should this forecast play out, it will mark the first time sales from the nation’s second-largest private industry will tip into the trillions.

Last year, the foodservice industry forecast was $997 billion, while the pre-pandemic forecast from 2019 was about $863 billion, illustrating a staggering growth trajectory throughout the past four years despite a global black swan event. Of course, much of these sales have been driven largely by pricing; menu prices peaked at an 8.8% year-over-year increase in March 2023, but have since started to cool a bit and were 5.2% higher in December.

Still, demand for restaurants has also proven to be quite high, particularly among younger consumers. Fifty-two percent – including 67% of millennials and 63% of Gen Z adults – say ordering takeout from a restaurant is an “essential part of their lifestyle,” meaning pricing isn’t the only driver here. Notably, the trillion-dollar breakthrough is a cause for optimism given that the industry remains much smaller than it was in 2019. According to Technomic Ignite data, there were just over 631,500 restaurants in 2023 versus just over 703,000 in 2019.

“Looking at the operating environment for the upcoming year, it is one where there is an overall moderation in industry growth, but the milestone of passing $1 trillion is truly astounding when you consider that is over $3 billion a day on average and $125 million an hour,” Hudson Riehle, SVP of the association’s research and knowledge group, said during a recent interview. “As decades have passed and consumers continue to shift their food spending toward away-from-home solutions, the industry continues to not only garner consumer support but also increase in its economic size and importance.”

Riehle points to data showing that the restaurant industry comprised 25% of the family food dollar in 1955. By 2010, that rose to 49% and Kalinowski Equity Research estimates that share-of-spend for restaurants was at nearly 56% in December 2023.  

Workforce

restaurant workforce

In addition to hitting record-high sales this year, the association is expected to employ a record-high 15.7 million people and with more room to grow. Forty-five percent of restaurant operators report that they need more employees to meet consumer demand and a majority (70%) have job openings they say are hard to fill. The association expects the industry to add 150,000 jobs per year on average for the next eight years, with total staffing levels reaching 16.9 million by 2032.

“The industry has become an area of training and development for the national workforce. This latest research shows that over three out of five adults have worked in the restaurant industry and that is even higher for younger cohorts,” Riehle said. “As a result of that, and in tandem with the demographic changes which have occurred as the decades have progressed, younger consumers place a higher priority on spending at restaurants and deem them more essential than other generations.”

Investment priority? Technology

restaurant tech

As these younger consumers prioritize restaurant experiences more, the industry’s operating model has shifted. Though off-premises became a necessity during Covid, the channel continues to grow because of how these cohorts use restaurants, whether via delivery, drive-thru, carryout or curbside. As such, technology has become critical and will be a top investment priority for operators big and small in 2024; 60% of operators plan to make technology investments this year, versus 48% in 2023.

“It is evolutionary, not revolutionary. For those younger cohorts, their expectations are higher. It doesn’t mean all restaurant concepts have to incorporate technology into their operations to remain viable. It means, looking at younger cohorts and how they use restaurants differently, operators that are seeking to grow are obviously more focused on meeting the needs of those younger consumers through technology,” Riehle said.

What they especially want is the ability to order and pay quickly and seamlessly, he said. They also like the ability to tap into a loyalty program to earn stronger value opportunities not available to non-loyalty members. Seven in 10 adults said they look for a daily special or discount, and the association’s data suggests consumers prefer using a loyalty or rewards program facilitated through a mobile app.

For operators, Riehle makes a point to note their priority isn’t to deploy technology that replaces workers, but rather to augment what those workers are doing, especially as labor shortages remain. Nearly half (47%) of operators say the use of technology and automation will help with those shortages.

“There is still a sizeable number of job vacancies,” he said. “The logical extension is that more resources are invested in how labor is onboarded and deployed. Operators have made it clear they’re augmenting the workforce versus automating. This is still the service industry.”

All told, Riehle is optimistic about this state of the industry, acknowledging a moderating year ahead but solid and consistent growth in the long term.

“Even after four years of the pandemic, (restaurant spending) is over 50% again. The typical American consumer has made it quite clear in terms of their standard of living as to how they want to spend their money. They want to prioritize restaurant spending,” he said. “The typical consumer over the upcoming decade will continue to allocate a great portion of their spending to restaurant meal, snack, and beverage solutions.”

Protests Are an American Tradition. But Why at Restaurants?

Restaurant Tech Editors
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Protests Are an American Tradition. But Why at Restaurants?

A recent demonstration outside a Philadelphia falafel spot was just the latest in a history of boycotts and conflicts.

George Recine, a Boston advertising executive, knew exactly where to eat lunch last week during a business trip to Philadelphia.

“What better place to stop by than Goldie?’” he said.

Mr. Recine, 45, had read reports about a protest there a few days earlier that Pennsylvania’s governor and the White House had condemned as antisemitic. A crowd carrying Palestinian flags had gathered in front of the popular falafel restaurant, co-owned by an Israeli-born chef, and chanted, “Goldie, Goldie, you can’t hide, we charge you with genocide.”

All Mr. Recine knew was that the owners had donated restaurant proceeds to an Israeli medical nonprofit organization that has supplied that nation’s troops with toiletries and gear in the Israel-Hamas war. He showed up to buy a falafel as a statement. He didn’t think an American restaurant serving Israeli food should be a target.

A man with a beard is speaking in front of the restaurant Goldie in Philadelphia.
George Racine, an advertising executive from Boston, stopped at Goldie for lunch to show his support for the restaurant. Credit…Kriston Jae Bethel for The New York Times

Like the protesters, Mr. Recine was participating in a longstanding American practice: If you want to ignite social change or protest a war — or even just air an opinion — do it at a restaurant.

Why? Unlike many other businesses, restaurants often proclaim their nationality, ethnicity and sometimes the owners’ political views. And at a time when Americans of differing political tribes often stay in their own corners, a restaurant can serve as a de facto town square.

“Food is very accessible and has a very low barrier to entry, so the restaurant becomes a proxy for whatever your feelings are,” said Johanna Mendelson Forman, a professor at American University who teaches a course called Conflict Cuisines that examines the nexus of food and war.

Food in America, she said, has always been political.

During World War I, many Americans refused to patronize German restaurants or beer gardens, an import that had proliferated in the late 1800s. (New York City had more than 800 at one point.) Drinking beer was such an expression of German identity that to do so was portrayed as unpatriotic.

A vintage photo from the World War I era shows a parade protesting a restaurant with a sign in the window that says “The Kaiser’s restaurant.”
During World War I, many Americans pushed back against restaurants like this one that were perceived to be pro-German. Credit…U.S. National Archives and Records Administration

Nearly a century later, French fries served as another barometer of American patriotism in 2003 when France opposed the U.S. military plan to invade Iraq. Restaurant owners poured French wine into the gutter and renamed French fries freedom fries.

After Russia invaded Ukraine in February 2022, dozens of people waited in the bitter cold to eat pierogies and borscht at the 70-year-old Ukrainian restaurant Veselka in the East Village of New York. The Russian Tea Room, founded in 1927 by members of the Russian Imperial Ballet who were escaping communism, lost business to a boycott. Members of the staff were harassed online.

Ruth Reichl, the food writer and former New York Times restaurant critic, said that in an increasingly fractured society, restaurants and the people who run them function as a sort of family — with many of the flash points that one might see among relatives.

“Restaurants are the heart of the community,” she said. “In moments like this they become a place where our deepest emotions play out.”

Restaurant-centered political action can be both ineffectual and short-lived. Americans seem to love French fries more than ever, and the crowds at Ukrainian restaurants have thinned.

But world events can have a lasting effect on businesses. In the days following the 9/11 attacks, restaurants serving Middle Eastern food were attacked and closed.

Chinese restaurants emptied out at the start of the pandemic, when little was known about Covid’s origins and President Donald J. Trump fueled anti-Chinese sentiment by calling it the Wuhan virus or the “kung flu.”

Grace Young, the cookbook author and culinary historian, ate at Wo Hop, the second-oldest restaurant in Manhattan’s Chinatown, the day before the city lockdown began. The manager told her that 70 percent of the neighborhood’s restaurant owners had already decided they couldn’t go on without customers and closed.

An empty Chinese restaurant with a glass storefront and tables draped in pink tablecloths with black chairs.
When Covid hit, many Chinese restaurants, like this one on Canal Street in Manhattan’s Chinatown, lost nearly all their business. Credit…Ashley Gilbertson for The New York Times

“It was a really heartbreaking situation,” she said. “What happened to Chinatown is people just didn’t discriminate against the restaurants. They discriminated against every business in Chinatown.”

Many restaurants never reopened, and business in Chinatown hasn’t returned to pre-Covid levels, she said.

Because restaurants are one of America’s most accessible cultural products, they have been barometers not only for social change but for cultural understanding. Food becomes a vehicle for public acceptance of political ideas.

Americans skeptical of both the communist Chinese government and Chinese food beyond chop suey watched President Richard Nixon eat Peking duck and steamed chicken with coconut during his visit to China in 1972. The trip stabilized a precarious diplomatic relationship, and the cuisine took off in the United States.

Wyche Fowler, a former U.S. senator and ambassador to Saudi Arabia who also happens to like good food, was fond of saying that you could always tell where the latest global conflict was taking place by looking at the list of new restaurant openings in Washington. Indeed, restaurants serving the food of an immigrant’s homeland serve as both a point of entry into the American economy and a place to gather.

Restaurants have been the locus for civil rights battles. In 1960, four Black college students sat down at a Greensboro, N.C., lunch counter reserved for white people. They were working under the simple notion that anyone should be able to order a cup of coffee anywhere.

When they were asked to leave, they stayed. For six months, they and other protesters who joined in endured racial slurs and food dumped on their heads. The action inspired other sit-ins and helped fuel a powerful new chapter in battle to desegregate the South.

In 1960, civil-rights protesters braved verbal and physical abuse by taking seats forbidden to Black customers at a Woolworth store in Greensboro, N.C.Credit…Bettmann / Getty Images

More recently, chefs themselves have actively brought politics into their restaurants. That’s in part why marchers decided to protest at Goldie, one of several restaurants co-owned by Michael Solomonov, whose sales on Oct. 12 were donated to the Israeli nonprofit. (In a letter to the staff obtained by The Philadelphia Inquirer, Mr. Solomonov said he was unaware that the Israeli organization was providing the army with ambulances and medical supplies.)

In November, support for Israel also caused a deep public rift between the staff and the self-identified Zionist owner of an Upper East Side coffee shop that drew international attention.

Not all the chefs’ political involvement is as controversial. In 2012, the James Beard Foundation began its Chef Bootcamp for Policy and Change to train hundreds of chefs to influence national and local food politics.

José Andrés created World Central Kitchen in 2010 to mobilize local chefs to help feed people in disaster zones. When the Ukraine war began, the organization decided it would also begin helping in active war zones which now includes Israel and Gaza.

Feeding people is feeding people, regardless of the contours of any conflict, Dr. Mendelson Forman said.

“There is less politics in their motivation than humanitarianism,” she said. “Isn’t it human to want to support those who have been victims and need to be cared for?”

Jon Hurdle contributed reporting from Philadelphia.

What the Past Tells Us About What’s to Come for Restaurants in 2024

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What the Past Tells Us About What’s to Come for Restaurants in 2024

Adaptability will be key in 2024.

We’re heading into a new year, and while that brings celebrations, new beginnings, and moments for reflection, it’s important to anticipate that challenges may not be far behind. The quick-service restaurant industry is no stranger to adversity. But to really predict any potential challenges or growth opportunities in 2024, it’s best to look at the last few years leading to this point.

COVID-19’s Impact on the Quick-Service Industry

No industry was left untouched by the pandemic. Every company, no matter what sector they were in, had to pivot their strategy to keep their doors open. The National Restaurant Association estimated that approximately 100,000 permanently closed during the pandemic. For restaurants, this meant a massive shift to online ordering, carry out, delivery and taking care of the guests ever changing needs. Overnight, customers were forced through government policy, to eat food off premise as dining-in was either limited or eliminated.    

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Third-party delivery apps like Uber Eats, DoorDash, Grubhub, and Postmates soared in popularity, with consumers and restaurants both taking advantage of contactless delivery. Brands that had developed an app prior to 2020 saw increased usage across their client base. For example, Chipotle went into 2020 with less than 10 million app users. By October of 2021, they had more than 24.5 million members—learning them a 40 percent increase in only a year.

Mobile ordering, due to its convenient nature, is here to stay. A recent study showed that 71 percent of consumers had recently ordered food through a mobile app. Most of the respondents cited that convenience was the main factor influencing their purchase.

Industry Growth is on the Horizon

Even with dining room shutdowns, reliance on takeout and delivery, and a slow return to on-premise dining, the global quick-service industry has been able to bounce back and is now poised for growth in the coming years. In 2023, the worldwide quick-service restaurant market was valued at $7.981 billion. From now until 2031, it’s projected to grow at a compound annual growth rate of 8.88%, reaching an estimated value of $13.297 billion by the end of the forecast period.

However, even with strong growth projections, an industry can still face obstacles. The pandemic changed the landscape of many businesses. While it’s no longer considered a public health emergency by the CDC, many of the behaviors people adopted during COVID-19 have become mainstays of normal life.

Potential Challenges Quick-Serves May Face

Difficulties such as hiring and unprecedented inflation can make generating a strong return on investment tougher than the past.

Labor shortages and rising wages: while the labor market has improved the past six to twelve months, the industry is likely to face ongoing challenges in both recruiting and retaining employees. This has been exacerbated by workers continuing to seek higher wages.

Higher interest rates: Securing loans will likely be more difficult for small businesses. Due to the Federal Reserve’s interest rate hikes over the last couple of years and the collapse of three large banks—Silicon Valley Bank, Signature Bank, and First Republic Bank—lenders are all tightening their purse strings. New or expanding businesses may struggle to secure loans in 2024 without the contribution of sufficient capital by the investors.

Rising inflation costs: In recent years, the industry has grappled with rising inflation impacting both food and service costs. Although inflation has eased somewhat for goods, the service sector continues to bear the brunt of high inflation expenses. Additionally, the cost of constructing new restaurants has seen a notable increase compared to the past two years in particular.

Consumer spending habits: Consumers have suffered the most from astronomical inflation costs. In fact, a recent survey revealed that restaurants and bars were the second nonessential category to see a drop in sales. Of the respondents, 62% admitted to spending less on meals out.

Health and sustainability concerns: Consumers are becoming increasingly more health-conscious and environmentally aware. In fact, nearly 80 percent of U.S. consumers take into consideration a brand or product’s sustainability practices when making purchasing decisions.

Anticipated Growth Opportunities for Quick-Service Restaurants

Even though consumerism has transformed, change can bring about new opportunities when fully embraced by restaurant operators and brands.

Technology integration: Considering how important technology was to restaurant survival during the pandemic, it would only make sense for quick-service restaurants to continue integrating new tech into their operations. Penn Station East Coast Subs, for example, has recently committed significant resources to technological advancements—all of which will be unveiled in the coming year.

Menu innovation: To keep up with consumer demand, quick-service restaurants need to look at offering healthier, sustainable, and diverse food options to attract a broader customer base.  This includes limited time offers to keep both current guests engaged and attract new customer. 

Space redesign: With mobile ordering and delivery remaining popular in the post-pandemic world, quick-serves may want to look at reworking their restaurant space to better accommodate takeout orders—thus reducing dine-in space.

Strong branding: Consumers want to engage with a brand. Strong marketing isn’t just a well put together ad campaign anymore. Participating in conversations on social media is becoming more important. Brands need to have more than just a name, they need personality, too.

Sustainability: Adopting eco-friendly practices can not only reduce operational costs but also appeal to environmentally conscious consumers.

Strategies for Quick-Service Operators and Investors

It’s unlikely that any quick-service restaurant owner can immediately seize all of the opportunities listed above. Picking one or two things to focus on in the new year is a great strategy. Look at what it is that you’re excelling at. Do you have a strong social media presence? Are you regularly incorporating new menu items to suit consumer trends? If not, these could be good areas to start making changes.

Adaptability will be key in 2024. As trends and consumer demands evolve over the next 12 months, the businesses who show flexibility will see lasting success.

Understanding Gen X’s Unique Food Preferences

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Understanding Gen X’s Unique Food Preferences

Food preferences are a complex interplay of taste, health, value, and convenience. While these factors are universally important, the way they manifest can vary across generations due to differences in life stage, culture, macro-economic conditions, and technological influences.

Often overlooked, Generation X (1965-1980), sandwiched between Baby Boomers (1956-1964) and Millennials (1981-1996), stands out for its distinctive embrace of customized traditional food.

To understand this embrace of customized tradition, let’s delve into the past. Gen X, known as the latch-key generation, grew up with little adult supervision, fostering independence and a strong emphasis on work-life balance. Raised largely unplugged, with computers existing in only 51% of households in 2000, they were the last generation to experience family dinner regularly.

A less diverse cohort, Gen X – 71% identify as Non-Hispanic White vs. 61% for Gen Z – enjoyed television shows centered on wholesome relationships (such as “Little House on the Prairie”, or “Growing Pains”) and is now at the peak of their earning potential, as noted by NBC News.

Gen X Cuisine and Food Preferences

Generation X’s engagement with food can be characterized as traditional with a twist. Whether eating at home or at a restaurant, they appreciate comfort food like meatloaf, hamburgers, pizza and soda.

Unlike the Boomers, Gen Xers are also attracted to personalized versions of traditional foods such as hamburgers or pizza with unique toppings or sodas with unique flavors like Coca-Cola freestyle fountain drinks. While Gen X explores global cuisine, its palate isn’t as diverse as Gen Z or Millennials. Gen Xers’ top three global cuisines are Mexican, Italian, and Chinese.

In contrast, Gen Z has the broadest palate with Asian cuisine, Japanese, Thai, Indian, and Chinese being much more popular, according to a Civic Science report. This may be due in part to changing USA demographics. Asian Americans grew 81% between 2000-19. making up 7% of the US population in 2021, as noted by Pew Research.

All generations express an interest in healthy, fresh food. Gen X and Boomers’ focus on foods delivering health benefits such as energy, immunity, and feeling full. They’re seeking to address health and wellness as well as addressing health conditions such as obesity, diabetes, and cancer. They’re also attracted to products that tout superfoods like blueberries, kale, berries, almonds, etc.

In contrast, Gen Z and Millennials are both interested in healthy, fresh foods, and local foods often with a sustainably component.

Where and How Gen Xers Eat

Generation X is more likely to eat at home in comparison to younger generations. U.S. consumers eat a home-cooked dinner 4.6 times each week, on average, according to FMI. For Gen Z consumers, it’s 3.6 times weekly; millennials, 4.2; Gen X, 4.8; and boomers and older consumers, 5.1, as IFT reported.

This preference stems from valuing the wholesomeness of home-cooked family meals. Gen X is also most likely to hold the family recipes (77% in comparison to Gen Z’s 53%) emphasizing the importance of family traditions, the New York Post reported.

When dining out, they value family time and a leisurely experience, with on-premises service being crucial (Gen X 68%, compared to 48% for Gen Z), noted hatocorp.com.

A Common Thread for Gen X

Ultimately, while taste, health, value, and convenience are universally important in food preferences, their manifestation varies across generations. Understanding these differences is crucial for the food industry.

Generation X’s unique position, combining Boomers and Millennials eating patterns, results in an embrace of customized traditional food, seen in the popularity of customizable soft drinks, pizzas, burritos, and gourmet burgers.

NRA: 63% of adults plan to eat out during holidays

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NRA: 63% of adults plan to eat out during holidays

Millennials are the top demographic to use restaurants during the holidays as a way to avoid crowded grocery stores during the holidays, per a National Restaurant Association survey of over 1,000 U.S.

Dive Brief:

  • Over the next few weeks, two-thirds of adults plan to eat out while 48% said they plan to order takeout or delivery, per a survey from the National Restaurant Association released Wednesday.
  • When it comes to take out, 66% of consumers said they would order an entire meal while 89% said they would order a main course, sides (86%), appetizers (74%) or dessert (63%), according to the association’s survey of 1,010 adults in the U.S. 
  • Takeout and delivery remain “critical components of the guest experience” across all demographics, Michelle Korsmo, National Restaurant Association president and CEO said in a statement. 

Dive Insight:

While all generations continue to turn to restaurants for their meals at home, there are generational divides on how and why consumers are eating out. The association found that 82% of millennials take into account takeout and delivery options when choosing a restaurant compared to 53% of baby boomers.

Millennials (75%) are more likely to use a restaurant over the holidays to avoid grocery stores during busy times compared to 65% of Gen Z and 57% of baby boomers. However, baby boomers at 72% were the least likely to order from a restaurant during the holidays while 86% of Gen Z consumers said they would likely dine in or order takeout. 

Thanksgiving already proved to be a busier time for independent restaurants, which saw a 5.8% increase in the number of transactions and an 8.2% in sales on Thanksgiving compared to 2022, according to SpotOn data emailed to Restaurant Dive. Average checks for SpotOn’s restaurant clients were up over 2%. The company also noted over 1,000 Christmas menu items were added to independent restaurant menus between Nov. 19 and 28. Most of these (52%) were beverages. 

Consumers are also expected to tip more during the holidays, according to a survey of over 2,000 adults conducted by The Harris Poll commissioned by DailyPay. About two-thirds of Americans said they plan to give bigger tips during the holiday season compared to the rest of the year, according to the report emailed to Restaurant Dive.

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Preparing for the Unknown: Restaurant Crisis Management Made Easy

Restaurant Tech Editors
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Preparing for the Unknown: Restaurant Crisis Management Made Easy

The restaurant industry has confronted substantial challenges in recent years, primarily due to the global pandemic’s initial impact. This crisis brought about labor shortages, disruptions in the supply chain, and inflation, all of which placed significant financial burdens on most restaurant owners. Nevertheless, amid these hardships, restaurant owners and operators exhibited remarkable resilience by rapidly adapting and innovating to not only salvage their business but also protect their reputation.

As we transition beyond the pandemic, the outlook appears increasingly optimistic. U.S. restaurant employment reached pre-pandemic levels in September, marking a milestone after three-and-a-half years of post-pandemic recovery. However, while there is reason to feel optimistic about the future, responsible restaurant operators must be prepared for the next crisis – because if the last few years of disruption have taught us anything; it’s not if a crisis will happen, it’s when the crisis will happen. Using this time to prepare and get your house in order is critical. 

So, what constitutes a crisis preparedness plan, and how can you develop one tailored to your restaurant? Below, I’ve outlined the steps! These will provide you with a structured framework designed to address the needs of both internal and external stakeholders during a crisis.

1. Risk Assessment: The first step in crafting a crisis preparedness plan involves conducting a comprehensive risk assessment. By studying how competitors responded to crises, you can gain valuable insights to identify potential threats and unique stressors specific to your restaurant concept and business model. This assessment will form the bedrock of your preparedness plan.

2. Creating a Comprehensive Framework and Protocols: Craft a thorough document that acts as your all-encompassing manual and strategy for preparing, managing, and evaluating your organization’s response to a crisis. This framework empowers your team members to adhere to specific steps in accordance with the situation’s severity. It should also delineate essential roles and responsibilities within your team, establish transparent communication protocols between different departments, institute a structured reporting system, such as a decision tree, and incorporate communication templates and tools. 

3. Plan Testing: With a robust foundation in place, it is critical to stress test your plan. Schedule a dedicated simulation of a crisis and run through the protocol as if it were a real scenario. Engaging in this activity will enable you to pinpoint vulnerabilities and make essential enhancements before the real crisis hits. Testing your plan is the best method to ensure the smooth operation of your protocol when confronted with a disaster.

Now, with a well-prepared crisis management plan in place, you can divert your focus to what truly matters—ensuring your kitchen consistently delivers exceptional dishes and your guests enjoy a memorable dining experience.

What is Restaurant Inventory Management?

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What is Restaurant Inventory Management?

Restaurant inventory management is crucial to effectively track and monitor their inventory levels. Through the insights gained from inventory management, restaurant owners can strike the right balance to prevent excess cash from being tied up in inventory or food waste, while ensuring they can meet customer demand.

Ultimately, efficient inventory tracking serves as a loss prevention tool and a measure of profitability, enabling restaurants to optimize operations, control costs, and maximize overall success.

Skilled restaurateurs with a strong grasp of inventory management are equipped with:

  • Real-time knowledge of the inventory purchased
  • The daily consumption rate
  • The remaining inventory at the end of each day

Essential Inventory Management Terms

When it comes to managing restaurant inventory effectively, it’s crucial for restaurant owners to have a solid understanding of the technical jargons that are used in inventory management. Here’s some of the terms for you to get yourself familiar with:

1. Cost of Goods Sold (COGS):

COGS is a critical metric that helps you track and manage costs. It represents the cost of the ingredients used in your menu items, including any food waste. To calculate COGS use:

Beginning inventory + Purchased inventory – Ending inventory = COGS.

By expressing COGS as a percentage of sales, you can assess its impact on your profitability.

2. Par Levels:

Par levels refer to the minimum amount of inventory a restaurant should keep on hand to meet customer demand. It includes a small buffer to account for unexpected fluctuations in inventory, such as increased demand or food waste.

3. Units of Measurement (UOM):

UOM determines how inventory quantities are measured, such as ounces, pounds, bags, or kilograms. Consistency in UOM is vital, as it ensures accurate unit conversions when purchasing ingredients and using them in recipes.

4. Unit Conversion:

Unit conversion is the process of converting one UOM to another. For example, if you purchase beef by the pound but serve it by the ounce, you need to calculate the cost per ounce for accurate pricing.

5. Recipes:

Restaurant Inventory Management

Recipes define the type, quantity, and volume of ingredients required to make a dish. Precise recipe costing enables you to gain insights into the profitability of your menu items.

6. Count Sheet:

A count sheet is an inventory control tool, often in the form of a spreadsheet, used to assist with inventory counting. It typically includes item descriptions, universal product codes (UPCs), suppliers, UOM, costs, and quantities.

7. Shelf-to-Sheet:

shelf to sheet - Restaurant Inventory Management

Shelf-to-sheet is a method of taking inventory where you count the items on the shelf and in storage, cross-checking them against your inventory management system. Organizing count sheets to reflect the kitchen layout streamlines the process.

8. End-to-End Inventory Management:

End-to-end inventory management encompasses all aspects of restaurant inventory, from order management and storage to counting and updating inventory price data from invoices.

9. Sitting (or On-Hand) Inventory:

Sitting inventory refers to the amount of stock currently available in the kitchen, either in terms of its dollar value or physical quantity.

10. Depletion:

Depletion represents the amount of inventory used over a specific period. Tracking depletion helps monitor food costs and COGS, enabling you to analyze Product Mix Management (PMIX) reports and assess menu item profitability.

11. Usage:

Usage quantifies the amount of inventory you plan to use during a specific period. It is calculated by dividing the value of your sitting inventory by the average rate of depletion.

12. Actual vs. Theoretical Inventory:

Actual inventory represents the true levels after accounting for factors such as waste, theft, spillage, and miscalculated portions. Theoretical inventory is the expected levels based on consumption or sales.

13. Variance:

Variance measures the difference between actual and theoretical inventory and can be expressed as a dollar value, percentage, or physical quantity. Variances can indicate data input errors, theft, or food waste.

14. Inventory Shrinkage:

Inventory shrinkage refers to the loss of stock due to theft, spillage, breakage, food waste, and miscalculated portions. It is a common reason for discrepancies between recorded and actual inventory levels.

15. Yield:

Yield represents the amount of usable product obtained after cleaning and trimming, often expressed as a percentage.

By familiarizing yourself with these essential restaurant inventory management terms, you’ll be better equipped to streamline your operations, control costs, and make informed decisions.

The Best Practices to Manage Restaurant Inventory Effectively

Manage Restaurant Inventory Effectively

In order to effectively manage your restaurant inventory, it is crucial to follow certain best practices. Here are some practices that restaurant owners can adopt when managing inventory.

1. Regular Inventory Checks

Conducting consistent inventory checks is key in restaurant inventory management. This process allows you to maintain optimal inventory for your restaurant, thus avoiding both overstocking and understocking.

2. Organizing Your Space Effectively

Start your inventory management by effectively organizing your restaurant space. It’s crucial to label all stored food and to arrange your storage areas (including walk-ins and dry storage) efficiently. This way, you can quickly identify necessary items and manage your restaurant inventory effectively.

3. Adopting a Consistent Count Schedule

Whether you opt for daily, weekly, or monthly checks, maintaining a regular schedule for your restaurant inventory helps establish an effective inventory management habit. It also simplifies COGS calculations and improves decision-making.

4. Streamlining Restaurant Inventory Procedures

Instruct your kitchen staff to check all incoming orders from suppliers against the corresponding invoices. This process ensures accuracy in terms of weight, quantity, and cost, aiding efficient inventory management for your restaurant.

5. Training Your Staff

Training all members of your team – from managers and shift leaders to line cooks and back-of-house staff – is essential in effective restaurant inventory management. An easy-to-use restaurant inventory management app can make this process simpler for all employees.

6. Implementing the First In, First Out (FIFO) Approach

Implementing the First In, First Out - Best Practices to Manage Restaurant Inventory Effectively

To minimize spoilage, ensure your chefs use the oldest inventory or ingredients before newer ones. This simple act can drastically reduce food waste, aiding effective restaurant inventory control.

Sales, theft, spillage, incorrect portions, and food waste all contribute to inventory depletion. To maintain accurate restaurant inventory, it’s essential to account for all food waste.

7. Tracking Daily Sales Reports

Tracking sales daily is important since sales directly impact restaurant inventory. Regularly monitoring the data from the POS system allows you to adjust your restaurant’s inventory planning and provision deliveries promptly.

8. Managing Seasonal Items

Remember to account for seasonal items in your restaurant inventory. Tracking inventory can help you decide how long to keep certain seasonal items on the menu, based on customer interest.

9. Leveraging Restaurant Inventory Management Software

Leveraging Restaurant Inventory Management Software - Best Practices to Manage Restaurant Inventory Effectively

Navigating away from traditional manual methods like restaurant inventory management in Excel, modern restaurant inventory management software offers an all-in-one solution for tracking and managing inventory.This software reduces errors often associated with manual inventory spreadsheets for restaurants and includes user-friendly features such as an automated product catalog and par level ordering system.If you are used to restaurant inventory management in Excel, you’ll appreciate the comprehensive insights this software provides into your restaurant’s operations, fostering data-driven decision-making to boost profitability and efficiency

In conclusion, successful restaurant inventory management is pivotal in the face of increasing food costs. This involves comprehending key inventory terms and adopting best practices such as regular checks and organized spaces. Training staff and transitioning to inventory management software can minimize errors and provide insightful data. These strategies result in better cost control and improved profitability, fostering overall business success. It’s a strategic move every restaurant owner should consider.

MRM EXCLUSIVE: The Tipping Point Is Now

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MRM EXCLUSIVE: The Tipping Point Is Now

With both restaurants and guest feeling the effects of inflation, tipping has become a topic of confusion and intrusion for diners, according to Restaurants: Consumer Trends Fall 2023/Winter 2024,  a report produced by Provoke Insights in collaboration with Modern Restaurant Management (MRM) magazine. 

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Diners are the most willing to tip consistently at fine dining establishments. They are also most willing to tip delivery services like UberEats and Grubhub. They are less likely to tip consistently at fast- food locations and ice cream parlors.

Half of Americans say they are happy to compensate service staff. These tippers are more frequently parents, Millennials from urban areas, and liberals.

Other diners have negative feelings about tipping.

  • Over a one-third of Americans say it is frustrating that they are asked to tip at dining establishments they normally would not have.
  • Those who do not tip more than 15 percent if prompted are likely to be older Republicans.
  • Others report feeling pressure to tip, particularly those in debt and the Asian populations.
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For a deeper dive into the survey results, MRM quizzed Provoke Insights President Carly Fink. 

What should restaurant owner/operators take away from the results?

From the cost of goods to staffing, inflation impacts all aspects of the restaurant industry. Consumers have noticed the price increases. From past research, we have seen that they are more conservative with what they order at restaurants. 

Tipping is now encouraged at all types of food establishments beyond traditional sit-down restaurants to combat menu price increases.

However, consumers do not necessarily like that this burden has been put on them. They particularly do not like tipping when purchasing at food trucks, fast food, and ice cream shops. If the food industry continues to move in this direction regarding tipping, it will take time for consumers to buy into this new payment method. More so, it is crucial that customers feel welcome at stores even if they do not want to tip to avoid patrons from not returning.

With tipping being such a pain point for guests and the added inflationary pressures, what can restaurants operators do to provide a valuable experience to guests?

It is okay for the service industry to ask for tips, but it needs to be in a way that doesn’t feel intrusive or makes the customer feel forced to provide the tip. Otherwise, the experience will be a turnoff.  

Well-thought-out loyalty programs with cost savings for consumers can be an added value. Just like tipping is becoming automated, loyalty programs at establishments should be the same way.   Consumers also want a program that makes it easy to obtain these potential discounts.

Where are guests most resistant to tipping?

Guests are most resistant to tipping when picking up food they order, as well as purchasing items at food trucks, fast food, and ice cream shops.

With increased use of automation at kiosks and at the drive thru, do you feel guests will feel less pressure to tip more than they want?

It all depends on how the tipping feature is displayed on these kiosks. Often, these machines push the consumer to add the same percentage of tip to the bill as they would if they were sitting down to eat (e.g., 15 or 20 percent). Tips at these machines should display options for lower tipping percentages so individuals would be more comfortable adding additional money if they feel up to it.

A new era of celebrity ‘voice cloning’ for AI drive-thru orders is coming

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A new era of celebrity ‘voice cloning’ for AI drive-thru orders is coming

Drive-thru customers may soon hear familiar voices taking their order at their favorite quick-service restaurant.

Customers of Lee’s Famous Recipe Chicken in Ohio can roll into the drive-thru at some units and football Hall of Famer Keith Byars will take their order.

Byars isn’t actually at any of the restaurants though.

The former player-turned-ESPN-radio-show host, has allowed his voice to be “cloned” by Hi Auto, the AI-ordering tech company partnering with Lee’s Famous for the test at a few units in Ohio, where the chain is based.

AI has been increasingly adopted in the quick-service world. But this new feature now offered by Hi Auto nationwide gives it more of a personalized twist.

Voice cloning allows the company to capture the nuances and personality of a particular person’s voice, including tone, accent and dialect, the company said. It can create a digital voice that is indistinguishable from the original speaker and can be seamlessly incorporated into a store’s order-taking system.

“Hi Auto’s AI voice cloning aims to humanize the customer drive-thru experience by giving automated attendants a ‘real’ voice,” said Roy Baharav, Hi Auto’s CEO and co-founder, in a statement.

Byars is a native son of Ohio. He played football first for Ohio State, and then moved into the NFL, playing 13 seasons for teams like the Philadelphia Eagles, the Miami Dolphins, the New England Patriots and the New York Jets. He now hosts “The Keith Byars Show” on ESPN-affiliated stations in Dayton.

Chuck Doran, Lee’s Famous’ owner and operator, said the chain has had a partnership with Byars since 2018, when the radio show launched. The chain brought AI ordering into the more than 120-unit system in 2020.

Ryan Weaver, CEO of Lee’s Famous, said the move has enhanced labor efficiency by saving about five to six labor hours daily, and it has improved order consistency and upselling conversions.

Hi Auto said voice cloning can help build brand identity for restaurant chains, and it can also help with communication, providing a familiar accent in certain regions. The voices can also be varied by daypart or season.

Understanding AI’s Role in Quick-Service Evolution

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Understanding AI’s Role in Quick-Service Evolution

The industry is discovering how the innovation can optimize every facet of the customer experience and back-of-house operations.

Restaurants are testing AI-enabled tools to enhance efficiency

Most quick-service restaurants rely heavily on recurring diners to drive business growth. Take Chick-fil-A, for example—92 percent of its customers visit on a monthly basis. Encouraging visitors to return over and over again requires innovative marketing strategies and high-quality data, which in the past was trickier and more time-consuming for marketers to track. Yet, AI adoption is spurring a metamorphosis across every industry, and quick-service is no exception.

With AI, hyper-personalization can be achieved at scale to foster loyalty with customers and quickly make a first-time visitor a devoted fan. About seven out of 10 restaurants use point of sale (POS) data for loyalty programs, upselling, and discounts. AI dives deep into diner preferences and order histories, so restaurants can design loyalty programs or promotions that resonate with their patrons, fostering brand loyalty and repeat business. 

In fact, the entire industry is quickly learning how AI can optimize every facet of the customer experience and back-of-house operations. 

AI holds promise across quick-service brand operations

Restaurant employee holding a tablet.

In the quick-service world, restaurants are testing AI-enabled tools to enhance efficiency. Chipotle, for example, is testing an automated system for dispensing ingredients, and earlier this year, Wendy’s began its automated drive-thru pilot. These chains are infusing their operations with AI to mitigate the impacts of an ongoing labor shortage, part of a revolution in back-of-house operations.

More restaurants will likely be forced to implement technological solutions to counter labor trends. In the future, more quick-service restaurants will analyze sales trends and other operational data to help adjust staffing needs, ensuring optimal service during peak times even in difficult economic environments. Operations data can also inform balance-sheet projections that account for more dynamic shift schedules. 

Training is expected to be another key area of AI’s focus. Data analysis can help restaurant operators emphasize team strengths and pinpoint areas that need improvement. POS system data will prove to be a veritable data goldmine for algorithms that will monitor inventory levels, track ingredient use, and predict item turnover to create a better purchase schedule for ingredients. 

Personalization takes center stage

Optimized operations will help restaurants focus more on the customer experience, where some large brands are already experimenting. IHOP, for example, is embedding AI in its ordering experience to deliver more personalized menu recommendations.

As industry AI use proliferates, restaurants are likely to ramp up their use of intelligent tools to personalize experiences. From order management to customized menu suggestions based on data such as past orders, dietary preferences, or even the current weather, AI-driven analytics will help restaurants create more tailored experiences for their clients. 

The ability to deliver data-driven experiences will prove especially powerful at the checkout counter (whether physical or digital). As mentioned earlier, the majority of restaurants use POS data for loyalty programs, upselling, and discounts.By diving deep into order histories and customer preferences, restaurants can design loyalty programs or promotions that resonate with their patrons, fostering brand loyalty and repeat business. And quick-service marketers are embracing it—in Movable Ink’s 2024 Audience of One survey, marketers  are increasing their use of AI for consumer behavior analysis (59 percent), personalization (56 percent), campaign optimization (55 percent), and more.

Recommending add-on menu items that either compliment the diner’s current order and/or menu items that graduate customers to new menu categories can help grow check sizes and improve the customer lifetime value. AI-enabled tools can help quick-service restaurants better understand the level of discount each individual customer needs to convert and predict when an individual customer is expected to make their next order. Using this data as a rudder for personalized offers will not only streamline promotional strategies and strengthen bottom lines but enhance the customer experience.

AI-backed security systems will be needed to bolster operations

To protect their new investments, quick-service restaurants will use more and more AI-backed security. Detecting customer order anomalies can help thwart fraud or theft—quick-service restaurants registers are often testing grounds for stolen credit cards—and computer vision-enabled cameras can process video data to identify potential threats. 

These use cases are sure to represent just a handful of ways quick-serve restaurants will bolster their operations with AI. As the technology improves and the labor and market landscape evolve, AI will help restaurants transform and develop long-term adaptive strategies to sustain growth.

From marketing to delivery: AI is the new backbone of the quick service industry

Although AI in the quick-service space isn’t anything new, the industry is starting to let AI steer marketing efforts and streamline engagement efforts. And AI use will not stop there. Quick-service restaurants will enhance both back-of-house operations and front-of-house customer experience with AI. The email marketing example more directly hints at what’s at the heart of any uptick in AI. Learning how customers engage with a brand and encouraging them down a path of discovery helps people find products they will enjoy time and again. Optimizing workflows will help quick-serve brands create the customer experience and earn the loyalty necessary to improve the bottom line.

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