2021 Restaurant Industry Outlook Guide
The Covid-19 pandemic caused devastating effects on the restaurant industry in 2021. The sector experiences the worst business conditions due to unpredictable lockdowns, mandated closing, cratered economy, and capacity limits.
Research shows that the restaurant industry’s economic toll has been staggering since March 2020 and caused the food sector to lose about $240 billion in sales. Eight million employees went jobless or furloughed during the peak of lockdowns in April 2020.
Instead of focusing on accepting the challenge posed by Covid-19 and make efforts to streamline the business, many restaurant owners close their doors. According to Fortune, over 110,000 restaurants, including eating and drinking places, in the U.S closed for business. Read on!
State of Restaurant industry in 2021
Although the restaurant business sales will see double-digit growth in 2021, it is challenging to bridge the gap and overcome the significant losses the foodservice sector experienced in 2020. The majority of restaurants closed permanently in the U.S were established businesses and operated for more than one decade.
Most restaurants followed the Covid-19 safety protocols and made efforts to shift to off-premises foodservice. Likewise, they set up outdoor dining, streamlined menus, and offered discounted deals for marketing purposes. The following sections of this restaurant outlook for 2021 will shed light on the foodservice industry forecast, operational trends, food and menu trends. Continue reading!
Sales and Economic Outlook
The restaurant industry’s economy is expected to grow in 2021. However, it won’t recover the substantial losses experienced during the Covid-19 pandemic. Total foodservice and restaurant sales were less than $240 billion and much below the expected levels in 2020.
The primary reason behind the losses is a shortfall in sales at restaurants and a significant reduction in spending at restaurant operations, especially in sectors like arts, entertainment, education, retail, health care, recreation, and lodging.
The majority of restaurants and food services closed were well-established companies in their cities, towns, or communities. Research shows that the average number of employees that worked in these shutdown restaurants was 32 people. About 17% of these restaurants employed an average of 50 people before they shut down their businesses.
About 72% of business owners who closed their restaurants are unlikely to open or operate another foodservice business in the coming months or years. However, 48% of restaurant owners think they will stay in business for the next few years.
According to Forbes, the Covid-19 pandemic affects the supply chain companies that supply goods to the restaurant and foodservice businesses. Forbes reports that about 85% of companies in the supply chain business experienced reduced returns on investments (ROIs) in 2020 than in 2019. The industry experienced about 30% of losses in business revenue in 2020.
During the first half of 2021, on-premises capacity restrictions will constrain sales growth due to surging Covid-10 cases across the country. Business conditions for restaurants and food services will improve by mid-year as more and more people receive Covid-19 vaccines.
Restaurants’ Consumer Outlook 2021
The key to flourishing in any business is knowing your customers and making changes to achieve a better product-market fit. The same principle applies to the restaurant business. If you want to gain a competitive edge, it is crucial to know your customers.
However, the Covid-19 pandemic has changed everything, causing dramatic changes in customers and their wants. In 2021, all businesses, including restaurants, will continue the Covid-19-period trend, and consumers will maintain their off-premise dining.
Over 76% of Americans have food delivery, order restaurant, and drive-thru food purchasing plans. About 50% of adults in the U.S plan to eat on-premises during 2021. Among them, 36% of people want to eat food inside the restaurant, while 25% have plans to sit at tables outside.
Restaurant Operational Trends 2021
The majority of restaurants in the U.S followed survival tactics throughout 2020. Authorities conveyed all restaurants and foodservice companies to make changes in their rules and regulations, operating conditions and overhaul their business operations to stay afloat. During 2020, the restaurant industry experienced a significant and rapid shift to off-premises service, and this operational trend is likely to continue in 2021.
Restaurant operators are making massive investments in technology, software, and apps to streamline their business operations. According to the National Restaurant Association, over 88% of people in the U.S enjoy going to restaurants, and 85% of them go out with their friends and families for dining. Eight in ten people prefer enjoying food in restaurants compared to taste sensations in home kitchens.
Nearly six in ten people say that restaurants and foodservice are vital to their lifestyle and social fabric. The National Restaurant Association reports that these feelings will increase in 2021 as people expect the end of the Covid-19 pandemic in the coming months, especially after mass vaccination.
However, the restaurant industry will still face the challenge to operate effectively and safely throughout 2021. Here are the operational trends for restaurant businesses in 2021. Keep reading, but take the time to enjoy the free tool below!
Many restaurants focus on optimizing their off-premises dining services because of the limited on-premises capacity. During the last few months in 2020, on-premises dining services were almost nonexistent, causing business owners to use more resources and expand their off-premises side of the business due to the Covid-19 pandemic.
The good news is that majority of consumers well-received this new shift from on-premises to off-premises dining. The National Restaurant Association reports that about 53% of people in the U.S food delivery is essential to their lifestyles. Unlike pre-Covid-19, restaurant businesses will generate a large proportion of sales from off-premises dining.
• Curbside Takeout
The majority of restaurants failed to implement curbside takeout strategies in 2020. However, some restaurants employed such plans during the pandemic. However, it is the least capital-intensive offering that foodservice companies could add in 2020.
The good news is that restaurant operators will add curbside takeout in 2021. It is projected that eight out of 10 fast-casual, family dining, and fine dining operators will add a curbside takeout option in 2021.
• Food Delivery
About 50% of full-service restaurant operators implemented food delivery options to increase their business revenues during the Covid-19 pandemic. The food delivery trend will grow more in 2021. Restaurant operators in all segments are more likely to implement third-party delivery strategies instead of focusing on in-house services.
Online Research shows that six in ten people in the U.S prefer food delivery options during the Covid-19 pandemic. About two in ten adults chose food delivery services in the pre-pandemic era.
Nearly 71% of millennials prefer direct orders from foodservice and restaurants, while 18% are more likely to order via third-party services. On the other hand, about 79% of boomers are more likely to place direct food delivery orders at the restaurant.
• Ghost Kitchens
Ghost kitchens, also known as dark or virtual kitchens, are relatively a new business model with more focus in 2021. Ghost kitchens allow restaurants and foodservice companies to offer food deliveries from a location with no on-premise customers.
The purpose of ghost kitchens is to cut business operations costs, allowing operators to spend more money on their delivery services. However, the majority of restaurants are unlikely to invest in ghost kitchen delivery plans. Over 71% of people prefer ordering from restaurants where they can visit in-person.
Some restaurant businesses focused on setting up drive-thru lanes during the Covid-19 pandemic, especially after April 2020. The National Restaurant Association reports that 1-3% of restaurant operators are likely to add drive-thru services in their parking lots in 2021. The primary reason behind this low percentage is the lack of resources and budgets.
Restaurant Technology Trends
According to QRS Magazine, more than half of full-service restaurants, fast-casual, fine dining, and café operators will invest more in technology resources, such as web-based food orders and management, in-app ordering, and online payment.
Although there have been no technology changes since the pre-pandemic era, many restaurants have invested in adopting technological tools rapidly. Restaurant operators will make more changes in their business operations with an increased focus on technology tools, convenience, and safety to ensure a streamlined business.
• In-App Ordering
The Covid-19 pandemic has caused many restaurants to focus on technology tools and invest in high-end app development for food orders and management. Since the beginning of the outbreak, one in four business operators in various segments have implemented technology, allowing customers to order through smartphone apps.
About one in four customers who plan to use apps for food ordering say that the app’s quality plays a crucial role in choosing one foodservice over another. The majority of these customers are millennials and Generation-Z adults.
• QR Codes
The QR code is an integral component of a restaurant’s IT-related operation management. The main advantage of using QR codes is to improve customer safety and decrease costs. About 50% of full-service restaurant businesses are likely to add digital menus for customers who can access them via QR code scanning. Like in-app ordering, one in five customers says accessing the digital menu via their smartphones using a QR code will influence their choice of a restaurant in 2021.
• Online Orders
The Covid-19 safety protocols require restaurants to avoid person-to-person contact and maintain social distancing. According to Forbes, nearly 40% of the restaurant industry operators plan to add mobile payment options in 2021. Mobile payments are beneficial for businesses that offer off-premises dining services.
Nearly 29% of people would choose a restaurant that offers contactless payment options. About 21% of adults in the U.S say that mobile payments would influence their restaurant choice for dining.
• Online Orders
The majority of consumers are likely to order takeout or delivery based on online ordering availability. Employing an online order management software will streamline restaurant businesses in 2021. About 41% of Generation-X adults agree on the efficacy of online orders. Many restaurants, foodservice companies, and fine-dining operators have added online ordering options in recent months.
Restaurant Marketing Strategies 2021
Restaurant business owners almost failed to maintain sales during the Covid-19 pandemic. However, operators that focus on new business models and marketing strategies allowed them to win more customers. The most effective marketing tactics during 2020 were rewards, discounts, and meal subscription programs. These marketing trends for restaurants are more likely to continue in 2021.
• Loyalty Programs
Loyalty programs had always been the most popular marketing strategy for businesses in the pre-Covid-19 era. The exciting thing is that the loyalty program still remains effective, driving more customers and encouraging them to repeat business. One in three on-premises and off-premises customers prefer loyalty and reward programs, meaning they are more likely to purchase or order food from restaurants that offer discounts and rewards.
• Value Propositions
The choice of restaurants is based on various factors, and one of them is “value,” which has become more important in these challenging times. Four in ten customers are more likely to purchase food or dine outside in restaurants that offer discounts on their menu items.
Three in ten on-premises customers will dine at restaurants that offer discounts at peak and off-peak times. Likewise, most consumers are likely to buy food from restaurants with options like smaller food portions for lower prices. Bear in mind that restaurants will generate more if they apply the same principle to takeout and delivery choices for customers who prefer off-premises dining.
Menu Trends for 2021
Restaurant operators will streamline their menus and focus on off-premises services, selling meal kits, groceries, and alcohol-to-go throughout 2021. During 2020, the restaurant industry experienced innovations, accelerated food trends, and elevated customer demand for meals.
Although restaurants lost over $240 billion with more than 2.5 million people unemployed, the operators’ commitment, resiliency, devotion, and creativity allowed them to focus on top food and menu that helped them survived the tough 2020. Many full-service restaurant operators plan to reduce inventories and develop menu items with smaller crews in their kitchens.
According to the National Restaurant Association, about 80% of full-service had on-premises customers before the Covid-19 outbreak. However, the pandemic led to on-premises dining restrictions, causing operators to shift to off-premises. During 2020, the majority of customers who purchased food from restaurants were off-premises traffic.
The bestselling foods and beverages during the Covid-19 pandemic were burgers and beers for full-service restaurants. On the other hand, sandwiches and soft drinks were the best selling items for limited-service restaurant operators.
• Bundled Meals
A bundled meal consists of an appetizer, side, and dessert. It comes in a family pack or an individual meal. Bundled meals are one of the best menu trends for 2021 and can influence customers’ restaurant choices. More than half of fine-dining operators added bundled meals to their menus since the Covid-19 outbreak. Likewise, four in ten casual and family dining operators followed the same strategy.
• Meal Kits
Many customers will buy meal kits at their favorite restaurants. The majority of these customers are more likely to be millennials and Generation-Z adults. Kits contain pre-measured ingredients and guidelines, allowing customers to prepare meals at home. About 20% of family dining and 23% of fine-dining operators added meal kits in 2020.
• Groceries Supplement Sales
More than half of customers, including millennials and Generation-Z adults, will purchase grocery items, such as fresh and uncooked meat, bread, dairy, produce, and pasta, from restaurants if they offer them. Grocery supplement sales is an excellent strategy for restaurants to optimize their revenue generation in 2021.
For instance, if your restaurant complies, it can help drive more traffic or customers and increase sales. During 2020, about 14 fast-casual and fine-dining operators implemented this strategy and generated decent revenues by selling grocery goods.
• Diet-Specific Food
Baby Boomers look for healthy food choices during the Covid-19 pandemic to improve their immune systems and ease novel coronavirus symptoms if they test positive. Restaurants that include nutritional and comfort food options are likely to generate more revenue in 2021. Diet-specific menus, including vegan food and gluten-free items, are trending menu items.
Authorities permitted restaurants and food service companies to include alcoholic beverages in delivery and takeout orders. The majority of restaurants plan to have cocktails, wines, and beers on their menus. These items are increasingly getting importance across different restaurant segments.
Seven in ten full-service operators and five in 10 quick-service or fast-casual operators have a high probability of including alcoholic beverages in their delivery and takeout orders. Alcohol-to-go is one of the leading food and menu trends during the pandemic, and this trend will stay in 2021 and the coming years.
The year 2020 was caused significant effects on the restaurant industry. Some restaurants closed their doors, while others continued to strive during the challenging times. Restaurants and foodservice companies that survived 2020 focus on modifications in their marketing strategies, aesthetics, internal systems, technology adoptions, and keeping an eye on food and menu trends.
The Covid-19 pandemic has forced restaurant operators to make drastic changes and adopt different ways to optimize their businesses. Operators believe that business success in 2021 is directly proportional to streamlined and aligned strategies with the new normal. Despite the pandemic’s hard-hit, operators remain steadfast, resilient, and committed to thriving in 2021.
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