STUDY: Restaurants Remain Cautiously Optimistic
Restaurant operators are cautiously optimistic about the year ahead, with nearly 8 in 10 predicting their sales will increase (33 percent) or hold steady (45 percent) from 2023 levels, according to the National Restaurant Association 2024 State of the Restaurant Industry Report. Restaurants sales are forecast to exceed $1.1 trillion in sales this year.
Delivery, carry-out and drive-thru growth continues
More than half, 52 percent of consumers, including 67 percent of millennials and 63 percent of Gen Z adults, say ordering takeout from a restaurant is an essential part of their lifestyle.
Profitability remains challenged
Operators are slightly less optimistic about profitability, with only 27 percent of operators expecting to be more profitable this year. Average food costs have increased more than 20 percent and average wages more than 30 percent from 2019.
Value in Technology
Operators and consumers see value in technology and promotions. Consumers' affinity for technology in restaurants varies and as a result, operators are strategically deciding how to incorporate technology into the experience. For full-service restaurants, nearly half (46 percent) of adults think technology has a positive impact, and this number weighs heavily towards younger consumers (64 percent of Gen Z and 66 percent of Millennials). Similarly, this group is more likely to want more technology options, according to the research.
These preferences can help operators make informed decisions on where and how to invest. In 2023, just under half (48 percent) of operators made technology investments to enhance the customer experience but 60 percent plan to make an investment in 2024. The areas where consumers say technology would have the most positive impact on their personal experience include options that make ordering and paying easier and faster.
If consumers are somewhat split on technology, they can agree on the value of a special deal or discount, with 7 in 10 adults saying they often look for a daily special or discount. This is inline with findings from HTs 12th annual 2023 Customer Engagement Technology Study: When asked what they really want from loyalty programs, 78% percent of customers surveyed want discounts,
Customers (85 percent) are more flexible about when they dine if it comes with a deal and 84 percent said they'd take advantage of deals offered for dining at off-peak times. Further, 75 percent of adults would opt for smaller-sized portions for a lower price — a trend that can help restaurants curb food waste and improve profits.
Lowdown on Loyalty
To further fuel customer retention, the data suggests focusing on loyalty and rewards programs. Customers prefer to see this type of program on a smartphone app, further enforcing the need for technological innovation and creating additional touchpoints between customers and restaurants.
Help Still Wanted
Forty-five percent of restaurant operators report needing more employees to meet customer demand and a majority (70 percent) have job openings that are hard to fill.
The industry will employ over 15.7 million people in the United States by the end of 2024. Overall, consumers are generally upbeat about their community. Fifty-five percent of adults describe their local economy, including the availability of jobs, as excellent or good.
"With more than $1 trillion in sales expected this year, the state of the restaurant industry is strong thanks to the agility of its operators and employees," said Michelle Korsmo, President & CEO of the National Restaurant Association. "As our report shows, restaurants are finding ways to adapt to the challenges of increased food costs and supply chain disruption. Restaurants have responded well to customers' desire to have more opportunities to enjoy restaurant meals, which continues to grow sales, create employment opportunities, and foster a strong sense of community."
Food Cost and Availability
If consumers notice menu changes on a more frequent basis, it's often the result of increased food costs. In the past year, operators report needing to find new suppliers, removing items from their menus, adjusting portion sizes or substituting lower cost items all in response to elevated food prices. The availability of food items impacted menu composition as well, with more than three quarters (77 percent) of operators saying their restaurant experienced supply delays or shortages of key food or beverage items in 2023. These changes will present a challenge for operators, especially with most adults (86 percent) saying they like ample choices on menus.
Further directing menu choices are social media trends. As the National Restaurant Association's 2024 What's Hot Culinary Forecast shows, savvy operators are turning to TikTok and other social media platforms to be inspired and to fire up viral trends. Operators will need to be strategic in how they balance thoughtfully streamlined, food-cost-effective menus and enough variety to satisfy demand and lead the latest trends.
For those offering it, off-premises remains a key area of opportunity, and customers agree, with a vast majority (88 percent) reporting being satisfied with the variety of local food options for takeout and delivery. Customers are viewing take-out in new ways, with two thirds (67 percent) of adults saying they'd be interested in subscriptions that offer a specified number of meals each month and half (53 percent) saying they're open to supplementing home-cooked meals with restaurant-prepared items.
"This is a historic and exciting year for the restaurant industry," added Hudson Riehle, Senior Vice President of the Research and Knowledge Group for the National Restaurant Association. "While challenges remain—including inflation, recruitment, higher operating costs and profitability—restaurant operators will continue to innovate and evolve to meet customer demands."
Click here to download the 2024 State of the Restaurant Industry Report, supported by Sage.