What’s on the Menu for 2017: Top Trends for Restaurants

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What’s on the Menu for 2017: Top Trends for Restaurants

02/01/2017
The restaurant industry experienced a full course of innovation in 2016 — delivery advancements, the expansion of digital technologies, and the proliferation of new loyalty tactics to name a few. In 2017, Applied Predictive Technologies (APT) said it expects quick service and full service restaurants to continue fighting for market share from fast casual players, and all restaurants to think through expanding their delivery capabilities. Restaurants will carefully evaluate which technologies are truly worth the investment, and executives will push to make their loyalty programs thrive. Based on APT’s experience partnering with global restaurant organizations, here are the top trends it sees emerging for restaurants in 2017.
 
Fast Casual: The Incumbents Strike Back
While fast casual players have been trailblazers recently, QSRs and FSRs are now moving back to the offense, and these industry incumbents will continue differentiating themselves in new ways in 2017. To combat fast casual competition, QSRs are investing more in premium, healthier menu options, like Chick-fil-A’s Egg White Grill and Harvest Kale & Grain Bowl. Meanwhile, FSRs are giving locations a fresh look to attract Millennials, and emphasizing new experiences through bar remodels and more happy hour promotions. For example, TGI Fridays is revamping their bar space in various restaurants and introducing Fridays Offsite, a separate coffee-shop area complete with grab-and-go items.
 
A high degree of risk, however, comes with each innovative idea that restaurants introduce to their chains. As QSRs and FSRs try new initiatives to steal share back from fast casual competitors, testing the idea in a subset of locations or markets is the key to success. Comparing performance in these test locations to similar restaurants or markets allows executives to isolate the actual sales and profit impact associated with each program.
 
Delivery Offerings: Build or Partner?
One of the biggest decisions around delivery is whether to build in-house delivery options or partner with third-party delivery companies, such as DoorDash, Postmates, and Uber Eats.
 
As executives determine whether to build, partner, or even offer delivery at all, they need to evaluate how delivery impacts total sales, including potential cannibalization of in-person orders. Restaurants also need to evaluate factors like the impact to the average check size and guest satisfaction rates. In fact, some companies like Culver’s are opting not to offer delivery in fear that sacrificing the food’s freshness will have negative, long-term implications.
 
Restaurants also need to determine the optimal scope and structure of delivery — should delivery only be offered during certain dayparts? What is the ideal delivery fee, if any? Delivery offers a big opportunity for restaurants to drive incremental sales, but restaurants need to get it right in order to succeed.
 
Beyond the Hype: Which Technologies Do Guests Actually Want?
Restaurants will continue bringing new technologies to the table, from digital ordering kiosks to tabletop devices and digital menu boards. Many restaurants are also increasing investments in mobile order and pay capabilities. McDonald’s and Chick-fil-A are joining chains like Starbucks and Taco Bell in offering this service, which allows guests to order and pay via a mobile phone app before picking up their food from the physical location.
 
However, restaurants are learning that acting quickly is not always the best move. Before launching these costly investments, restaurants need to evaluate which of these technologies guests actually want. Which investments are increasing profits and improving the dining experience? Which are not seeing a return on investment? The quantity of new technology offerings, each with the lure of being the “next big thing,” will grow exponentially in the coming years, making it vital for restaurants to meticulously analyze which technologies are actually worth the investment before adopting new ideas.
 
Refining the Recipe for a Successful Loyalty Program
In 2016, Chipotle piloted Chiptopia, Bloomin’ Brands launched a multi-concept loyalty program, and Starbucks tweaked their program to be based on spend rather than visits. Whether restaurants are launching loyalty programs for the first time or fine-tuning existing programs, loyalty will continue to be paramount in 2017.
 
Restaurants have many options when creating and refining their loyalty programs, and figuring out the right ingredients for a successful program can be difficult. Should rewards be based on visits or spend? Should rewards be uniform for all participants or customized based on prior purchases? Should additional surprise-and-delight offers be granted, and if so, at what cadence?
 
The "secret sauce" of any loyalty program is determining whether it is driving incremental visits and ultimately profits, rather than subsidizing purchases that guests would have made anyway. Testing a new loyalty program or structure in a subset of markets or customers is the best way for restaurants to confidently understand the optimal program design before committing to broader rollout.
 
A variety of new opportunities and challenges are coming down the pike for the restaurant industry. However, restaurants should not implement new ideas because they are trendy. They should only implement the ones that are profitable in their specific case. To find out which ideas work and which don’t, restaurants should conduct robust business experiments. These experiments lower the risk associated with trying new ideas and increase the speed of innovation. The future holds great promise (and profits) for restaurants that test, learn, and smartly innovate.