What Are the Top Trends In The Restaurant Industry In 2023?

COVID-19. Inflation. Recession. The labor shortage. What could be next?

Economists have been all over the map in the last fiscal quarter of the year, declaring that a recession is on the way. Or that inflation will be out of control in 2023. Or that we just might be in for a “soft economic landing”. Get out your crystal ball, but as more financial numbers are reported the news does not seem as gloomy as originally predicted.

According to the Wall Street Journal, “The end of distressingly high inflation is coming into view. Consumer prices gained 6.5% in December, down from June’s 9.1% annual rate, the highest since 1981.”

So… the answer to the tough economic questions facing the foodservice sector for 2023 appears best summed up by “it depends.”

But the Federal Reserve is now predicting that “there is good reason to think inflation will keep falling.” But the Federal Reserve’s target goal of 2% inflation is currently at 5.7%.

So the challenges facing the restaurant industry continue, but with some guarded optimism.

Key Restaurant Trends in 2023

Trends that are predicted to affect our industry in 2023 include:

• Technology integration: With the rise of mobile ordering, contactless payments, online reservation systems, and inventory management, technology has become an integral part of the dining experience and improved customer experience. How restauranteurs build their “technology stack” is today as important as their distribution relationships and marketing and promotion efforts
• The ongoing labor shortage: The Washington Post reports that there are nearly 2 million unfilled job openings in the leisure and hospitality industry. Further, there are 500,000 fewer workers in leisure and hospitality than in 2020.
• Emphasis on health: There is a growing interest in healthy, plant-based, and sustainable food options. Many restaurants are incorporating more vegetarian and vegan dishes and highlighting locally-sourced, seasonal ingredients, and sustainable efforts
• Creative cuisine: Consumers are increasingly interested in experimenting with unique and unexpected dishes, especially those that incorporate new and unique flavors and techniques. Fusion cuisines, such as Korean-Mexican or Japanese-Peruvian, are becoming more popular
• Going casual: Many restaurants are moving away from formal fine dining experiences and opting for a more relaxed and casual atmosphere that mix in mobile-based pick up and delivery options
• The value of sustainability: There is a growing focus on sustainability, with more restaurants adopting eco-friendly practices such as reducing food waste, composting, and using biodegradable packaging
• The delivery and takeout pivot: The COVID-19 pandemic accelerated online ordering, delivery, and takeout, and many restaurants have modified their business models and are going omnichannel to deliver customer convenience

Change and evolution of consumer desire and trends is a given in foodservice, and has been since the first restaurant opened. There is no escaping it.

Foodservice Inflation in 2023?

Inflation has been historically low pre-COVID, but supply chain disruption and the effects of COVID have been debilitating for restaurants. Today, inflation is almost 6% and is affecting every facet of the foodservice industry.

Inflation has several effects on the restaurant industry, most notably:

• Food costs: Inflation can cause the price of raw ingredients, such as meat, dairy, and produce, to increase. This can lead to higher food costs for restaurants, which may then be passed on to consumers in the form of higher menu prices
• Purchasing power: As the cost of living increases, consumers may have less disposable income to spend on dining out. This can lead to a decrease in-restaurant sales and revenue
• Labor costs: Inflation causes labor costs to rise, including wages, benefits, and insurance. Restaurants may need to raise menu prices, reduce staff, or cut hours to offset these higher costs
• Increased competition: Inflation can cause more restaurants to close or struggle financially, leading to fewer restaurants and increased competition for diners

Inflation presents a challenge for restaurants, as common strategies in the past have been to adapt menus, increase prices, and evolve business models (such as implement take out, adopt new technology to handle a higher volume of customer orders, etc.) to remain competitive and profitable.

Possible Recession in 2023?

Although a worry in late 2022 as inflation and costs increases across all industries, a 2023 recession may be less likely but would have a significant effect on the restaurant industry.

The negative effects of recession on the economy include:

• Decreased consumer spending: During a recession, consumers may have less disposable income to spend on dining out, leading to a decrease in restaurant sales and revenue
• Increased competitive landscape: As more restaurants struggle or close during a recession, there may be increased competition among those that remain. This can put pressure on restaurants to lower prices or offer discounts to attract customers
• Changing consumer behavior: During a recession, consumers may be more likely to seek out the value or budget-friendly options, such as fast food or takeout. Restaurants that cater to these preferences may be more likely to survive and thrive
• Difficult financing: During a recession, it may be more difficult for restaurant entrepreneurs to access financing, as lenders become more risk-averse. This can make it challenging for restaurants to expand their businesses or change their basic business model

A potential recession can create havoc for the restaurant industry, but it may also create opportunities for those that can adapt to changing consumer preferences. Restaurants that can offer high-quality, affordable options may be better positioned to succeed during any recession.

The Continuing Labor Shortage

The labor shortage in foodservice shows no signs of going away in 2023.

"The owner of the newly-opened BBQ Lab in North Hills (in Research Triangle Park in North Carolina) says the constant shifting with staff he has to do is like being an NFL quarterback.

"I step up to the line, I look at the defense, I call my audible," (owner) Jerry Stephenson joked. "We have workers who still get sick. We have workers who have family matters that come up, you know an infant sick or a family member sick who had to leave."

The current labor shortage not only affects the operator “Quarterback,” but has important effects on the restaurant industry as a whole:

• Finding workers: A labor shortage can make it difficult for restaurants to find and hire qualified workers, leading to understaffing and increased workload for existing employees
• Increased labor costs: With a limited pool of available workers, restaurants may need to increase wages and benefits to attract and retain employees. This can lead to higher labor costs and lower profit margins
• Reduced quality and service: Understaffing or relying on less experienced employees can lead to reduced quality and service, which can negatively impact the dining experience for customers
• Reduced hours or closures: Restaurants may need to reduce hours or even close temporarily due to staffing shortages, which obviously decrease profits

The current labor shortage creates significant challenges, especially for smaller businesses or those in regions with a tighter or smaller labor market. Restaurants may need to modify staffing strategies, such as offering flexible scheduling, investing in restaurant technology that allows owner/operators to do more work with less labor, and increasing employee training and development to attract and retain quality workers.

Will Food Costs Continue to Rise in 2023?

As mentioned, the predictions of food costs decreasing may not be on the horizon for 2023. So combating rising food costs will be a strategy that will be a requirement for most restaurants. The continued high cost of food will most likely result in:

• Higher menu prices: As the cost of raw ingredients increases, restaurants may need to raise menu prices to maintain profit margins. This can lead to decreased demand from increasingly price-sensitive customers
• More rapid menu changes: Restaurants may need to adjust their menus or switch to cheaper ingredients to keep costs down. This can impact the quality of the food or the dining experience for customers
• Thin profit margins: Even if restaurants are able to raise prices, rising food costs can still affect their profit margins. Investing in new restaurant technology, physical improvements, or expanding operations becomes much more difficult when battling food costs and financing becomes more difficult
• Evolving supplier relationships: Rising food costs can strain relationships between restaurants and their suppliers. If a restaurant is unable or unwilling to pay higher prices for ingredients, it may need to seek out new suppliers or negotiate new terms with existing ones

Rising food costs can create a challenging environment for the foodservice industry, particularly for small businesses or those operating on tight margins. The good news? Operators and managers who made it through 2022 more than likely have made the adaptations to rising food costs and will carry best practices into 2023 and beyond. Restaurants may continue to need to get creative with their pricing strategies, supplier relationships, food waste policies, and inventory management to maintain margin in 2023.

Key Statistics For Restaurants

The experts have weighed in, surveyed their customers and experts in the field, and have come up with the following predictions and stats that are important for 2023:

• 50%+ of restaurant operators said it would be a year or more before business conditions return to normal
• 54% of restaurants cite inventory as their top expense
• The foodservice industry reached $898B in sales in 2022 (National Restaurant Association)
• Diners spend an average of $47 in-restaurant $34 on takeout
• Diners are coming back to the restaurant: 44% are dining out once a week or more
• Diners are price sensitive: 46% say price influences their dining decisions
• 50% say email is their preferred way to connect with restaurants
• Frequency of diners visiting new restaurants: 35% rarely, 32% every few months, 28% monthly or more often, and 5% never

From FSR’s Magazines State of the Restaurant 2023, operators detail what will be their challenges in 2023:

• Food costs: 92 percent
• Labor costs: 89 percent
• Energy and utility costs: 63 percent

Additionally, FSR Magazine lists the strategies operators are implementing to cope with higher anticipated costs in 2023:

• 21 percent of operators say they will incorporate more technology into their restaurant
• 32 percent will cut staffing levels
• 19% will postpone plans for new hiring
• 87 percent will increase menu prices
• 59 percent will change the food and beverage items on the menu
• 48 percent will reduce hours of operation
• 32 percent will close on days that it would normally be open
• 38 percent of operators say they will postpone plans for expansion
• 35 percent of operators say they will stop operating at full capacity
• 13 percent of operators say they will eliminate third-party delivery

Restaurant Technology Trends in 2023

Square, in their recently published “Future of Restaurants,” highlights the continuing labor shortage and how appropriate technology can counter this significant industry-wide challenge:

• Staffing shortages are ongoing and remain one of the biggest challenges for restaurateurs: 31% have been short-staffed for two years
• 38% of restaurants plan to automate operational activities to maximize staff efficiencies
• 99% of businesses that drive $1 million or more in revenue a year agree that automating back-of-house operations would allow staff to focus on more important tasks in the business
• A whopping 99% of restaurateurs said that they plan to take steps to weather a potential recession in 2023. Beyond raising prices, restaurant owners have several other strategies to cut costs and increase profits:
• 38% plan to automate operations tasks to increase staff efficiency.
• 36% will reduce dining room hours.
• 35% will add or grow the use of non-core offerings such as classes and retail items.
• 33% will reduce menu offerings.
• 31% will hold off on planned improvement projects.
• 30% will apply for a line of credit.
• 30% would consider laying off staff or holding off on filling open positions
• 27% would apply for government assistance.

What Factors Diners Use to Choose a Restaurant

Given increased competition and a sensitivity to menu price increases, diners are choosier than ever about the restaurants they want to try or frequent. Diner’s restaurant choice has been historically based on:

• Cuisine and menu: One of the most important factors in choosing a restaurant is the type of cuisine and the menu offerings. Diners often look for restaurants that offer their favorite types of food or dishes they haven't tried before
• Location and ambiance: The location and ambiance of a restaurant can also be a deciding factor for diners. Some diners prefer restaurants that are conveniently located or have a specific atmosphere or decor
• Price and value: The price of a meal can also be a factor in a diner's decision, as well as the perceived value of the meal. Diners may be willing to pay more for a high-quality dining experience, but they also want to feel that they are getting good value for their money.
• Recommendations and reviews: Diners often rely on recommendations and reviews from friends, family, or online sources to help them choose a restaurant. Positive reviews can often be the deciding factor in whether a diner chooses to visit a particular restaurant.
• Special offers and promotions: Many restaurants offer special deals, promotions, or loyalty programs to attract and retain diners. These offers can be an effective way to draw in new customers and keep them coming back.

Restaurants that are able to effectively communicate their offerings and value to potential diners are likely to attract more customers and succeed in a competitive market.

Is Sustainability Important to Diners and Consumers?

Restaurant diners are increasingly interested in sustainability and environmental responsibility, and are seeking out restaurants that demonstrate a commitment to these values. Some of the ways that restaurant diners view sustainability include:

• Reduced food waste: Diners are often concerned about the amount of food that goes to waste in restaurants and are interested in restaurants that take steps to reduce food waste, such as composting or donating excess food
• Locally-sourced ingredients: Many diners prefer restaurants that source ingredients locally, as this reduces the environmental impact of transporting food long distances and supports local farmers and producers
• Sustainable packaging: Diners are increasingly concerned about the environmental impact of disposable packaging and are looking for restaurants that use sustainable materials, such as compostable or reusable containers
• Plant-based and vegetarian options: As mentioned earlier, many diners are seeking out plant-based and vegetarian options as a more sustainable alternative to meat-based dishes, which have a larger environmental footprint
• Energy efficiency and waste reduction: Diners may view restaurants that prioritize energy efficiency and waste reduction as more sustainable, as these practices can help reduce the restaurant's environmental impact

Diners are increasingly interested in sustainability and environmental responsibility, and are looking for restaurants that demonstrate a commitment to these values. Restaurants that are able to prioritize sustainability in their operations are likely to attract and retain diners who share these values.

What Are Key Health Trends In Food Choice In 2023?

What is a regenivore? The New York Times in their recent article “How Will We Eat in 2023? Here Are 10 Predictions,” spotlights “food forecasters” who define “a new generation of diners who no longer (simply worry) about eating sustainably, which implies a state of preserving what is. A new generation wants food from companies that are actively healing the planet through carbon-reducing agriculture, more rigorous animal welfare policies and equitable treatment of the people who grow and process food.”

The regenivore segment may be a tough customer to please in the short-term, but there’s a spectrum of diners today that do appreciate cost-effective sustainable efforts made by operators. According to the Times, sustainable packaging and “climate hero ingredients” like fava and lupin beans are entering the conversation about how operators answer the needs of the diners that are environmental activists in their restaurant menu choices.

The more common health trends in food choice that are predicted to influence diners' choices in restaurants. Some of these trends include:

• Plant-based and vegetarian options: Many diners are seeking out plant-based and vegetarian options as a healthier alternative to meat-based dishes. These options are often lower in calories, fat, and cholesterol, and may provide additional health benefits
• Low-carb and low-sugar options: Diners are increasingly concerned with their sugar and carbohydrate intake, and seek out alternatives. Alternatives include dishes that use low-carb ingredients, such as cauliflower rice or zucchini noodles, and desserts that use natural sweeteners, such as stevia or monk fruit
• Going gluten-free: Gluten-free options are becoming more common as more diners adopt a gluten-free diet for health reasons, such as celiac disease or gluten intolerance
• Local and organic: Diners are increasingly interested in knowing where their food comes from and how it is produced. This has led to a rise in locally-sourced and organic ingredients, which are often perceived as being healthier and more environmentally-friendly
• Menu customization: Many restaurants are offering more customization and personalization options, allowing diners to choose ingredients and preparation methods that meet their specific dietary needs and preferences

Health trends in food choice are driving changes in menus and restaurant offerings, as diners seek out healthier and more sustainable options. Restaurants that are able to adapt to these trends are likely to attract and retain health-conscious diners.

Technology In Restaurants Predictions For 2023

Restaurants are adopting various new information technologies to enhance their operations and improve the customer experience. Some examples include:

• Going mobile: Restaurants are increasingly adopting mobile apps that allow customers to place orders and pay through their smartphones. This can help speed up the ordering process and reduce wait times
• Tableside ordering and payment systems: Restaurants are also adopting tableside ordering and payment systems, which allow servers to take orders and process payments on mobile devices directly at the table. This can improve accuracy and efficiency and reduce wait times.
• Contactless payment options: In response to the COVID-19 pandemic, many restaurants have adopted contactless payment options, such as mobile payments or QR codes. This can help reduce the risk of transmission and improve the safety of the dining experience
• Digital signage and menu boards: Restaurants are adopting digital signage and menu boards, which can be updated in real-time and display dynamic content such as specials or promotions. This can help restaurants more effectively communicate with customers and drive sales
• Know the customer: Restaurants are adopting Customer relationship management (CRM) systems that allow them to collect and analyze customer data, such as order history or preferences, in order to personalize marketing and promotional efforts and improve the customer experience

The Most Popular New Information Technologies Being Adopted in Restaurants

There are several popular back-of-restaurant technologies being adopted by restaurants. Some examples include:

• Prevent food waste, limit food spoilage: Inventory management systems help restaurants track food and beverage inventory levels, reduce waste, and improve cost control. Some inventory management systems can automatically generate purchase orders or predict inventory needs based on historical data.
• Point-of-sale (POS) systems: POS systems are a mainstay in the restaurant industry and are used to process orders, track inventory, and manage customer data. Modern POS systems are often cloud-based and include features such as mobile ordering, online ordering, and contactless payment options
• Kitchen display systems (KDS): KDS systems are used to display orders in the kitchen, allowing chefs and kitchen staff to efficiently manage orders and reduce errors. Some KDS systems include features such as timers, order tracking, and real-time updates
• Employee scheduling systems: These systems help restaurants manage employee schedules, track labor costs, and optimize staffing levels. Some systems include features such as employee self-service, time and attendance tracking, and labor forecasting
• Food safety and compliance systems: Food safety and compliance systems help restaurants maintain regulatory compliance, such as HACCP (Hazard Analysis and Critical Control Points), and ensure food safety. Some systems include features such as temperature monitoring, compliance tracking, and automated reporting

How Will Owner/Operators Calculate Customer Satisfaction In 2023?

Restaurant operators can calculate customer satisfaction in various ways, such as:

• Surveys: Restaurant operators can use customer surveys to collect feedback from customers about their dining experience. Surveys can be conducted through email, text message, or on paper at the restaurant. Some common metrics used in customer satisfaction surveys include Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT)
• Online reviews: Restaurant operators can monitor online review sites, such as industry-favorite Yelp or Google Reviews, to see how customers are rating and reviewing their restaurant. Online reviews can provide valuable feedback on aspects such as food quality, service, and ambiance
• Social media: Restaurant operators can monitor social media channels, such as Twitter or Instagram, to see how customers are discussing their restaurant. This can provide insight into customer sentiment and identify any areas for improvement
• The mysterious mystery shopper: Mystery shopping involves hiring a third-party company to send anonymous diners to a restaurant and evaluate the dining experience. Mystery shopping can provide objective feedback on aspects such as service, food quality, and cleanliness.
• Sales data: Sales data, such as average check size or the frequency of repeat customers, can provide insight into customer satisfaction. If customers are returning frequently and spending more per visit, it may indicate a high level of satisfaction.

Calculating customer satisfaction requires a combination of methods, but good feedback and information can be used to make improvements and ensure that the customer dining experience ensures customers come back.

What Restaurant Technology Is Most Important To Consumers In 2023?

According to various surveys and studies, the restaurant technology that is most important to diners and consumers includes:

• Mobile ordering and payment: The ability to order and pay through a mobile app or website is increasingly important to diners, particularly as the use of mobile devices continues to grow
• Online reservations: Many diners prefer the convenience of being able to make reservations online, rather than having to call the restaurant or make a reservation in person
• Contactless payment: In the wake of the COVID-19 pandemic, contactless payment options have become more important to diners who are concerned about the risk of transmission
• Loyalty programs: Many diners appreciate loyalty programs that offer rewards, discounts, or exclusive perks, particularly if the program is easy to use and offers personalized rewards
• Digital menus and ordering: Some diners prefer digital menus and ordering systems that allow them to browse menu items and customize orders, particularly if the system is intuitive and user-friendly

Restaurant technology that improves convenience, speed, and safety is becoming increasingly important to diners. As technology continues to evolve, it's likely that these preferences will continue to change and evolve as well.

Customer Satisfaction in 2023

Ultimately, success in foodservice centers on customer satisfaction. And the unique and interesting thing about “restaurant culture” is that it seems to change every year. The goal to provide a new and interesting dining experience is insatiable it seems. It’s what makes this industry so dynamic.

Every restaurant is unique, there is no single formula that guarantees success and increased revenue. Successful restaurateurs often “zag” when all their competitors “zig”. Experimentation is key. An interesting academic read on the “Restauraneur’s Challenge” on meeting this need is encapsulated in this paper from Deloitte about the challenge of ever-evolving customer tastes and the elements of serving up a great restaurant customer experience.

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