There is a deep yet unspoken hope that after beating the virus everything will get back to normal. With the pandemic lasting for the second year, it is more than unlikely to get back to the previous models, mostly due to the fact that new habits were formed and new possibilities explored. And they are here to stay.
“The Power of Habit” penned by Charles Duhigg is a New York Times and Amazon bestseller describing the way people operate in an “automated way”, based on habits formed in their day-to-day life. According to the book, it takes no less than two weeks of training to build the new habit and even longer to make it imprinted in the brain strong enough to forget about it and still follow.
With the COVID-19 pandemic starting in 2020 and lockdowns lasting for months, it is not surprising that the habits of both business people and ordinary customers have vastly changed.
The restaurant market changes during covid-19
To fully understand the way the pandemic has influenced the restaurant business it is necessary to have a view on the situation before and during the pandemic. With that, it will be much easier to understand the impact of the pandemic on society and the restaurant business alike.
Restaurant market before COVID-19
The State of the Restaurant Industry report 2019 delivered an enthusiastic and optimistic prognosis on the industry’s future. Approximately half of the restaurant owners claimed that their business is stronger than it was two years before. The sector employed a whooping 15.3 million employees, being the second-largest private-sector employer. Also, there were next 1.5 million jobs predicted to be added by 2029.
Yet by then, there were signs of the revolution coming, The report highlighted that 60% of restaurant owners claim that takeout and delivery orders are higher than they used to be two years before. Also, 40% claimed that they are investing to expand their off-premises.
These investments appeared to be life-savers when the COVID-19 pandemics has hit.
Restaurant market during lockdowns
The COVID-19 pandemic and lockdowns have been real game-changers when it comes to the restaurant business. With thousands of people locked in their homes and restaurants stripped of their ability to serve the clients in the locale, it is not a surprise that the restaurant business shrank.
By December 2020 up 17% of all US restaurants have been closed permanently. That translates into 110 thousand businesses in the US.
The unemployment rate has spiked to 13% in the second quarter of 2020 – basically, the quarter with the first lockdown imposed (precisely, the lockdowns have been initiated on March 2020, so the effects have been seen in the second quarter). The rise was powered mostly by the employees of restaurants and the hospitality sector that have been hit severely by the lockdowns.
Thus, it is safe to conclude that the pandemic and following lockdowns have delivered a harsh blow to the global hospitality business. On the other hand though, while there were strugglers, there was also a group of winners.
According to Reuters, the revenue of Uber Eats doubled reaching $1.2 billion, despite the weaker overall Uber performance. With fewer places to go to, Uber services appeared obsolete.
Yet with the new situation came new habits that were hampering the performance of restaurants and integrators alike. The COVID crisis has hit the companies and domestic finances. According to Reuters, there was an increasing number of users willing to cook and eat at home instead of ordering food.
A glimpse into the future
The situation highlighted above delivers several trends that are visible now and will get reinforcement in the upcoming future. It is also a modern business hope and challenge in a nutshell. Yet it needs some explanation:
Food orders will stay here for good
As highlighted in “The power of habit” mentioned above, there was enough time for the companies and customers to build new habits and get used to them in the new situation. According to Restaurant-Hospitality, up to 53% of adults say that ordering or buying takeout food is essential for their way of living. Also, 68% of consumers admit that they are more likely to purchase takeout or delivery food now than they were before the pandemic.
Considering that, it is unlikely for restaurants to see the return of the times before the covid, when dining out was the default option, while the takeout or order was a less popular alternative.
Integrators having a high ground
The lockdowns were in fact completely unexpected, with various forms of state support varying from the country. Yet it was the point where many restaurants faced the dilemma: go digital or die.
According to McKinsey data, at the beginning of the century, the delivery market was built around Pizza and Chinese food. Now the food delivery market is worth $150 billion, meaning that its worth has more than tripled since 2017.
A huge share of this growth was initiated and consumed by food delivery integrator services like Uber Eats or Wolt.
This one gets tricky, especially considering the delivery market explosion. The pandemic has brought not only lockdowns but also a disruption of global delivery chains. The markets see the devastating effect of these disruptions in shortages of various goods, including semiconductors or cars. Food is also heavily hit by the situation.
According to the Deloitte report, food production suffers mostly from staff shortages, starting from crops rooting in fields due to the lack of workers to harvest them. Even with crops harvested, there is a challenge with transporting them, with numerous restrictions on movement and understaffed logistics.
With that situation in mind, it is not surprising that an increasing number of restaurant owners will secure their food sourced locally, forging cooperations on local markets instead of building worldwide logistics chains. While the earlier model appeared to be more cost-effective, it has been severely disrupted by the ongoing crisis. Also, the rising prices of fuels are further undermining the overall cost efficiency.
The world after the pandemic will be looking for more robust and secure food supply chains, with restaurant owners being a significant part of the chain.
Home cooking on the rise
The lockdown was a shocking experience and the core of it was innocent at first glance – people were forced to stay at home. This has delivered a lot of anxiety and stress for people who used to go out frequently, as well as disrupted the way people worked. According to the estimations done by the Eurofund, up to 40% of the EU workforce was switched to remote work during the pandemic. Before the COVID hit, only up to 15% of all EU workforce has ever worked from home.
Yet with reducing the need to commute, the time to do something else at home has emerged, with cooking at home being one of the directions to follow. According to the Kitchen Cooking Index delivered by Premierfoods, up to 73% of people enjoyed cooking at home and 91% are planning to cook at home at least at the same level of intensity as they used during the pandemic.
This trend may deliver a shrinkage to the restaurant market, or at least weaken the dynamics of the market development.
More healthy food and dieting
The lockdown was also a time to take a deeper look at the way people live. This has delivered a significant change in the overall look on the healthcare and wellbeing trends. With loudly spoken impact on mental health and anecdotal evidence of people putting on weight during the lockdown, there was an increasing consciousness regarding the importance of healthy food and the benefits of a conscious approach toward the diet.
According to Forbes, 53% of Americans said that they are going to stockpile hygiene products and groceries. Also, due to the reduced physical activity, 28% of Americans claim to eat more plant-based proteins than before, 24% are going to eat more plant-based dairy and 74% are going to reduce their sugar intake.
This trend is also not to be overlooked by the restaurant owners, who need to deliver the food the increasingly aware people are willing to eat.
The shift from phone orders to app-based orders is clearly seen in the app download statistics. According to Statista data, there were 36.4 million food delivery app users in the US in 2019. The number has risen to 44.1 mln in 2021 and is predicted to grow to 53.9 mln by 2023.
The dynamic is breathtaking, with the market expanding by 204% during the last five years according to BusinessofApps. Considering the strong shift toward app usage and the convenience of this channel, it is much likely for food ordering apps to stay.
The rise of dark kitchens
With the rise of delivery and apps to order food, it is not surprising that new restaurant business models emerge. One of the most interesting is the dark kitchen concept – the restaurant that operates in a fully digital model, with no place to serve meals to clients. The food is ordered via digital channels and delivered to the place of destination.
This model brings multiple advantages, including reduced costs of operations and flexibility unseen in the restaurant business. On the other hand, though, the restaurant gains no benefits from the attractive location and the footfall – there is no footfall at all. More about the model can be found in our recent blog post about virtual kitchens, dark kitchens, and the differences between them.
Ordering Stack is a software suite that is fully ready to support operations of dark kitchens and comparable business models as well as boost and digitize the operations of a traditional restaurant.
Summary – the digital food trucks
The history delivers an interesting parallel to the digital ordering systems. Food trucks have been around since the XIX century, nicknamed “roach coaches” mostly for the doubts around hygiene and food quality. Yet the food trucks were around to serve the blue-collar workers near construction sites or warehouses, where people were looking for fast and nutritious food to give them energy for the rest of the day.
With the 2010 financial crisis, the purchasing power of white collars has dropped, forcing them to discover the food trucks with their food for a decent price, making the whole culture of street food more “hip” and fashionable. While from the outside it could have looked like the year 2010 was the invention year of food trucks, the technology and habits were there already, with the crisis accelerating the adoption of new habits.
Actually, the COVID-19 proved to be exactly the same for integrators and digital restaurant tech, forcing the market to adopt new solutions in an accelerated time frame. If you wish to talk more about the tech solutions that will make your restaurant futureproof, don’t hesitate to contact us now!