While the short-term outlook for the U.S. foodservice industry is bleak, research firm Mintel forecasts its full recovery over the next couple of years.
After several years of growth, the industry is expected to decline by up to 30% from 2019 to 2020 following nationwide dine-in bans/restrictions, restaurant closures, job losses, and lowered consumer confidence, according to Mintel. But total market sales are projected to rebound to pre-pandemic levels by 2023, with limited-service restaurants (LSRs) including fast-food and fast-casual restaurants, bouncing back more quickly and representing a notably larger share of the market.
While sales declines will be felt across both LSRs and full-service restaurants (FSRs), the majority of these declines will be driven by the FSR segment, which has been hit the hardest by pandemic-related closures and restrictions. During 2020, FSRs are predicted to see a 39% to 42% decline, while LSRs are expected to decline 13% to 18%.
Before the pandemic, restaurant industry sales were set to outpace at-home food spending and restaurants were mushrooming. COVID-19 turned the industry on its head in just a few weeks, but LSRs are faring better than their full-service counterparts, notes Amanda Topper, associate director of foodservice for Mintel.
“LSRs are offsetting steeper declines with a focus on value. They were innately better prepared operationally because of established drive-thrus, delivery options, and lower price points,” she says. “Prepandemic investments in off-premise technology, including mobile ordering, also set up LSR operators to weather the storm better.”
Topper predicts that dine-in restrictions will shift the focus to off-premise options until the end of 2020. “During the short term, drive-thru, takeout and delivery options will help mitigate sales declines. In the long term (1-2 years from now), continued investments in off-premise dining will help operators recoup sales, but foodservice will continue to be challenged in a recession as consumers cut back on discretionary purchases,” she says.
Food safety, sanitation, and value are top priorities
According to Mintel, two in five consumers are looking forward to going to a restaurant once social distancing measures are relaxed, but there is still concern about doing so. Consumers will demand that operators continue to take safety and sanitation seriously; 42% of diners want to hear about food safety and sanitation from restaurants. Meanwhile, value will be top of mind for thrifty diners, with 68% of Americans constantly searching for restaurant deals.
“Even as dining rooms reopen on a state-by-state basis, consumers are likely to have concerns about dining out and limited budgets to do so. Heightened safety and sanitation practices and value-based promotions will be vital to gain consumer trust and woo back diners,” Topper says.
“While food safety and sanitation were important areas of focus before COVID-19, the outbreak has brought these practices front and center. Ways to continually improve them will be critical moving forward. Even more so, transparency about those measures will help operators welcome diners back, whether on-premise or off. Visual cues demonstrating detailed sanitation programs will be imperative.”
Off-premise set to play a larger role
Even before the pandemic, 22% of consumers were interested in ghost restaurants — those without a physical dine-in location. Now these concepts have even greater relevance. Curbside pickup and walk-up windows are well positioned to alleviate food safety and contamination concerns. Almost four in 10 fast-food diners are interested in walk-up windows at fast-food restaurants and over a quarter are interested in a secure pickup cubby for their food.
“As the pandemic was unfolding, the actions the industry took to maintain business with safety were swift: operational shifts to cashless payment, contactless delivery, curbside pickup, and walk-up windows,” Topper says. “Effective communication of these changes on digital channels was vital to reaching diners.
“Diners will go forward, ordering with caution for both their health and their finances. Promoting takeout and delivery options offer another middle ground where operators and consumers can meet, especially for those who crave the experience of a restaurant meal at controlled costs (e.g. no tipping, pricey beverages) in the safety of their own home.”