The restaurant’s industry has undergone numerous changes in the last ten years.
This is partially due to new competitors arising, new technology, and changing consumer preferences. But it means that investors need to particularly alert when determining how to make a profit with this asset type.
The Quick Service Restaurants Industry Is Not What You Think It Is
Overall consumer spending on restaurants industry has increased by 40% since 2009, with fast-casual restaurants experiencing the highest growth rate at 127%.
Fast-casual restaurants fall under the definition of quick service restaurants.
Technically QSR restaurants also include fast food restaurants like McDonald’s as well as casual dining chains like Applebee’s. However, the specific term “fast casual,” refers to a sort of hybrid that falls somewhere between a fast food and a casual dining restaurant.
Fast-casual restaurants combine an inviting, sit-down atmosphere with the convenience of fast food. The menu is diverse, and they often serve organic, high-quality ingredients. Salads may be hand-tossed, bread is not white bread but artisan loaves, and each restaurant offers a menu highly unique to their particular brand.
The ambiance of a fast-casual restaurant also differs significantly from a fast food restaurant. Interiors are upscale and offer a soothing design specific to each restaurant.
Chipotle, for example, favors industrial style restaurants with an emphasis on brick walls and stainless steel. Panera Bread, on the other hand, features plenty of warm wood and with a midcentury modern palette of colors and style.
Consumers Seeking An Authentic Food Experience
Consumer preferences have changed over the years, with consumers seeking healthier foods, in particular organically grown, often locally sourced foods and products that are eco-friendly.
Restaurant owners have also begun including gluten-free or paleo menus in order to attract the large percentage of consumers in these specialty niches.
Following the success of Chipotle’s and other fast casual restaurants that serve ethnic foods, more restaurants are expected to adapt menus with unique flavors or ingredients, as diners seek authenticity.
In fact, more flavor fanatics are willing to put their money where their mouths are and indulge in foods that boast authentic, traditional flavor.
These customers also place a high value on all-natural, artisanal, low-fat foods, which means that restaurants industry with this trifecta of characteristics is likely to be more profitable than your average fast casual restaurant.
Consumers Decide Between Convenience And Experience
The trend of fast casual is unlikely to go away anytime soon. However, it will continue to evolve as the desire for convenience vs. experience affects where consumers choose to spend their dollars.
Some consumers will still enjoy trying new places to eat out, tempting taste buds with unique dishes. Others will continue to choose convenience over newness, which opens up the market to groceries willing to add fresh food to their inventory.
Indeed, the grocery store industry has already hopped on this trend; sales of prepared food at grocery stores and convenience markets total $51 billion in 2016.
Home Delivery Will Continue To Gain Steam
E-commerce, in particular, Amazon, has trained consumers to expect fast, reliable delivery service, and the restaurant industry is no different.
Some owners are turning to the newest technology to meet this need through delivery robots, while others have contracted with third-party delivery services.
Although how owners satisfy this demand may differ, there is likely bound to be a surge in technologies developed to manage multiple platforms, allowing owners to serve multiple delivery zones with a minimal amount of time and expense.
Restaurants Industry Will Strive To Deliver Dynamic And Memorable Experiences
Retailers have discovered that creating experience-based retail is one of the most effective ways to encourage customers to spend more at their store.
Not surprisingly, the same holds true for restaurants industry as well.
Instead of focusing on just food and drinks, owners are pushing the envelope by offering younger consumers new, diverse ways to experience dining. Mississippi-based Newk’s Eatery, for example, lets consumers in behind-the-scenes, allowing them the opportunity to see the preparation of any item on the menu.
Utah-based Sub Zero Ice Cream’s stores let users custom create their own ice-cream flavor; waiters then freeze the ice cream using liquid nitrogen directly at the table – clouds of smoke and all. It’s a memorable experience that keeps consumers coming back time and time again.
Other restaurant owners have capitalized on the Instagram craze, by creating eminently photographable food works of art.
These socially savvy restaurants know that by providing unusual, sometimes fantastical dishes (like the “kitchen sink sundae” filled with 18 scoops of ice-cream, four oversized brownies, four gigantic chocolate chip cookies, and toppings, courtesy of Florida-based Sloan’s Ice Cream) is good for business.
While many restaurant owners have revamped their business strategies, there is still room for growth in the industry.
While it is still wise to be selective when choosing a franchise or stand-alone QSR, there are plenty of owners who are rising to the top and willing to fight fiercely for their share of the market.Tags: commercial investment properties, Quick Service Restaurant, restaurants, restaurants industry