Roll With The Tides or Let The Tides Roll In
The Good Ol’ Days
It’s Friday and you’re wrapping up a client brief that you’ve been prepping for all week. After a quick meeting with your manager, you text your friends to meet you out for drinks at a rooftop bar before the four of you get dinner at a new restaurant that just opened up downtown (it took you weeks to get a reservation!). As you drive out of the parking lot of your office building, you’re blasting Spotify and excited to start the weekend. Your friends are already waiting for you at the bar and you squeeze past the happy hour crowd to find your friends huddling around a corner table of the roof. You each order a cocktail from the happy hour menu as the bartender comes around to take your order. A few hours later, you all head down the street to dinner and step into a dimly lit Italian restaurant that is bustling with diners ordering their selections off the a la carte menu. The hostess guides you and your friends to your table, you are instantly greeted with your waiter who serves you a complimentary basket of bread to share. He stays at the table a few minutes longer to walk you in-depth through the specials as you each page through the menu. After enjoying a family style meal of pastas and splitting a few desserts, you wrap up your fine dining experience by paying and heading home.
Seems like a decade ago, huh?
Over the past year, dining experiences like this have drastically changed – from the introduction of paperless menus via QR codes to social distancing and capacity restrictions in restaurants. Dining during the pandemic was a limited and not always enjoyable experience. In the harsh winters of 2020, diners were huddled into outdoor spaces with heaters or worked to convert their dining rooms into restaurants by lighting candles and putting takeout on plates to mimic the experience of a Michelin star restaurant. Meal delivery services such as Postmates and UberEats integrated contactless delivery to set a standard for social distancing to limit physical contact and the potential spread of COVID-19. In a fundamentally risk-verse industry, restaurants were faced with difficult decisions and changes to their business models. Coronavirus didn’t force restaurants to adapt new technologies. It did, however, force them to accept change to stay in business and up-to-date with the new and everchanging industry standards. The integration of new technologies is simply a physical representation of accepting the need for change. As the country begins to re-open, many restaurants and meal delivery services are faced with a difficult decision again – whether to maintain the changes to their business model brought on by the pandemic or to revert back to how things were prior to 2020? For many, we believe they will maintain the changes as they have seen an uptick in revenue, reduction in overhead costs, and a new industry standard.
A Stagnant Business Model
Restaurants date back as far as 1100 A.D. in China, with pre-fixe menus being introduced in the 1500s in both Japan (multi-course tasting menus known as kaiseki) and France (pre-fixe family meals known as table d’hôte). The first fine dining restaurant in America was opened in New York City - Delmonico in 1837. The restaurant, the oldest fine dining restaurant in America, temporarily closed its doors in 2020 as a result of the pandemic. The onset of fast food restaurants came with the rise of the automobile industry and highway system, with White Castle being the first to open in Wichita, KA in 1921.
The business model for these restaurants, through the ages, remained similar: guests review the menu, place an order with a waiter which is relayed to the chefs for preparation, and finally the waiter delivers the meal to the table and receive payment. Fast food dining changed this model for where the order is made (at a cash register or through a window while seated in a car) and when payment is given (prior to food consumption). As the pandemic hit, restaurants were forced to assess this longstanding operating environment and in many cases the processes in which customers were informed of food options, required to place orders and make payment, and how they received the food, was altered dramatically.
For restaurants that did not have delivery services in place, they had to integrate technology to ensure that their restaurants were accessible on delivery platforms (e.g., UberEats, DoorDash, Caviar). For restaurants that provided take-out orders, they had to establish practices and policies that allowed for contactless payment (e.g., Square). Many of these technologies were introduced in the early 2000s but were not fully adopted by restaurants until recently. Restaurant owners were reluctant to adapt technologies until the idea of closing their doors was imminent.
Farm-to-Table vs. Risk-of-Closure
Research done by two University of Berkley economists revealed that 17% of independently owned full-service restaurant startups close within its first year of business. In 2020, the 17% stayed consistent, however instead of impacting new startup restaurants, it impacted restaurants of all sizes and shapes – franchise, chain, and independent restaurants. On average, the majority of restaurants that closed had been in business for 16 years. Many small and large food service businesses were forced to adapt or go out of business. It was basic Darwinism – businesses that did not adapt to maintain staff, integrate technology, and adjust menu offerings suffered, while those that were able to move swiftly to adjust for changes in the industry and supply chain succeeded. Some of these adaption techniques included performing analysis of the most cost-effective and accessible menu items in the new business model. The State of the Restaurant Industry Report reported that 35% of customers are more likely to order from restaurants if it offers alcohol beverages to-go. Off-premises alcohol sales represented 10% of sales for restaurants. Restaurants were able to hire back bartenders if offering alcohol as part of their to-go or delivery options. Given this additional revenue stream, many restaurants determined to hire back bartenders if offering alcohol was a feasible option in their delivery model. Thus, many more may be inclined to keep alcohol on its to-go menu if the option becomes permanent in its state.
Customer-defined Business Standards
In addition to modifying food and beverage options, staying in business required restaurants to understand new customer preferences and values of the pandemic world. Human behaviors and acceptance of risk has been drastically different since the pandemic began. Historically, food businesses were not forced by the federal government to follow food health and safety practices. The Food and Drug Administration (FDA) outlines, and updates every two years, the Food Code – a food safety guidance document that cannot be enforced and is outweighed by state, county, and city guidelines. It was up to the discretion of each restaurant on whether they wanted to follow them, or simply live up to local guidelines to avoid being fined by health inspectors. Most consumers were previously unaware of the food safety training and requirements placed on fast food and fine dining employees. As long as the business created a positive vibe (e.g., making sure the menus were clean, removing bad odors, had clean utensils), they would visit. This changed when the pandemic began.
Loyal restaurant customers began calling to ask their favorite food spots to see if they were complying with COVID-19 food safety protocols. Were restaurants allowing contactless pickup or delivery methods? Did management provide their staff with adequate protective equipment? What types of cleaning methods were being used on tables, chairs, floors, bathrooms? Even a deep-dive on consumer preferences from when food safety standards originated based on Upton Sinclair’s The Jungle could not have predicted the increase in consumer drive. Customer and restaurant personnel safety practices dictated whether businesses would gain business and maintaining previous health and safety practices was not an option.
A Human-Driven Experience Must Prioritize Human Behavior
Restaurants have always been a human-centered experience. From when the concept originated in China and France, the goal was to provide customers with their choice of food. As the industry grew, the taste and selection of food was given primary importance and new restaurants and cuisines were created to diversify offerings. However, the pandemic reminded us to not only prioritize the food, but also the ability to adapt to customer’s expectations for the entire experience, including health and safety. This ability to adapt practices empowered certain businesses to succeed and others to fail. As the restaurant industry experienced this past year, businesses will only remain relevant if they cater to the values and experience of their customers – whether that means finding new ways to deliver food or ensuring a safe experience inside the restaurant. As the country begins transitioning back into a new normal it will require continued engagement and awareness on customers’ comfort levels. With social distancing and capacity restrictions being relaxed as a result of increased vaccinations and decreased COVID-19 cases across a majority of the US, what changes implemented during the pandemic will remain is a topic of discussion. Businesses will need to determine which technologies and investments provided effective returns and make strategic decisions to cancel certain processes features that do not affect their business. Given the rise of technology and changes to menu offerings, it is likely that restaurants will maintain many of the changes integrated in 2020. Whether these restaurants will face another pandemic in its lifetime is unknown. However, the ability to for the restaurant industry – and other industries, organizations, and individuals – to adapt and maintain awareness of the end-users’ expectations and preferences is a necessary investment to evolve to stay at the top of natural selection.
 https://www.history.com/news/first-restaurants-china-france  Ibid  Ibid  https://www.smithsonianmag.com/history/crispy-salty-american-history-fast-food-180972459/  https://www.researchgate.net/publication/267695784_Only_the_Bad_Die_Young_Restaurant_Mortality_in_the_Western_US  https://www.businessinsider.com/thousands-us-restaurants-closed-coronavirus-pandemic-2020-12  Ibid  https://fortune.com/2021/01/26/restaurants-bars-closed-2020-jobs-lost-how-many-have-closed-us-covid-pandemic-stimulus-unemployment/  Ibid  https://www.fda.gov/food/retail-food-protection/fda-food-code  https://www.qsrmagazine.com/outside-insights/foodservice-cleaning-and-hygiene-age-covid-19