The National Restaurant Association’s (NRA) 2016 Restaurant Industry Forecast predicts that restaurant industry sales will reach $783 billion this year. Although this number represents the seventh consecutive year of real growth in restaurant sales, the rate of growth remains only moderate for the nation’s second-largest private sector employer.
According to the June 2016 BDO Benchmarking Update, the restaurant industry struggled to maintain flat to positive same-store sales during the first quarter of 2016. What’s more, many attribute any increase to higher menu prices rather than traffic growth. Looking ahead, the industry could be significantly affected by Department of Labor’s new overtime rule that goes into effect December 1, 2016.
According to the new rule, salaried employees earning less than $47,476 will automatically qualify for overtime, a significant increase from the previous threshold of $23,360. The new rule could force restaurants to pay millions in additional salary to managers while looking elsewhere to trim dollars to make up for the cost. It will be interesting to see which proactive measures the industry takes to restructure their exempt positions in light of the change.
The condition of Georgia’s restaurant industry is better than that of the nation. According to the Georgia Restaurant Association (GRA), Atlanta’s first quarter restaurant sales volume grew an impressive 3.5% over the same period last year. While half of all national restaurants reported negative sales trends in the first quarter, 71% of 109 independent Atlanta restaurants surveyed by Black Box Intelligence, a research firm tracking the restaurant industry, reported positive comparable sales.
To achieve consistent positive growth, restaurants will need to offer the most innovative products and services with a high value proposition. With that in mind, here are a few trends we’re seeing in the national and local Atlanta restaurant scene.
Trend #1: Tech-Savvy Diners
From reading reviews and making reservations to receiving discounts and paying for meals, today’s diner is tech-savvy and deal-conscious. To remain competitive, restaurants will need to stay ahead of the technology trends. For example, small, cost-effective devices called “beacons” use Bluetooth connections to communicate with customers’ mobile phones. Many restaurants are using this technology to drive the customer experience with customized marketing messages, such as special deals and coupons.
Consumers are also getting used to paying the most convenient way, whether it is by using mobile wallets that store credit and debit card information or by using rewards programs. That means restaurants need to consider apps that can connect to mobile wallets.
Emerging technologies allow restaurants to customize the dining experience by using data that allows them to remember the customer’s preferences or even track a customer’s location to ensure their food items are ready when they arrive.
Two examples are Table 8, which allows customers to purchase reservations at trendy restaurants, and Table Savvy’s technology, which allows restaurants to fill tables by offering a discount. These and other technologies can provide a competitive advantage when it comes to attracting diners. However, the easy access and free flow of information on online review sites can present a mixed bag for restauranteurs as they balance great reviews with those that reflect bad experiences by vocal diners.
Trend #2 – Technology for Better Business
Technology is not just for customer interface—it also allows restaurants to create efficiencies in managing their inventory, scheduling employees and reducing overall costs. GRA’s allied partner, Orderly, does this by using technology to streamline the restaurant ordering process.
Through Orderly, operators can order ingredients and supplies on mobile devices when making purchasing decisions for their restaurants.
Another GRA partner, Barmetrix, uses “combinations of technology, process, information and training to maximize inventory and service experience,” while Easy CO2 taps innovative technology to eliminate loss through kitchen ventilation and product loss.
When considering how to allocate technology dollars, restaurants will need to assess the costs and benefits of available software and hardware and whether to purchase or use a subscription, such as Software as a Service (SaaS). Restaurant owners should also determine whether to purchase hardware or back up to a cloud-based system.
A variety of off-the-shelf analytics tools are available to run general analytics on labor, inventory, food cost, menus, customer behavior and social media. While restaurants are spending 2.5% of their revenue on technology(1), 44% of attendees polled at a BDO Restaurant CFO Roundtable held earlier this year said they plan to increase their tech spending from 1% to 5% over 2015. Restaurants also plan to continue their focus on controlling costs through strategic inventory and labor management, as well as leveraging technology to drive higher profit margins(2).
Trend #3: Convenience Made Easy
Speaking of convenience, international food and restaurant consultant Baum + Whiteman expects a revolution in high-speed food delivery to homes and offices (think Amazon Prime Now, Grub Hub and UberEATS).
According to Baum + Whiteman,“Tech-driven delivery is 2015-2016's Big Disrupter of food retailing and food service; it’s aimed at the ultimate consumer convenience ... food brought quickly to homes, offices and (why not?)” hotel guests.”
The rampant use of smartphones to find a restaurant, order, pay and get loyalty points without ever speaking to someone, is driving this growing trend. Amazon's Prime Now app can get entire menus delivered in one hour. At the same time, Amazon has partnered with Fresh Nation to deliver food from farmers’ markets directly to homes.
Using technology to get food in customers’ hands more quickly – whether at the drive-thru or in the restaurant – was a focus of Atlanta-based Chick-Fil-A. The company’s Innovation Center designed and implemented the use of tablets in their drive-thru lines to speed up the process of moving approximately 95 cars through between noon and 1 p.m. More recently, Chick-Fil-A launched its own app (Chick-Fil-A-One) that lets users order, pay and skip the line at the register for fast food pick-up.
According to the GRA, there are approximately 12,000 restaurants in metro Atlanta. As new technology and trends emerge in the coming years, area restaurant owners and operators will likely adopt change if it means improving their bottom line and allowing their businesses to run more efficiently. In addition to technology, issues including local sourcing, environmental sustainability and convenience will all continue to play an important role in the future state of the restaurant industry.
For more information on Smith and Howard's hospitality industry accounting, please contact Christine Ratliff, CPA, at 404.874.6244.