The Rush by Toast - August 9, 2019

By: Isabelle Hahn

5 Minute Read

Aug 09, 2019

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Welcome to the second edition of The Rush, where we cover notable happenings in the industry. This week's coverage includes the rise of fast-casual and how to stand out in this rapidly growing industry, a delivery acquisition, and shocking news about a popular, seemingly eco-friendly option.  

⏳Here's what you need to know about this week's restaurant trends in 10 seconds or less:

  • Fast-casual concepts are in a much better position for success than full-service casual restaurants in the coming years.
  • DoorDash buys rival delivery service Caviar for $410 Million.
  • The compostable to-go bowls that have been a staple for chains like Chipotle and Sweetgreen contain high levels of hazardous chemicals. 

If you have more time:

How to Stand Out in a Sea of Restaurants 🍽️

  • The restaurant industry has exceeded growth expectations in past years, which could mean that restaurants are chasing too few consumer dollars and headed toward decline. 

  • Fast-casual continues to dominate the market and a recent survey shows that diners are willing to pay more and stay longer at “eatertainment” establishments. 

  • Restaurant chains aren’t safe from closure or changing consumer behaviors, even in this climate of convenience.

Restaurant growth has been inevitable in the United States. According to the National Restaurant Association, projected annual sales in the restaurant industry are $863 billion – that’s 4% of the country’s gross domestic product. But according to food journalist Kevin Alexander and food-service industry analyst David Henkes, a decline in restaurants could be on the horizon. 

Alexander and Henkes cite an overdue recession, restaurant growth exceeding population growth, and generational changes in spending habits as potential causes for decline.

According to the Providence Journal, Subway closed 1,100 locations in 2018 and Starbucks is looking to close 150 under-performing stores this year. However, fast-casual concepts are in a much better position for success than full-service casual restaurants in the coming years, especially in urban markets. According to the New York Post, New Yorkers spend 130% more on food outside their homes than do people anywhere else in the US. Fast-casual and fast-food is all the rage in the Big Apple, partly because of the high number of single-member households.  

So if fast-casual concepts are expected to soar, what other concepts can keep customers coming back? Turns out “eatertainment” venues like TopGolf and Pinstripes are picking up in popularity. 

A quarter of Americans want more venues that offer both an activity and food and drink, and 21% said they are willing to pay more at an eatertainment venue versus a traditional restaurant. Games and entertainment help bring customers into these establishments, but the entertainment value isn’t what brings revenue in.: According to Food Newsfeed, these eatertainment establishments get 75% to 80% of their revenue from food and beverage.

Delivery Updates 🚗

  • DoorDash buys rival delivery service Caviar for $410 Million.

  • The popularity of delivery points continues to grow as Americans continue to favor convenience.  

In 2015, for the first time on record, Americans spent more money at restaurants than at grocery stores. And in 2020, the majority of restaurant spending is projected to move off-premise via online ordering and third party delivery services

Delivery is already a crowded market. DoorDash purchasing Caviar for $410 million proves that competition is only escalating. 

Caviar’s parent company, Square, has owned the delivery service since 2014. Caviar operates in around 15 cities and focuses on delivering food from upscale restaurants. 

Biodegradable Food Bowls are a No-Go 

  • The compostable to-go bowls that have been a staple for chains like Chipotle and Sweetgreen contain high levels of hazardous chemicals. 

Molded fiber bowls have soared in popularity due to the growing awareness and eco-consciousness of consumers. Instead of single-use plastics and styrofoam containers, these compostable alternatives allow consumers to feel better about their waste having a lesser impact on the health of the planet. 

Unfortunately, an extensive investigation by The New Food Economy revealed that all fiber bowls contain PFAS, a troubling class of chemicals with no known half-life. 

These bowls are likely making compost more toxic, writes The New Food Economy, and adds to the chemical load of the very soil and water they were supposed to help improve. 

The potential environmental impacts and health effects of these bowls have not been thoroughly studied.

Why These Trends May Impact Your Restaurant Operations

  • Market Oversaturation: Knowing and preparing for consumer behavior changes is extremely important for long-term success. Since fast-casual concepts are continuing to dominate the market, why not embrace part of their model as a full-service establishment? You don't have to change your entire concept, but updating service practices to get people in and out quicker might be the difference between staying in business or closing your doors as Americans continue to embrace convenience as part of their daily routine.

  • Demand for Delivery: According to Technomic, revenue driven outside of the physical restaurant makes up 44% of all restaurant sales and 25% of those orders account for delivery. Third party delivery vendors like DoorDash scratch two itches: they deliver your food and they help market your restaurant to new audiences and help you expand your brand reach. This acquisition specifically offers an opportunity for upscale and fine dining restaurants to expand their delivery capabilities.

  • Compostable Containers: For now, there is no commercially viable second option for restaurants using the "compostable" molded fiber bowls. The city of San Francisco has announced plans to ban the bowl and there have been no statements from restaurants as to what to do with the remaining supply or what to use as an immediate alternative. This could be a great opportunity for restaurant owners to dive into other sustainability research and practices, like the six types of sustainable technology that help restaurants reduce waste.

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