2017 Restaurant Industry Predictions

Will 2017 be the year of DNA diets, delivery bots, seat-less restaurants, and high-tech vegetables? The year that food halls flood the market and Steve Ells is ousted as CEO of Chipotle? When our new president tosses the economic coin in the air, how will it land — with a Trump slump or a slam dunk?

We all love predictions. Most of us probably can’t forecast our co-worker’s lunch order, but we’re more than happy to predict what the next big thing might be. But this year is trickier than most for crystal ball-gazers.

Searches for “2017 forecasts” reveal an interesting pattern: Most of the confident predictions were written prior to the U.S. election. The estimates that have come out since offer little more than a watered-down predictions potluck.

While delivery drones aren’t likely to blanket the skies – nor is cricket flour likely to go mainstream – this probably will be the year in which high-end chefs discuss dirt, insects, garbage, and copy-machine food (i.e., pizza that’s designed and “cooked” by a 3D printer) all in an effort to improve their image. 2017 might not be the year in which “restaurant algorithmists” are in high demand, but big data scientists and artificial intelligence experts will begin to carve a niche in the restaurant industry — forging new career possibilities for the future. It’s also a year when space food (having undergone a makeover from the days of Tang and Spam) will take on a new look, complete with a denser nutritional profile and legions of Silicon Valley fanboys.

1.    THERE ISN’T A “RESTAURANT RECESSION” NOW. THERE WON’T BE ONE IN 2017, EITHER.

Talks of a “restaurant recession” have recently sent everyone in the industry — investors and restaurateurs alike — into a frenzy. Google searches for the term spiked dramatically over the last year, reaching their peak in late October. But a look at the data reveals the media hype machine doesn’t have the whole picture. Consumer spending at restaurants continues to increase — in fact, spending on food away from home now surpasses spending on food at home. The pie continues to grow larger, though the slices of that pie are now harder to measure.

Pockets of the industry, particularly low-tech chains, are struggling. But that’s because they’re fighting an outdated war against the wrong enemy — while some are busy copying what fast-casual chains are doing, they blinked and missed the rise of food trucks, meal kits, delivery services, and more. In other words, people are still going to restaurants — but they’re eating at other places (in new ways), too. 

2.    TRUMP WILL REMAIN IN THE HEADLINES; MINIMUM WAGE AND OVERTIME WILL GET SIDELINED

In an interview with NBC's Chuck Todd, PEOTUS Trump said he wants to keep the minimum wage “pretty much where it is right now.” A federal minimum wage increase will likely be sidelined under the new administration, and some economists are predicting Donald Trump’s U.S. presidential win will be so “yuge” it’ll grow the global economy.

In any event, the revved-up U.S. economy – coupled with already low unemployment rates – will make for higher restaurant labor costs and struggles with recruiting and retention.

The result? Fewer staff, cutbacks on hours, less training, and, therefore, poor service in low-price-point, full-service restaurants. A spike in commodities could set off a wave of bankruptcies for debt-laden, low-check full service restaurants, though commodities are expected to remain stable over the next couple of years.

3.    DELIVERY WILL CONTINUE TO DOMINATE BEYOND DOMINO’S (DUH)

We’ve all been inundated with news about UberEats, Postmates, Caviar, Amazon, and even high-tech chains (Domino’s, in particular, has unveiled a slew of new ways to deliver pizzas). Eventually, innovation will mean more than simply clicking your way to a Shake Shack delivery. The tech and restaurant industries are currently sowing the seeds for further progress — like delivery via drone, autonomous vehicle, and even 3D printer.

Venture capitalists are certainly wise to the potential of delivery: Since 2012, meal delivery and grocery delivery startups have raised more than $8.4 billion cumulatively. To put it in perspective, that’s more than all of the restaurant IPOs of the last 16 years, combined.

4. TECHNOLOGY WILL BREED NEW CAREERS IN FOODSERVICE

Foodservice, one of the world’s largest industries, is lagging behind in terms of technology. But investments in advanced analytics aid consumers in terms of experience enhancements. Just look at McDonald’s digital menu boards, which are smart enough to display only hot food on a cold day. It’s a benefit to operators, too, in terms of cost optimization (people tend to order more food from a kiosk than they would from a person, for instance). This continued emphasis on tech will inevitably lead to new foodservice careers in the future. Expect “restaurant chain algorithmist” to be a covetable job by 2020.

Of course, there are still plenty of restaurants — chain and independent alike — that remain misaligned, misinformed, and inadequately prepared to prioritize the implementation of tech in their business. Like a cat being snuck up on by a cucumber, many chains will continue to turn their backs on advances in technology — until they get scared silly by what’s been next to them all along.

5.    HEADS WILL ROLL; BANKROLLS WILL GROW

The turnaround of McDonald’s is hinged, in part, on its organizational redesign. Two of the five biggest stressors in life are getting a new job and moving, and McDonald’s is doing both: restructuring their organizational structure and uprooting their headquarters from the ‘burbs to downtown Chicago in a bid for relevance.

And then there’s Chipotle, which has seen sales, traffic, and revenue decline since its well-publicized food safety scandal of 2015. The chain was slow and smug in its response to the disaster, and remained unfocused and tone deaf with its new burger concept. All this blood in the water has attracted some big sharks hungry for redemption, including activist investor Bill Ackman, who amassed a 9.9% stake in the burrito behemoth and is expected to knock some sobriety and serious accountability back into the chain. Though a legal battle â€” and changes to the board â€” are in the works, co-CEO Monty Moran's torch had to be sacrificially snuffed in order for the chain to move forward.

6.    (ALMOST) EVERYTHING WILL GET SMARTER

It won’t happen overnight, but the Internet of Things will make its way into everything from our vegetables to our proteins. Cows and cucumbers are already being tagged with wearable devices, after all. These innovations will allow for developments in sourcing and traceability —a plus for consumers and operators in a post-Chipotle E. coli world.

Kiosks and tablets might be nothing new, but there’s more on the horizon, thanks to tech — like artificial intelligence, which is already making waves in foodservice. With Starbucks recently unveiling an innovative “conversation ordering system” powered by AI technology, it’s only a matter of time before facial recognition software makes its way to drive-thrus and dining rooms around the world. 

7.    NEW KINGS WILL BE CROWNED

Everyone — the media, consumers, and investors — is searching for the next Chipotle. In 2017, the new breed of fast-casual darlings will take the national and global stage. The success of salad chains Sweetgreen and Tender Greens (which have a sense of authenticity that’s been lost at Chipotle) proves that “fresh” remains the most bankable word in foodservice. Sweetgreen alone has received more than $90 million in equity funding, the latest indication that food-tech hybrids have taken on the stale status quo.

8.    URBANIZATION AND SOLO DINERS WILL FINALLY START TO RESHAPE THE RESTAURANT REAL ESTATE STRATEGY

In 2011, the rate of population growth in urban centers was greater than in the suburbs — and urbanization has only intensified since, throughout the globe. This population migration has led to areas now clustered with retail and entertainment options, a fact that’s complicated restaurant real estate and given rise to automats and food ATMs.

Chains with smaller footprints will dominate in the future and, thanks to the rise of solo dining, restaurant prototypes will be reimagined. A growing percentage of households – 29 percent — is single, a segment that spends significantly more per capita than married couples. Because no one wants to eat in a crowded dining room alone, we’ll begin to see reconfigured restaurant designs: ones with smaller dining rooms, more bar space, and more high top seating.

9.    FOOD HALLS WILL GAIN MORE FAVOR, BUT NOT NECESSARILY NEW FLAVOR

Thirty or 40 cities around the world will get awesome new food halls this year. The projects have a lot of potential, as both the American food court and Asian hawker centers were sorely in need of a makeover. But as popular as food halls are with the media, they’ll snag more headlines than dollars in 2017.

10. UGLY INGREDIENTS WILL FIND LOVE

Ugly vegetables are finally finding the love that’s long been withheld in favor of good-lookin’ GMOs. As more consumers learn it’s not just what’s on the outside that could be good for them, restaurants are incorporating imperfect produce into their menus and confronting the problem of food waste head-on.

A mainstream audience might not be ready for it, but even ugly water is getting a makeover. While we won’t see sewage water on Whole Foods shelves in 2017, we will hear more about a push to hydrate consumers using recycled wastewater. Both the world’s richest man and one of the best actuaries in the world (made famous in The Big Short) are betting on it.

11. GLOBAL DEMAND IN F&B INVESTMENTS WILL INTENSIFY

Despite the massive amount of venture capital interest in the food space, there’s still pent-up demand. Tyson, the world’s largest meat processor, just launched a $150 million VC fund with an eye on meat substitutes. VCs have been devouring food startups at an astounding rate. One of the most notable — Blue Apron — is expected to go public this year.

Another company gearing up for an IPO, Airbnb, could also have implications for the food world. With its expansion beyond home sharing, Airbnb could redefine culinary tourism (and put pressure on reservations apps like OpenTable in the process) by offering experiences like truffle hunting or beer tasting with locals. Space food is getting VC interest, too — meal replacement company Soylent has snagged at least $20 million, a bulk of which came from Andreessen Horowitz.

Just as the smartphone reshaped communication (a trend that newspapers certainly didn’t see coming), technological advances are rapidly reshaping the foodservice industry. While some of the above might sound like science fiction, game-changing technology has already become the norm for some major food brands. The question is simply how long it will take the rest of the industry to catch on.

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ABOUT THE AUTHOR:

Aaron Allen is a global restaurant consultant and the founder/CEO of Aaron Allen & Associates, a leading global restaurant industry consultancy specializing in growth strategy, marketing, branding, commercial due diligence for emerging restaurant chains and prestigious private equity firms. Aaron has personally lead boots-on-the-ground assignments in 68 countries for clients ranging from startups to multinational companies posting in excess of $37 billion. Collectively, his clients around the globe generate over $100 billion annually and span six continents and more than 100 countries. 

This article is part of the LinkedIn Top Voices list, a collection of the must-read writers of the year. Check out more #BigIdeas2017 here.