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State of the Restaurant Industry – My Predictions on Where You Should Focus for 2020

Hey, everybody. Ryan Gromfin here – author, speaker, chef, restaurateur, founder of the RestaurantBoss.com, as well as clickbacon.com And today is what I call the state of the restaurant industry. So the state of the restaurant industry 2020. It sounds all formal, I don’t want it to be formal. I want this to be a fun conversation, I want you to engage and comment and let me know what you think, but this is my opportunity once a year to look into my crystal ball and make predictions about the future, about where things are going, about where I’d be focusing if I were you, about where I’m taking my one-on-one clients, the things that we’re working on. So, this will be a little bit longer than normal, maybe a 10 or 15-minute video, but sit back, relax, and enjoy it because it’s going to be a fun one. I’m going to go back and forth at my notes here, so forgive me if I take my eyes off of you for just one second here, but as we go through these, you’ll start to see some trends for sure, but the one thing I want to remind everybody of is, I am the back-to-basics guy. So through a lot of this, you’re going to hear a lot of this back to basics. If your restaurant is struggling, if your restaurant isn’t making enough money for you to live the life that you planned on when you opened your restaurant, then the first part of this, the technology part of this isn’t going to be the thing that’s going to save your restaurant. If you’re struggling right now, chances are you’re spending too much time chasing bright shiny objects or you’re spending too much time in the weeds doing the work. So again, this first part about the technology might not be the answer, but as we get further down, it is going to apply to everybody, especially those of you that are struggling. So, I just want to preface with. At the end of the day no matter what we talk about here, no matter what trends or anything, there are going to be restaurants that buck all of these trends and are crushing it out there because they are so good at the basics. Whenever I work with or take on a new client or I’m helping someone out, most of the time if they are not where they want to be, if their restaurant is not doing as well as it should be, it’s because of the basics, it’s because of operations, controlling finances, systems, processes, procedures, etc., like that. So, with all that said being the back-to-basics guys, let’s get into the state of the restaurant industry in 2020. So, of course, I’ve got technology on my list as number one. Again, I preface that. Don’t get caught up in chasing bright shiny objects. Technology is going to play a big role, it’s been playing a big role, but more than ever in 2020, it’s going to really play a big role in these areas. Of course, online ordering. Make sure you’ve got online ordering. Even if you don’t take advantage of third-party delivery apps, people are wanting to order online, have their credit card stored in an account somewhere. They’re wanting it to be easier than calling and it’s better for you anyways because then your people don’t have to pick up the phone, but make sure that you’ve got a solid online ordering app for people if you do any pick up to go, or delivery. Self-service kiosks. For those of you that are in quick service restaurants or counter service restaurants, self-service kiosks, the technology has advanced dramatically and when the big guys are starting to do it, you need to get into the game. If you have not been doing McDonald’s lately, check out the self-serve kiosks that McDonald’s have. They are fantastic and I can tell you that a year or two years ago, I hated self-serve kiosks. The technology has improved so much that now when I go to a McDonald’s, I would way rather order from the kiosk than from a person. So self-service kiosks, we’re going to be seeing more and more of that. Curbside pickup. If you haven’t been to a Chick-Fil-A lately, order from their app for curbside pickup. I know like chilies and Applebee’s have been doing this for 20 years, but it was always kind of clunky, it’s getting better. There’s technology out there now where even if you don’t have your own app, people can just hit a button or send a text message or something to let you know they are there. Curbside pickup is becoming a very big deal. For those of you that are in a situation where you can afford to have a custom map built, work on that, or a lot of third-party companies, you can get custom apps white-labeled, where they’re cut… it’s an app, but it’s custom-built for you, but I would highly consider some kind of an app that ties your ordering and your curbside and your pickup and your loyalty and push notifications, and all of that into one. Custom apps, you are no longer too small of a restaurant to have your own app. Of course, third-party delivery. Third-party delivery is absolutely huge right now. You know it, it’s becoming bigger every day, it’s going to get bigger in 2020. It exploded in 19, it’s going to get even bigger in 2020. For some of you, this is a good thing. For some of you, this is a bad thing, but you can no longer fight it, you can no longer say, I don’t want to pay those commissions. Third-party delivery is here. The way that I suggest you take best advantage of third party delivery is to use it as a marketing tool, but in order to do that, you have to have a method of converting a customer to your own customer. So what I mean is, if you’re on one of those third-party delivery companies that are charging 25 or 30%, use them to find new customers, but then, put a postcard or something in with a coupon for the next time they order to order off of your online app, from your website directly rather than through the third party. Give them a discount, but now, they’re going to create an account with you, you’re going to get an email address, you’re going to get a phone number. Yeah, you’re going to give them a discount, but now hopefully, you can own that customer rather than the third party delivery. Unless you don’t offer delivery of your own, which you may not, then you have to consider using the third party delivery companies, but this is very much here to stay and it’s only going to become a bigger part of the business. Now, this last part is going to be very interesting. Some of you will have heard of this, some of you will have never heard of this, but ghost restaurants or virtual restaurants. I put this in my 2019 address and we have opened up multiple ghost restaurants with clients over this past year very successfully. If you are not sure what a ghost or a virtual restaurant is, this is a restaurant where it doesn’t exist. I mean it exists obviously, but it doesn’t really exist like to the public. So there’s two ways to do this. One way is where you literally just open up a kitchen somewhere in an industrial area with low rent, no storefront, and rely 100% on third-party applicator… or third-party deliveries. Another way to do it is to take your current restaurant and add some arms, some extensions to it like. For example, I worked with a client that was mostly a pizza restaurant, but he added… he had hamburgers, he had poutine on his menu, he had like some fish and chips things on his menu, so he added three different concepts. He added a hamburger concept, a poutine concept, and a fish-and-chips concept to third party delivery apps that look like it’s their own restaurant, but really it’s coming from the same kitchen, and he was able to pick up over a thousand dollars a week in sales from each of those individual restaurants without having to do anything. One of those concepts was doing a couple of thousand dollars a week and it was food that was already on his menu, but he just branded it a little differently. So ghost restaurants, virtual restaurants, do your research, this is definitely becoming a thing. Okay, now we’re going to move away from technology a little bit. Unfortunately, staff is going to become a bigger problem than it already is. I know for many of you, staffing is the biggest challenge that you’re facing in the industry right now. Finding staff, training staff, getting your staff to do what you need them to do, but here’s the reality and forgive me for being so honest here, but here’s the reality – staffing is not going to get any better, it’s not going to get any easier and we have to stop blaming Millennials or Gen Y’s or Gen Z’s or Gen X’s or whatever it is. We have to stop blaming them. It is not their fault; they are not people. Some of your restaurants have just not adopted to modern technology to the way that the new generations work. There are restaurants out there, I go back to Chick-Fil-A, go back to In-N-Out that are crushing it in this area. Companies like Uber are having no problem hiring people and keeping them, and I know it’s a different type of job, but that’s your competition right now. The reality is, in this modern economy, you are going to have to fight to find your staff and keep your staff, it is not going to get any better. Gone are the days where you’re just going to put a Help wanted sign up, put in ads on Craigslist and 30 or 40 people are going to apply who are all going to be qualified, that is gone. So here’s what I’m saying about staffing is one) your ability to succeed in this new economy, your ability to have the success that you want to keep your current location operating, operating well, to open up a second location is going to be directly dependent on how good you are at finding, hiring, training, maintaining, leading, and developing your staff. If you are not able, if you are not the best in the world, or the best in your community at finding, hiring, and training staff, you are going to struggle no matter what. You are going to have issues with everything you try to do in your business. So staffing (I am sorry) is not going to get any easier. There are some people who are arguing that when this economy slows down, and I believe we are going to have a slowdown coming soon, maybe not this year. I said it last year, I really do think it’s going to happen in 2020, but who knows. It’s an election year, it happens a lot in election years, but even if we don’t have a slowdown, it is not going to get better. Even if we do have a slowdown, it is not going to get better. Staffing issues are here to stay, you have to be the one that gets better. So, the big thing I would say when it comes to staffing is start looking at daily pay apps or daily pay processes. More and more big companies are starting to implement daily pay procedures. I don’t think the technology is there yet for small independence, it’s there for big companies, but daily pay, if you’re not familiar with this, it’s literally where your staff will get paid daily like at the end of their shift, money will get transferred to their phone via an app for their paycheck. The technology is kind of crazy, I’m not a 100% sure how it works. I’ve interviewed a few of these companies, it’s quite interesting. Like I said, it’s not available yet for independent restaurants, at least not on a large scale. It is available for much bigger companies with like 500 employees, but keep an eye on daily pay, that’s going to be a way to motivate your staff a little bit more. It is not the answer, I’m not here to tell you that’s the answer to it, the answer is better training, better hiring, better systems, better leadership, all the things that I talk about in all of my videos and my training courses, but staffing is an issue and look at daily pay, that’s going to be something that I think is going to make some progress here in the next year or so. Another thing I want to talk about here is specialization. The third thing on my list is specialization. We are no longer looking at generic things in this world, we no longer… look what’s happening to department stores, looks what’s happening to large retail. We want specialization. Look at the food truck revolution that changed the restaurant business forever. Gone are the days… look, there’s always going to be the Cheesecake factories of the world that have huge menus and do well, but though, if you look at the restaurants in your community that are doing the best, the newest restaurants that are succeeding at the highest levels, they are very specialized at something. So if your menu is incredibly wide, I would suggest that you start looking at narrowing your menu and going deeper. Specialize at something, be the best in the world or the best in your community at something. Specialization is going to continue to grow. Think of that example I just gave you about the virtual restaurants. He opened up three restaurants, even though he’s selling the same food that’s on his regular menu, people are searching for hamburgers, they’re searching for poutine, they’re searching for fish and chips and they’re going to have more confidence in a restaurant that only sells fish and chips rather than a restaurant that sells pizza and hamburgers and wings and fish and chips and poutine and subs. So focus on specialization. Number four) And this one’s going to be weird, it’s always been important to me, but it’s becoming more and more important, it’s food safety. Why is food safety becoming more important? Well, like everything else, social media, technology is allowing news to spread faster. dirty restaurants are going to spread faster, challenges at restaurants are going to spread faster. There was a terrible accident at a Buffalo Wild Wings a couple of months ago about some chemicals that got mixed improperly. The debate is still out on what happened there, I have my opinions and other people have their opinions, but the point is, food safety is on my list as something that you have to start taking more serious than you have ever taken it before. Now, with digital temperature logs, digital thermometers, we’re going to see in the next couple years, I think we’re going to see the implementation of certain checklist, certain temperature logs, things like that are going to be required law. Whereas right now, they’re not really required, they’re recommended. I recommend and I teach them, but they’re not required. We’re seeing a lot of bills coming through where these are going to be a requirement, so food safety. fifth thing on my list is sophistication. What I mean by sophistication is our consumer is more advanced and more educated than ever before. Better quality ingredients, better-sourced ingredients, that’s been happening for a while. What I’m talking about is more customization of things like to-go containers. More sophistication on to-go containers, more sophistication on the types of food you’re serving, just sophistication in general. And that’s not reserved for high-end only. I’ve been working with a client who is literally having to-go containers custom-built just for their type of food because they are seeing delivery as a huge trend. Delivery is taking 50% of their business right now and it’s probably going to grow into more so. We need more sophisticated tools, we need better everything to go along with it, so just ask yourself the question of – how basic is everything we’re doing? Where can we become more sophisticated? You are going to need better quality everything all the way through because your consumer is more sophisticated than ever before. The sixth thing on my list is polarization. What I mean by polarization is, we’re moving more to the extremes. So on the health side, we want healthy food that’s even a healthier, we want more of this plant-based food, we want more natural ingredients, we want more organic, we want more local, that is going to keep going, but here’s the crazy part – we’re also going on the other side of big-giant-greasy over the top, you know milkshakes that have fudge and caramel and things coming down the side and cookies coming out of them and all of this ooey-gooey. I was just on the phone with a client earlier today and we were looking at some of his competition in the breakfast area and one of his competition does these insane iced coffee drinks with whipped cream and scoops of ice cream and sprinkles and cookies and they come in these huge mugs with giant straws. So what’s happening is this polarization of everything in the world. Look at politics, you’ve got the extreme left and the extreme right. Nothing is happening in the middle, nobody’s interested in being in the middle. Same thing is happening with food. So, I’m not telling you what side you should be on, but don’t be in the middle. Don’t try to be a little bit healthy, that is not what people want. If you’re going to do healthy, do healthy. If you’re going to do unhealthy, do unhealthy, but get yourself away from the middle, a little bit more than you probably are right now. I know the middle feel safe, but the middle is not where people want to be. The middle is not exciting. Polarize yourself a little bit more. We’re seeing that trend. Now the last thing I want to say is kind of a stretch. My big prediction for the year. I’ve been saying this for a while, I don’t know if I’ve said it publicly, but subscription services. I haven’t quite figured this out yet, I’ll be honest with you. If I do, I will be the first to let you know, that’s why I haven’t written about it much. I haven’t figured it out yet. A few brands have been experimenting with this, but subscription services are becoming very popular everywhere. Of course, they are, look at Amazon Prime. Target’s got their subscription service. I think Walmart has one. Movie theaters have subscription services now for like $15 a month. You got like one movie ticket plus like 20% off of popcorn and drinks and all that, but subscription services. Start thinking about a way that you could include a subscription service in your restaurant. One of my clients has a wine bar and we started a wine of the month program, where people pay like $29 a month, they get a bottle of red, a bottle of white, and then once a month, they come into a party at the restaurant where they can pick up their wine. This has been a massive success for him. He’s had hundreds of people sign up, he’s gone to the point where when he does his pickup party once a month, he has to do it twice a month now and divide his list in half because he can’t fit them all on his restaurant. Not only has it created this incredible pass of revenue, but it brings people into the restaurant in a more regular basis. So that kind of subscription service has worked incredibly well for him. Katz’s Deli in New York is experimenting with a program where it’s all-you-can-eat pastrami sandwiches. A barbecue place here in Austin, the Salt Lick is experimenting with an all-you-can-eat membership for barbecue. I don’t know how to do this yet in the restaurants, I don’t know the answer yet for you, but start thinking about subscription services. And there’s two ways you can do this. You can either do it on your own, or there’s an app out there called MealPal. MealPal is only available in a few cities, but I think you’re going to start to see more of those third-party apps like MealPal, where they’re going to go out to your restaurant, negotiate pricing with you, and in exchange, they’re going to bring business to you. And what Mea Pal does, I think it’s like $8.99 per meal or like $6.99 per meal. You basically pay on a monthly plan and I think you get like 10 meals a month or like 12 meals a month that are pre-paid for and you could pick from any of the restaurants in the city that they operate. So very similar to like what a Uber eats or a GrubHub on the delivery side is doing, which kind of brings me to the point where I want to wrap up today’s video. I know this got a little long, but I think this is so important about. Again, this restaurant industry, the state of the restaurant industry in 2020. We are going to see more and more of these third-party applications. The companies that have the money, that have the technology, that have the ability to develop these big technology companies like Uber eats, like DoorDash, like GrubHub, like this MealPal, like Amazon. They are going to continue to eat away at your margins, They are going to continue to eat away at your margins, what’s happening is, people are looking at food differently than we’ve ever looked at. With so many good restaurants out there, we’re looking at food from a standpoint of either I want an experience or I just want food. The polarization, again, either ultra-fine dining or some kind of experience, like there’s all these bocce-ball places that are opening up restaurants, there’s ax-throwing places, there’s a restaurant called culinary dropout by Fox Restaurant Group that are spreading like wildfire. They’re opening up all over the country, but they have ping pong tables and corn hole and live music, and they’re these huge fun restaurants and bars, and we love going as a family. My kid loves to play corn hole and we could have fun and we could sing and dance and just have this great time while we’re eating. So, we’re moving more toward experiences exponential restaurants or utility. Just give me my food. The problem is, if you’re on the exponential side, that’s great, but if you’re on the just-food side, if you aren’t unable to produce very good quality food at very controllable, very reasonable prices, you’re going to get squeezed out, you’re in the middle, you’re going to get squeezed out. The restaurants that are going to make it as we make this shift are going to be the ones that can turn out a lot of food really effectively, really efficiently at really good prices because they can take advantage of all of these third-party apps without their margins getting squeezed too much. The ones that are getting squeezed the most are the ones that don’t have those experiences, don’t have the playgrounds, don’t have the ultra-fine dining, right? Your good old everyday family-style restaurants, QSR’s etc., where you’re still relying on a lot of staff, you have a complex menu, it’s difficult to execute, it’s difficult to operate. You need a lot of management, but then as you start losing business to these other companies, as you start getting on DoorDash, as you start getting on Uber Eats, as you start getting on some of these subscription services like MealPal, they’re all going to chip away at your margins. This is what happened in the retail world. Look at Amazon, right? Amazon came along as a book company, but now they sell everything, but they’re so big that literally, most companies are having to sell their products, even though they sell them on their websites, they’re having to sell them on Amazon because that’s where people are looking to buy stuff, but then the problem is, they have to give so much margin to Amazon. Amazon’s the one making all the money in this. So what the retail companies are doing to fight this is they’re getting very specialized. The retail companies that are going to survive either in brick-and-mortar or online are getting very specialized, are focusing on customization, are focusing on one narrow area, where if someone wants your product, they have to go directly to you to get it, they’re not going to go to Amazon because they can’t customize it and things like that in Amazon, so they can maintain their margins. So where I want you to really be thinking kind of the theme of all this is, whether it’s the technology of the specialization or the polarization or the membership model or of all the things that we talked about here, what I really want you to be thinking about is, where are you going to fit into this newer world that we’re creating? Where are you going to be distinct? Where are you going to be unique? Where are you going to be original? Are you going to be utilitarian? Are you just going to turn out one type of food as fast as you can at the best price possible and make the most money off volume? Or are you going to be in that very specialized world or that very exponential world? The places that I’m afraid that are going to struggle the most are the ones that are kind of in the middle, that are just providing good food at a good price, but there’s a lot of staff, we haven’t taken advantage of automation, we haven’t taken advantage of a lot of the technology, it’s a complex menu, so we need a lot of kitchen and a lot of management, we have a lot of training issues. Your margins are going to continue to get squeezed. I hope this wasn’t too somber of a video. I’m actually… what’s crazy is, I’m actually more excited about 2020 than I’ve ever been because I think the rules of the game are getting clearer and clearer. So the only question is going to be, who’s going to adopt, who’s going to open up in this kind of new world, and who’s going to continue to play by the old rules, and you might struggle, but I’m more excited about the restaurant industry in 2020 then I have ever been. I hope that showed through in this video. I feel like maybe it got a little depressing there with some of the realities of it, but here’s the thing, this is going to be a great year. I’m here to help with anything you need. That’s my overview on the state of the restaurant industry of 2020. I think it’s healthy, I think it’s strong, I do think we’re going to see a slowdown in the economy. I think that’s going to be good for most restaurants. Those of you that do a great job, those of you that are excelling, those of you that are kind of following some of these rules, you’re going to do better in an economic slowdown because you’re going to pick up on some of that business that was going to those other restaurants, but there’s going to be that bottom 10% of restaurants that are just going to disappear when this economy slows down, that’s just the reality of it. I hope you enjoyed today’s video. Tell me what you think, tell me your thoughts on this. Put some comments below. I look forward to hearing more and getting into a great conversation with you regarding my vision for the state of the restaurant industry in 2020. Have a wonderful day. I hope you enjoyed this week’s training video. If you haven’t subscribed to our channel yet, would you go ahead and smash the like button right up there, so you can get notified every week when we release a new free training video. I’ve also gone ahead and put a couple of videos for you here and here that I think you’re going to enjoy. Remember, systems create freedom, freedom creates value and value creates scale. Manage systems, develop people, and be awesome.

17 thoughts on “State of the Restaurant Industry – My Predictions on Where You Should Focus for 2020

  1. Lots of interesting predictions and true insights but daily pay has to be the most fascinating to me. Seems like a thing that should have happened a long time ago, that restaurant owners can really attract talent with this benefit. The idea that people get paid once a month is bonkers the more you think about it.

    Also, I never thought we would see it, but there will be an squeeze in restaurant business just like with retail. Most simply will not make it due to pricing. Very sad but inevitable.

  2. Awesome advice! I’m building an ice cream business over on my YouTube channel. This vid gives my confidence I’m going in the right direction. Thanks!

  3. Starting a restaurant this year, and have watched all you videos, you make me feel even more confident in my choice.

  4. Awesome video, thank you for posting! I definitely felt the one about being specialized very early on before I opened Pasta Dal Cuore. It always felt like too many places were trying to be too many things to too many people, like they were casting too wide a net. Also, I was severely humbled by my lack of experience in cooking all things, but I knew I was good at pasta! Please keep posting more amazing videos, I really appreciate your insight and experience, and the way you communicate so much of it! Would love to see more videos about leadership issues… sometimes I feel like I'm not the greatest at keeping up the energy, or sustaining my strength when everything seems to be going wrong several days in a row 🙁 That said, I am grateful that we are still here, and that folks like you are talking about our kind of issues on such an easily accessible platform!

  5. Nice content, but how many 3rd party apps can new restaurants be able to sustain? With a 7-10% profit margin how can a new restaurant or even an existing one be able to pay for all these services that will take a percentage of your sales?

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