Insights and Resources

5 business trends restaurants are facing in 2021

Restaurants struggle with profitability and handling labor shortages

INSIGHT ARTICLE  | 

Authored by RSM US LLP


What are the top issues and opportunities trending for restaurant businesses this year? From delivery and technology needs to labor challenges and profitability concerns, there’s much on the table for owners and operators to address.

Delivering on consumer preferences

As we emerge from pandemic restrictions and seek normalcy in our daily lives, consumers will trek back to on-premise dining. People continue to want the convenience of someone else preparing their food, while also craving the social interaction and overall experience of dining out. However, consumers have also grown accustomed to the convenience of off-premise dining, whether via delivery or curbside pickup. Restaurant operators who may have rushed to implement temporary bolt-on technology or engaged a third party to provide delivery through the initial months of the pandemic, will need to optimize their strategy going forward. Efforts done early on in the pandemic were often implemented as quickly as possible to allow for survival in a difficult cash flow situation. On a longer-term basis, however, technology solutions, together with modified operating models, need to be adjusted and right-sized to allow for profitability, as well as sales generation. At the same time, consumers’ expectations will rise. Unfriendly technology and off-premise surcharges tolerated during the pandemic will give way to expectations of effortless online ordering with well-executed delivery providing quality food at a reasonable price point.

Investing in technology

Off-premise dining will continue to be an important part of most restaurant operations, regardless of the segment of the industry. Optimizing operational efficiency and cost effectiveness needs to be a top priority as it will be a critical success factor moving forward. Technology will play an important role across the operation and those with the foresight and capital to invest will be the best prepared for success.

Curbside pickup has become widely accepted and offers a more cost effective off-premise solution than third-party delivery platforms. With the appropriate technology, ordering and payment responsibilities reside with the guest, minimizing stress and additional cost to the operation. It also provides the operator better control over the product the guest receives if kitchen capacity is managed effectively, something diners seem to understand and appreciate. Likewise, a digital strategy managing supply chain and inventory will be equally important for operators in 2021.

Profitability: From struggling revenues to recovery

COVID-19 has taught many operators that they can be more profitable producing less revenue. In 2021, data analytics will help operators analyze optimal operating hours, staffing needs and menu planning.    

Expanding kitchens to accommodate peak off-premise demand without affecting dine-in service will be critical for some concepts. Continuation of family meals and other creative menu planning will also be critical to retain market share. Some restaurants will struggle financially through this difficult time of uncertainty and recovery. They will need to leverage low-interest loans, government aid or debt restructuring to improve cash flow for an eventual forward motion to recovery.

The labor dilemma

Labor will continue to be a significant challenge for restaurant operators in 2021. Record high unemployment should provide an ample labor pool to draw from over time; however, many U.S. workers were hesitant to return to work, creating near term staffing issues for many operators. Costs are also likely to rise. Training costs to replace workers who do not return and to ensure all workers understand new safety protocols established during the pandemic will be incremental to most operators; and potential new labor policies, including an increase to the minimum wage, will place additional stress on the bottom line. Operators must use data to understand traffic, operations flow and more to determine appropriate labor strategies. Understanding the labor needs of the business and then finding qualified employees will be more important than ever.

Mergers and acquisitions: Ramping up

Restaurants should expect investment in the industry to ramp up in 2021 as stressed brands look for financial partners to help them survive in the near term and evolve their operating models to accommodate permanent shifts in consumer behavior. Savvy investors will bargain hunt for struggling brands and seek to capitalize on shifts in the competitive landscape across the board. Competition for guests, talent and real estate will be at unprecedented lows as we continue to emerge from the pandemic’s impact. Those prepared to take advantage will be in prime position to succeed. 

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This article was written by RSM US LLP and originally appeared on 2021-04-26.
2020 RSM US LLP. All rights reserved.
https://rsmus.com/what-we-do/industries/consumer-products/restaurant/5-issues-restaurants-face-in-2021.html

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