Restaurants are one of the fastest growing sectors of the retail industry, accounting for 15 percent of all retail spending. In 2015, restaurant sales surpassed grocery sales for the first time on record. But just because the industry is experiencing growth doesn’t mean there aren’t growing pains—both new and established restaurant brands are finding that, though consumers may be eating out more frequently, they might be doing it differently.
Today’s on-demand culture is causing restaurant disruption just as it is in the rest of the retail industry. With an onslaught of delivery apps available, restaurant brands are rushing to compete in the sphere, focusing not just on delivery but also on providing the right product for delivery. Some brands are experimenting with delivery-only outlets, picking up smaller, strip-center real estate that offer little or no sit-down options.
Celebrity chefs used to focus on high-end dining only, but with a change in consumer demand, they’re diversifying their concepts. Celebrity-chef fast casual and takeout options are becoming commonplace as investors take note that a younger generation prefers to dine out more frequently but to spend less money when they do.
Food Halls - One Size Doesn't Fit All
Food halls have been generating a lot of buzz, but the
concept, just like its predecessor, the food court, doesn’t work everywhere. Food
halls can be hugely successful in urban environments with lots of lunch
traffic, in high-density retail areas and near major transportation hubs. But
the concept isn’t a guaranteed traffic driver on its own, so investors must
proceed with caution if they don’t already have the demand for dining options.
While Americans continue to increase spending on dining out, restaurants face rising competition from new and existing players looking to grab a piece of the growing pie. Success and growth in the sector over the next 5-10 years will depend on the restaurant players’ ability to differentiate their offer and cater to the consumer demand for convenience, authenticity, and choice. Expect to see diversification of concepts and delivery approaches among established national and regional chains, alongside growth in smaller, independent concepts that appeal to consumers’ interest in all things new and different.
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