What are the Biggest Challenges and Opportunities Facing the Restaurant Industry During the Next Year?

It looks like consumers are cautiously expanding their spending for dining out, which is good news for everyone in the sector. Opportunities exist for those that can continue to deliver great food at a good value. Further, new menu items will keep consumers engaged and provide compelling reasons to make visits. Pockets of opportunity include snacking/day-part expansion, specialty beverage, select better-for-you (healthier) options, and both premium and value menu items. These strategies must be delivered in a way that is consistent and relevant to your consumer to be successful.

That being said, the environment is still very challenging. Continued concept proliferation has given consumers countless choices and has fragmented consumer spending. Many consumers today expect a great deal (and can always find one); competition is fierce on all levels (sharp pricing and offers, higher-quality ingredients, etc.); commodity prices are still a major concern; and the list goes on. Cutting through the market noise and resonating with consumers on a level that builds true loyalty is not an easy task.

What's the Current State of the Industry?

Growth is out there to be had, but there will be winners and losers for sure. Any concept in a turn-around will have a tough go, as it is very difficult to change consumers' perceptions. Also, growth often comes at a price in this sector (e.g., high promotions end up with lower margins) – getting out of the promotions cycle is not easy. Recent market growth leaders are finding a tougher time posting strong growth, but they are still advantaged as they have generally won by having superior products and execution.

What Burning Issues are Senior Executives Facing?

A list of key issues for the restaurant c-suite includes:

  • Delivering signature menu items that are truly differentiated and can drive traffic
  • Identifying where players might have menu gaps, and filling them to give consumers more reasons to buy
  • Developing messaging that matters to consumers
  • Providing great value consistently
  • Knowing when and how much to spend on physical concept renewal
  • Achieving operational excellence (e.g., sourcing, in-store execution)
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