From Farm to Smartphone to Table: What Entrepreneurs Can Learn From the Shifting Dining Industry
Updated May 22, 201811:00 AM
We all know business in the internet age is rapidly evolving, and perhaps this is no more apparent than in the food industry. (The clothing industry, too, is undergoing huge changes and shifts.) Hungry customers want convenience, speed and quality when mealtime rolls around. Smartphones have caused seismic shifts in the restaurant world, and one one of the biggest is customers’ desire to enjoy restaurant-quality food at home -- either via delivery of a meal prep-kit or via courier service from a local restaurant.
When diners do go out to eat, it’s overwhelmingly to patronize a “fast casual” establishments -- think Chipotle, Panera Bread or Smashburger -- that offer higher quality ingredients than fast food chains but skip the table service. These days, transparency is also a deciding factor for dinner: Diners want to know where the ingredients came from and who prepared the food (if they can see the kitchen staff at work, so much the better).
We’re exploring these culinary-industry trends so entrepreneurs like you can apply key learnings to your own small business.
Fast, cheap & good
For a long time consumers have had to pick two of three sides of the quality triangle -- fast, cheap or good -- but never all three at once.
Pick any two
You can have fast and cheap food from the drive-through, but it won’t be that great. You can choose fast and good at your favorite neighborhood bistro, but it comes with a higher price tag. Or you can opt for cheap and good by cooking at home for yourself, but that’s going to take some time and effort.
Is it possible to have all three? That’s the conundrum that meal box companies like Blue Apron, HelloFresh, Plated and Sun Basket are attempting to solve. Meal prep delivery companies, which tout their non-processed, fresh ingredients and a a variety of choices, are thriving across almost all income levels in the U.S. Depending on the service, the price per serving in a box is anywhere from $5 to $10.50 or more, and delivery in a refrigerated box comes once per week on a day you specify. The convenience factor is hard to pass up, especially when combined with farm-fresh ingredients. Craving a wholesome meal that’s quick to whip up without leaving your house? Dinner is served!
Move over, pizza. Today’s there’s plethora of restaurant delivery options available thanks to UberEATS, Seamless, DoorDash, Caviar and the newest competitor, Amazon Restaurants. Now diners place an order from their smartphone and enjoy their favorite restaurant meal delivered straight to their door. Customers love it -- but is it a good deal for restaurateurs?
The downside of delivery
As of June 2016, delivery sales accounted for 7% of restaurants’ total revenue. A report from Morgan Stanley estimates this number could soon reach 40% of all restaurant sales. While many delivery services say they are adding value to the restaurants they pick up from, some restaurant owners view delivery as detrimental to their bottom line.
In an interview with the New Yorker, Michelle Gauthier, restaurant owner of Mulberry & Vine in Manhattan says, “We know for a fact that as delivery increases, our profitability decreases.” Why? Because the courier service is eating away at the restaurant’s already tight profit margins.
The basic budget structure for operating a traditional restaurant has been roughly 30% of revenue to ingredients, 30% to labor and 30% to everything else -- utilities, rent, overhead, insurance, marketing, profit, decor. With courier services charging around 20% commission paid by the restaurant, it’s difficult for restaurants to do more than break even on delivery orders, which also require special packaging.
Goodbye fine dining, hello fast casual
Another significant shift restaurant owners are tracking is the growing preference for fast casual dining over the fine-dining experience. In the past year, 70% of consumer spending was directed toward the nice-but-not-too-fancy option. Is fine dining becoming a thing of the past? Megan Garber writes in The Atlantic, “Now … the emphasis is on the back of the house rather than the front — food is the focus — and restaurants that try too hard on the ‘fine’ front read as stuffy and thus outdated.” While fine restaurants are on the decline, food trucks, farmers markets, lunch counters and other “accessible” eateries (with kitchens viewable to diners) are on the rise..
Also impacting restaurants’ bottom line? Higher labor costs, a tight labor pool, the cost of rent in large cities and expensive ingredients.
What can small businesses take away from these dining trends?
Today, when people go out to eat, their focus is on authentic connections -- with their dining companions, the servers and chefs, and, of course, with the food itself. Small business owners across every industry can benefit from recognizing this desire for a meaningful, unfussy experience.
Take away #1: Make quality experiences easy
We know today’s diners have plenty of options for enjoying a beautifully glazed salmon fillet with roasted potatoes and asparagus -- sitting in a restaurant, having it dropped off by a delivery service or making it themselves from a meal kit. The lesson here is that it’s critical to meet your customer where they are to give them the quality experience they crave.
For the accountant, perhaps this means adopting DocuSign capabilities so your clients can review documents and provide a signature on the go instead of having to drive to your office. For designers or consultants, this could mean creating a simple, web-based login for your clients to review your work remotely. For everyone, it means keeping a laser focus on a streamlined, efficient and delightful customer experience. (You can read more on this topic right here.)
Take away #2: Be authentic and as transparent as possible
Always assume that your customer is savvy when it comes to shopping around, researching the best deal and knowing when they’re being treated fairly. Just as diners want real food with traceable provenance, your customers want to know that you are fair, authentic and consistent when it comes to delivering high quality products and services. Bottom line: Keep your promises. (This article sheds more light on the importance of brand authenticity.)
Take away #3: Enhance the digital experience
Hungry customers rely heavily on their devices for booking reservations, finding nearby eateries, placing grocery orders, splitting the check with friends, Instagramming your brunch, counting calories and leaving a review on Yelp. Of course, device-dependence goes far, far beyond satisfying culinary cravings, and small business owners should make sure their customers’ online experience is straightforward, seamless and satisfying. (This article has tips for building a great website.)
Take away #4: Amp up the soulfulness and let your humanity shine
There are many ways to simply and genuinely connect, human to human, without being unprofessional. Value your customers’ time and their support of your business by offering a respectful, warm and memorable business exchange. (Want tips on how to keep customer relationships positive even when something goes wrong? Read this article.)
QB Community members, what are your observations about the shifts happening in the dining industry?