The Restaurant Industry
The Fourth Wave of Innvovation
The global restaurant industry has been ravaged by a pandemic of near biblical proportions. Coronavirus (COVID-19) is changing the industry in ways we can't yet full understand. Off-premise sales were already over 60% of sales in the U.S., via catering, delivery and drive thru, suggesting a new industry taking shape. Now, it's nearly 100%, because dining rooms are closed. Re-opening an economy has never been tested before, so there is no data on what works and what doesn't, sector by sector. What's clear, is there will be carnage. Tens of thousands of restaurants will close permanently, under their current ownership. What percentage of these will reopen is a guess. It's unknown in part because investors are on the sidelines for now. Because restaurants operate on slim margins, angel investors generally invest based on personal relationships, ego and emotion, not ROI. Now, with a decimated market and unpredictable future, emotional investment gives way to pragmatism. Banks have never been an option, really, unless the enterprise is of sufficient size, and even then, it's a hard to find and fully secured. Private Equity is taking a pause, assessing how discounted the market will become before pouncing on bankruptcies and closures to expand their current portfolio under economically desirably metrics. It's a hot mess!
Prior to COVID-19 -Over the last 100 years, the restaurant industry has grown to become the nation’s second-largest private-sector employer with more than 15 million workers serving more than 170 million customers every day. Early projections indicate that restaurant and foodservice sales in 2019 will exceed $863 billion generated by one million restaurants, of which, 70% which are independent operators. However, 2020 saw a reduction of perhaps 100,000 restaurants and $210 billion in revenue. We all look to the second half of 2021 as the beginning of full recovery, tech innovation being adopted and deployed and new intelligent business models.
The $3 trillion global restaurant industry is massively relevant and vital to all economies. In the U.S. alone, over 1 million restaurants will generate more than $863 billion in sales and employ 14+ million employees in 2020. Restaurants are on the hunt for fresh ideas and new channels to improve sales and maintain margins. They must discover new sales channels and leverage new technologies.
Restaurant operators already suffer from a wide array of business challenges, not to mention any major business interruption (like a global pandemic). Operators must seek technical solutions that address business challenges and change legacy business practices. Operators know that technology is transforming the global restaurant industry and many operators have increased the average annual investment from less than 1% historically, to nearly 3% of sales today. Because of this, they and we, seek solutions that address (a) demand generation (b) labor cost reduction (c) CRM and transaction data and insights; and (d) automation/AI for value creation and efficiency.
Even more impressive is the transformative effects restaurant tech is having on the industry globally, both B2C and B2B. Investors have sunk over $20 billion in restaurant technology startups in the last 10 years and ecosystem of cloud solutions can be confusing.
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