State Of The Restaurant Industry 2023: An Analytical Deep Dive

The restaurant industry is entering 2023 on a positive trajectory, with revenues projected to reach $997 billion this year. However, my analysis of financial metrics, consumer trends, and tech adoption reveals intriguing opportunities as well as pitfalls for restaurants. Let‘s dig deeper into the numbers.

Steady Growth Ahead Despite Economic Uncertainty

2022 saw the industry’s revenue exceed pre-pandemic levels at $898 billion, recovering from the 2020 slump where revenue dropped to $659 billion. Barring any economic shocks, the National Restaurant Association projects 4.9% growth in 2024 sales.

Revenue Growth Projections

Year	Revenue	Annual Growth
2022	$898 billion	+13.8%
2023	$997 billion	+11%
2024	$1.04 trillion	+4.3%

However, we could see slowing momentum for growth, especially for value-focused chains. With inflation eating into disposable income and bargains enticing budget-conscious diners, average checks may face downward pressure after 2023.

Many companies also continue navigating margin pressures from food and labor. To protect earnings, operators must manage costs ruthlessly, streamline operations, and eliminate waste.

Surging Digital Orders, Declining Store Traffic

Digital ordering for both delivery and takeout sustains massive pandemic-era gains. Revenue from online orders tipped over $79 billion in 2021, soaring 126% from $35 billion in 2019 (Statista).

Uber Eats alone saw 89% more orders and 98% higher gross bookings in Q3 2022 versus pre-pandemic levels. GrubHub, DoorDash and other apps continue aggressive expansion.

However, the pivot comes at a cost – declining dine-in traffic. Data from 48,000+ restaurants shows store traffic down 15% compared to 2019 averages as delivery and takeout gain share (Zenput).

Bleak foot traffic hurts impulse purchases of apps, desserts and drinks. Loss of atmospherics and service interaction also erode brand loyalty over time.

The key question: Can digital convenience and off-premises repeat business offset lower average checks and transaction volumes from reduced on-site dining? Leadership teams are scrambling to analyze this trade-off.

Food & Menu Trends: Comfort, Nostalgia, Indulgence

Menu analysis shows escapist and nostalgic comfort foods dominating orders – led by pasta, pizza, burgers, fried chicken, doughnuts and milkshakes. Dinzil‘s recent Popularity Score index of menu items confirms comfort cuisine surging +18% since 2021.

Brands innovating around comfort classics in 2024 include:

Shake Shack – Korean-style fried chicken sandwiches, bourbon bacon bites
Panera – Biscuit Pot Pie, Chicken & Dumpling soup
Dunkin‘ – Popping Bubbles Dunkin’ Cold Brew, Ham & Cheese Roll-ups

Classics endure, but an experiential indulgence trend also emerges. Consumers increasingly want photogenic, sensory menu items to generate social buzz and satisfy emotional cravings after pandemic deprivations.

Examples include over-the-top Shake Shacks, next-gen hot chicken sandwiches, tableside guacamole, topped waffles, Chinese-Mexican fusion tacos and mix-and-match mini dessert shoots.

Automation Picking Up Steam

Labor constraints accelerate self-service and automation adoption. Ordering kiosks and payment apps minimize labor needs while digital menu boards enable dynamic pricing.

In the kitchen, chains test out AI-powered robotic fryers, burger flippers and coffee makers to sidestep staffing problems. Pizza giants rely on automatedQuality assurance tools like computer vision and predictive analytics help manage the new machine workforce.

POS provider Brightloom found 87% of operators plan increased tech budgets in 2024 – significantly up from 23% last year. Priority technologies span online ordering, workforce management, app-based payments, customer loyalty programs, inventory tracking, cash flow control and security monitoring tools.

Investment seems inevitable. Even amid cash burn, unicorn startups like Cartken ($140M funding), RoboEatz ($100M) and Yo-Kai ($85M) attracted massive investments in 2022 to disrupt kitchen and service operations through automation.

Massive Market Consolidation Continues

The Opentable State of the Industry report signals massive consolidation within the restaurant industry. Their data spanning 7 million diners shows seated reservations closely correlated to brand size and familiarity. Reservations at small and single-location restaurants still lag up to 30% behind chains.

Industry M&A deals also set new records recently. Large chains and investment groups continues their buying spree of struggling smaller brands. Deals exceed $32 billion over the past year, significantly more than the previous 2018 peak of $18 billion (Pitchbook).

Top acquirers include private equity firms like Fortress Investment Group plus mega chains like Darden Restaurants, Bloomin‘ Brands, Brinker International and Yum Brands. They target struggling yet lucrative fast casual and full-service brands.

Unfortunately, this means diners find even more homogenization on Main Street and the mall food court. Regional cuisine gems and mom-and-pop eateries continue disappearing.

Growth Potential in Underserved Markets

Despite the challenges, underserved markets offer expansion potential for lean entrepreneurs.

Hispanic concepts, African and Asian flavors, child-friendly cafes, experiential pop-ups, food halls focused on dietary preferences (vegan, keto etc.) and even food trucks can still carve out a niche. Lesser-impacted towns also merit exploration.

CBInsights data shows 52% of diners want more locally-sourced produce on menus. Emphasizing authentic regional offerings and community roots helps attract patrons looking to support small businesses after the carnage of the pandemic.

Ghost kitchen PROVIDERS with centralized meal prep infrastructure lower the barriers for launching such concepts. They offer plug-and-play commercial kitchens combined with on-demand delivery.

Sustainability Concerns Rising

With climate change and food waste capturing headlines, diners increasingly favor eco-conscious brands. Technomic’s latest consumer survey shows 60% feel it important restaurants use ethically sourced, organic ingredients – though price remains a concern.

In addition to touting green supply chains, operators explore ways to cut food and packaging waste. Refillable containers, right-sized portions, discount "ugly food" selections, per-bite pricing, and AI forecasting to minimize unsold inventory should gain traction.

However, progress feels slow considering the sector accounts for 11% of greenhouse emissions. Policymakers may intervene with taxes and regulations targeting single-use serveware, high-emission beef and penalties on waste. These would slash margins unless consumers accept higher prices for sustainable ingredients and packaging.

The path ahead promises rewarding opportunities but also turbulence for businesses balancing guest desires with profitability. However, by harnessing technology thoughtfully, optimizing operations, understanding shifts in consumer behavior and targeting strategic investments, restaurants can continue serving up great meals while advancing the industry.