Hosted by Forbes.com senior contributor Alicia Kelso, we are joined by Piper Sandler‘s Nicole Miller Regan, Rival Technologies‘ Andrew Reid and RMS‘ Joel Davis. Our expert panel takes a look at what restaurant trends operators should keep in mind as we enter 2021.
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Alicia Kelso:
Welcome to the newest installment of the webinars series Revenue Stream with RMS. My name is Alicia Kelso. I am a senior contributor for forbes.com where I cover the restaurant industry. I’m here today with a power panel to share the word on the street: What investors and consumers are thinking about dining in 2021. Joining me on today’s call, her name you should all know, Nicole Miller Regan. She’s the managing director and head of consumer equity research practice at Piper Sandler.
Nicole Miller Regan:
Hi Alisha, thanks for having me.
Alicia Kelso:
A familiar face to RMS clients is Joel Davis. He’s the chief strategy officer of Revenue Management Solutions. He’s also an artificial intelligence professor at the University of Florida.
Dr. Joel Davis:
Hi, Alicia, nice to be here.
Alicia Kelso:
Finally, we have Andrew Reid he’s the founder and CEO of Rival Technologies and he’s gonna offer some consumer research to some of the world’s biggest enterprises using voice, video and chat solutions.
Andrew Reid:
Hi Alicia, thanks for having me.
Alicia Kelso:
All right, so this’ll be fun. Today, we’re gonna touch on the macro issues that operators are facing going into 2021 after this unprecedented year. And so Nicole, let’s start with you. We’ve been through nearly three full quarterly earnings reports since the pandemic hit back in March. Are you where we thought we would be in terms of recovery.
Nicole Miller Regan:
Yeah, it’s a great question. I think it’s just really hard to put down a guidepost and say here’s where we were and here’s where we think we would be, because it’s so unprecedented. So I would say it this way, the first thing we had to figure out was how bad is it going to be? And that took a little while to see where are sales gonna bottom out. I mean, never before, did you see doors closed and sales were down a hundred percent. There were zero. I’d never put that in a model before. So very, again, unprecedented but we soon realized we understood, where is this gonna bottom and how are we gonna recover? And then we had to figure out how long. And it was probably the May and June timeframe that we really understood. Okay, we’re looking forward. There’s a path to recovery. That’s the second phase. And then where we are today is to understand what are the permanent behavior changes. So when I think about right now, we’re in a better place. So if things go against us in terms of mobilization and there’s restrictive mandates, we’re gonna know part one how bad, we’re gonna know part two for how long. And so, what we’ll figure out is how has and why has the consumer, if at all changed permanently.
Alicia Kelso:
That’s a good point that we know a little more this time around. So Joel, speaking of recovery, there are a number of brands particularly in quick service that have just thrived as though no pandemic has happened. What do you think their differentiators have been to insulate them during the past eight, nine months?
Dr. Joel Davis:
Well it’s hard to give just one answer to that question. I think, first brands associated with takeout are doing really well. So you can think like pizza and drive through QSR. In general, I think the ones that are thriving are offering food that really travels well. So it’s portable. They also have a strong digital presence, and they’re very familiar with who their consumers are and how their consumers want to use that brand. And they’re staying on top of some of those trends in terms of how consumers might be changing week to week, and even day to day sometimes. I think this is also reflected in how poorly small independents seem to be fairing, versus some of the bigger players. And I don’t think the independents always have the means to make those quick changes in their offering, and spin up a digital offering. And so they’re often at the mercy of delivery companies and those fees that the delivery companies charge. Maybe I will give one exception to that. And that’s the local restaurants that have been able to offer and serve in this portable way this comfort food. Food that people crave during this time when they want that social connection of food and they want to live to eat, which is something we often we ask our customers, do you live to eat or do you eat to live? And a lot of people tell us that this is really an important part of the social fabric. So those brands, those small brands seem to be doing really well, as evidenced by the lineup of the door on some of those places, even during this pandemic.
Alicia Kelso:
Nicole, if we go back to those brands that are healthy and thriving, have you seen investment priorities shift with those brands and do you think those priorities might continue in the longterm?
Nicole Miller Regan:
Yeah, I would say this, there’s a difference of brand, not by investment per se, at the time now, but what they were doing previously. So there’s an ability to be proactive versus reactive. A proactive example, Chipotle, a company owned model, big-time human capital investments, very equal to any financial aspect that they’re investing in, even digital. And not that it’s good or bad, but no franchisees and no debt. So you’re not dealing with landlords, lenders, franchisees, and they’re playing the same playbook or executing the same playbook. They would have been almost irregardless of the pandemic not to say they weren’t disruptive. That’s not fair, but they didn’t have to deal with a lot of what other operators did. And so I think in that case their investments will be the same. There’ll be ongoing, in terms of people, digital and development. Others aren’t ready to make those investments. They’re still standing by, they’re gonna ebb and flow, start and close, close and start. And they won’t be able to get back to their intended 2020 strategy until we probably get through the winter.
Alicia Kelso:
Okay, one thing that you mentioned really stands out with Chipotle as it applies to them specifically ’cause they don’t have debt. So they’ve talked a lot about their Chipotle lane specifically, and that fills in nicely to my next question, which is, are we seeing concepts that have typically relied heavily on urban markets? Are we seeing a shift there because the office worker hasn’t fully returned, or might not fully returned, are you seeing some of those development strategies move more towards suburban markets?
Nicole Miller Regan:
Not yet, but I think so. I think it’s an excellent question, and excellent point of debate because that’s where we’re at. Did the consumer change permanently? If so, how, if they’re not ever going back to the office or not as frequently, do you have a store there? You probably do, but it’s a different type of store. So I think it happens in two phases. Part one, anyone’s development pipeline is 12 to 18 months out. There’s not much they can do or should do to shift that. So it’s gonna be wherever they were going before. But looking past that, that certainly have to ask the question, what does an urban or central business district environment look like? I think people still traffic there, but again differently. So I like to think of it almost as a packaged foods, products kind of umbrella if you will. You have the main Cheerios and then you have honey nut Cheerios, and chocolate Cheerios and cinnamon Cheerios. Starbucks does an awesome job of that. There’s like the structured standalone beautiful Starbucks that we’re used to, but they can have a virtual digital store. And then they can have the big flagship 40,000 square foot roastery facility and everything in between. That’s what you’re seeing from a Chipotle, that’s what you’re seeing from a Shake Shack and all those guys that are thinking about all the variety of formats they can utilize.
Alicia Kelso:
Yeah, interesting. Joel, with that in mind, do you think that these latest regional performance trends and developments, what are some of those, as it applies to what Nicole just said? And can you share some key success strategies? ‘Cause it sounds like that maybe complicates things is to have a big variety of real estate, for example. So what would you pull as a key success strategy as it applies to what she just said?
Dr. Joel Davis:
Well, maybe answering just the first part of your question. I think regions is the wrong unit of measurement at this time. I think Nicole’s right. It’s not so much about which state is doing better than others. As Nicole said, there’s a lot of ebb and flow in performance and those are based on the current restrictions, and the capacity in those regions and of those brands to make those changes. I think the other way to think of it, like Nicole said is urban versus suburban. And there’s not always a bright line between the two, but with so many people working away from work you’re always gonna see the really significant impact on those restaurants that relied on that daytime population. The ones that have been able to make the change in their operations, who were really relying, for example on that business lunch crowd, in that urban development area I’ve seen a lot of pickups. So those places who were able to package their product and serve it to the people who are still living in some of those areas and have done quite well. Other brands have definitely started to suffer.
Alicia Kelso:
Okay.
Dr. Joel Davis:
I think, one thing, even if you think about 12 to 18 months out, and I agree with Nicole, those build-out strategies are very long. I do think it’s worth thinking about those build-out strategies because I think brands are gonna have to be very cautious about an urban build-out strategy that relies on pre-COVID data. And that’s because most of that data is just not very reliable anymore. In fact, it’s not reliable anymore ’cause we just don’t know what the post-COVID behaviors are going to be. So if I was relying on building urban stores 19 months from now, or 20 months from now in an urban environment that needs that lunch crowd, I think I’d be very cautious and I’d look for some other research opportunities to learn more about other consumers may be changing.
Alicia Kelso:
Interesting, especially in such a short amount of time getting all that data. Andrew, let’s shift to you then based on your research that you’ve seen, do you think brands should engage with the different geographic customer segments based on what Nicole and Joel just said?
Andrew Reid:
Yeah, definitely listening to Nicole talk, thinking about, well you’re gonna see the investment thesis maybe shift, on how you think about things like suburban dining as opposed to the traditional investments in urban. But I think both Nicole and Joel make great comments around just that your old data, you can’t necessarily rely on making decisions based off that. You need to be thinking about all of your customer segments and really going to them and thinking about this new normal. We’ve got a new world where health and safety are suddenly a concern the minute that you walk into any establishment where we also have new themes around environmental impact, we’re living in a world where the amount of disposable packaging going through my house on a regular basis has changed astronomically. And that’s starting to really matter to people, then obviously the product itself. So I really am encouraging everyone to think about putting that customer first, and trying to understand holistically and with a continuous mindset because the customer mindset, I think we’re seeing change almost weekly right now. And so for the next while, it’s gonna be about trying to make sure we’re checking in, we’re talking to that customer and we’re putting her at the decision-making table and making sure we’re using that data to make decisions. So yeah, it’s definitely interesting place out there. I think the folks that do put their customer first are the ones that we’re gonna see really emerge as real winners after this.
Alicia Kelso:
Okay, interesting. I’m gonna shift gears a little bit here, Nicole something you mentioned earlier talking about the human capital piece. The incoming administration has prioritized an increase in minimum wage in the coming years. And should that come to fruition, I’m curious to know your perspective on how it could impact an industry the size of the restaurant industry.
Nicole Miller Regan:
Yeah, very important topic. Labor is 30% of most company’s P&L. So it’s gonna have a major impact if you shift those figures especially up when sales are down. But thinking about it and what we just experienced to your point in the last six to nine months, we’ve learned that you have to think as customized 101 as possible and everything’s being done at the local. Not even the state and very, I say very little, but maybe less so in terms of where the change comes from at the federal level. So let’s say it does happen. I think that you’re already seeing restaurants take control of that conversation and essentially those minimum wages at a local level, and they’ve been doing it for some time. I mean, almost everybody we cover. In fact, everybody we cover as well above the minimum wage as it stands today. So it seems to be a very lagging indicator or lagging change if you will. But then there’s also time to pause, and think high level. Structurally there’s much more to a benefit package than just the minimum wage. The starting entry. And so the industry does two things. Number one, it gives a lot of people a first job. And that has to be at a minimum wage. Otherwise the whole entire framework does not work. The second piece, however that the industry has been tasked with and does a good job of, and can always do better is creating, not just jobs, but careers and lifestyles. And that’s where total benefits package comes into play. So I think again, someone like a Chipotle or Starbucks they’re getting good and they’re getting great and they’re getting better at understanding what does the employee want? Yes, they want a certain minimum wage of course but they want opportunity and that comes in many forms.
Alicia Kelso:
Okay, that’s an interesting shift in recent years. I appreciate that perspective. Andrew, and you touched on this earlier with the discussion on the environmental impact that we’re seeing and on the heels of this, minimum wage discussion too. I’m just curious from your research, do you think younger consumers care about what brands are doing and how they’re approaching these macro, social and environmental issues? And if so are these efforts actually affecting their impact or their purchase behavior?
Andrew Reid:
Yeah, I think they do. I think younger generations definitely do care more and more. And it’s an interesting dangerous game. And the fact that it’s one thing to pay lip service. You’ve seen some brands make stances and say things. And when those get stress tested, when something fires up on social media about, something going in the wrong way that’s where the authenticity shines through. So I think the brands that really wanna take a specific stance when it comes to social responsibility, those are brands that, need to sort of, they can’t just say it, they need to do it and they need to do it with a certain amount of transparency so that people really believe it. I think the environmental impact thing is the same thing, there’s a difference between how do I tick the box and be able to publicly say that we’re doing something that matters, versus a company that through and through really cares about social responsibility or really cares about the environment and the impact they’re making. And so I think the ones … that this is a game that if you wanna be involved in and take a stance you need to make sure you’re doing it with a certain amount of authenticity and you’re pushing it all the way through your organization. Nicole’s comment about Chipotle, I think was interesting. ‘Cause that’s where she started it. I mean, it was that supersedes the finance side and a lot of other areas of their business. It’s the human capital that they invest into their people and the culture that they have there. So yeah, it’s definitely something that I don’t think it’s just young people. I think we’re just seeing more and more people become aware of this. And for some folks, this is really, they put their wallet behind brands that they feel are doing the right thing. Not everyone but we’re seeing an increased amount of people that feel that way.
Alicia Kelso:
Okay, interesting. And I don’t wanna, I’d be remiss if I didn’t tap into Joel’s specific area of expertise here, as it applies to that that minimum wage discussion, specifically would a minimum wage increase, in your opinion lead to greater adoption of automation?
Dr. Joel Davis:
Yes, so you probably want some more than that. I always struggled to answer this question briefly because it’s an area that I’m so interested in and I’m so passionate about, but I’ll try to do this in 30 seconds or less. Let me just say that automation is coming no matter what you do with minimum wage and very specialized and narrow jobs are going to get automated first. So whether that’s robots in the kitchen chopping up a salad, which is really terrifying if you think about it, or algorithms, which predict which new menu items should be on the drive-through board as you go through it. And those will be reducing the amount of employment opportunities in those spaces. Now that the simple economic argument here is this, as the cost of automation goes down and the quality of that automation goes up, then the value of the substitute in this case, that’s human labor, goes down as well. So there’s less human labor in that chain. And I think that’s gonna happen in the restaurant industry. I also think, it’s likely we’re going to continue to see this in very unique ways. I don’t believe we’re going to see a new minimum wage legislation come into place and a bunch of layoffs happen in any industry. I think what we will see is as a recession comes along and as layoffs then take place and belt tightening happens in a certain industry those jobs just don’t recover as much. So we see more jobless recovery, and this is not going to be unique to the restaurant industry, I think we’ll see this across every industry.
Alicia Kelso:
Okay, thanks for that. Nicole, I wanna shift back over to you. We’ve seen table service restaurants especially impacted throughout this past year. And we’ve also seen a lot of companies become pretty nimble in response, adding curbside and delivery. And some are even adding, walk-up windows. Do you think that those shifts, some of these changes that those table service chains are making, is that helping with investor confidence?
Nicole Miller Regan:
Oh, absolutely, with investor confidence, sure. ‘Cause every extra dollar you get gets valued and absolutely makes people understand that the consumer intends to eat out and that makes investors feel good and that makes stocks work. So certainly, it goes back to your very first question that you asked me today. I mean, that’s understanding the permanent behavior shifts and this seems to be one of them. So the trick is how much do you invest there to understand what I think at some point the customer also comes back and sits down in that dining room. And so I think these are permanent options that don’t go away or they get better at them. And they live in the future of restaurant dining, but I also don’t want anyone to think that we’re closing down dining rooms permanently. we’ll probably close down quick serve, excuse me, limited service dining rooms for a while. And you saw that even in cases where you could reopen you’d have reopening signs but it didn’t mean the dining room with the drive-through attached was open. In fact, most likely it wasn’t. However, what we see in our own survey work is that, a lot of what Joel says, I mean, Joel taught me, get the data and then figure out what to do with the data and understand it. And those are the two most powerful things I think any company can do today. But that being said, the little bit of data that we work with says, and I even hesitate ’cause Andrew and I were talking the other day, we’re not really looking at teens versus millennials, like generationally ’cause the response to COVID is so individualized. But I will say the pre-pandemic data said, teens they grow up, become millennials, young adults. And they go from limited service to full service. And I don’t think that should surprise anybody and this delays that once again, but it doesn’t change the fact that they will end up eating in the dining room.
Alicia Kelso:
Okay, that’s interesting. I appreciate that ’cause that makes a really smooth transition into my next question for Joel. As we talk about some of the blurring of the generations and some of the blurring of the segments, Joel can you tell me, are dining concepts in your opinion, are they gonna have to adjust their expectations? Because we’ve seen such a huge consumer shifts to ease contactless, convenience, speed. The drive-through is obviously king, and how was that? How are dining concepts gonna have to adjust to fit that consumer shift if at all?
Dr. Joel Davis:
Yeah, I’ll start by saying, I think they have adjusted their experience and some of those adjustments that they’ve made are here to stay. And I think Nicole makes a good point, exactly which ones are here to stay, which ones of those are sticky and how sticky they’ll be. I think that’s yet to be determined, but many of those adjustments they’ve made are not going away. It’s obvious we’re gonna have more people working in more places soon, and exactly how that plays out. It’s just too early to tell. I think we’re going to continue to see innovation especially in that upscale market, with the continued emphasis on making their food portable. I think that upscale market has done a really good job with that. And that’s a channel they’re just not gonna walk away from when this is done. They’re not gonna go down, and go back to just having people in the seats. They’re gonna be exploring all these other channels and growing their distribution in that way.
Alicia Kelso:
Okay, and that was one of my questions is, how will the fine dining, specifically the fine dining segment be affected, is that what you’re–
Dr. Joel Davis:
Yeah, I mean, I think that they’ve already made the changes and in many cases they’ve already made the changes they need to make. The question is how much they need to pull back from some of those changes in the future. As people look forward to going back to that social experience. And then how much does that delivery channel for example, erode the brands, market presence or market awareness does that actually grow their presence, does it grow awareness, or does that erode from who that brand actually is? A social experience where you go and dine with friends, for special occasions. And I think that’s yet to be determined but I would be very surprised if those upscale brands entirely walked away from these new channels that they’ve developed over the last several months. There’s just too much there.
Alicia Kelso:
Okay, Andrew along these lines, have you seen actual brands gain affinity with younger consumers because of the efforts, the convenience and safety efforts that they’ve made in response to the pandemic? And if you can conversely, have you seen any maybe lose ground ’cause they weren’t doing enough based on your research?
Andrew Reid:
Yeah, for sure. I think I wanna just comment on Joel’s, what Joel was saying, which was interesting that, and I’m seeing my favorite upscale brands able to offer cuts of meat and being able to creatively take their supply chain, they’ve been curating for so long and be able to leverage that in a whole new way. So I was saying to my wife the other night, I hope that when this is over, I have this option on, when I’m ordering my door dash from my favorite restaurant where I’m ordering my dinner, and I’m ordering a bunch of groceries at the same time and those kinds of innovations, I hope are here to stay ’cause that is a really interesting way to creatively drive revenue and to take advantage of all that supply chain and keep it going. So, but to your question, you just asked I think we are seeing this new tier of consideration, a year ago when you got your food and your to-go bag, or you went and got your food, are my fries soggy? Are they warm? Are they salty to the right level? Now it’s, first of all, do you pass the safety and cleanliness test and am I comfortable being there? And then the product still has to be good. Those fries still need to be hot. They still need to work the same way. So I think we’re seeing this change, and it’s not just because of younger customers, they’re helping drive a lot of it, but it is more global. And it really just means that the consideration set we have to, there’s more brands have to take on and just the actual product and delivery of the product itself. So that’s what we’re basically seeing right now.
Alicia Kelso:
Okay, well that’s interesting. Nicole, I’ve done so many stories in recent months on the growth of delivery and the dizzying pace at which it’s grown and in some instances and markets by triple digits, and that applies to off-premise in general, curbside, pickup, all of it. Do you expect this staggering growth to correct itself or, I mean, what are your expectations on the other side of this as it applies to that those numbers correcting themselves? Or is it gonna continue to be a material part of these businesses?
Nicole Miller Regan:
A material part, yes but a correction, I certainly hope so. If not, that’s really not good for the restaurant industry. So we have to see a correction. I think we will see a correction. If we don’t, that implies that their biggest rivals the grocery store almost, and we’re gonna eat everything at home, where are you gonna socialize? This doesn’t make us feel any better about going to the mall. And that’s where we socialized before Amazon. And the restaurants didn’t get Amazon because you can’t eat online. At least not yet. But I mean, my goodness we just accelerated trends by three to five years. However, it’s gonna . It has to, I hope it does. And what I mean by that is I hope that customers are out and they spontaneously pick a restaurant and drive-through or sit down and stop in. I hope and believe like Joel and Andrew are both saying we’re experiential, basically behavior is ongoing and where better to do that than in a restaurant. And that’s where you socialize. So we definitely went from experiential to dining, to social distancing. But I think we’ll reverse that trend. That is not to say, we’ll go back to zero in any digital sale, any delivery sale. But I think at some point it will go down a lot like just the opposite of vaccines go up and shouldn’t delivery go down. Something like that I think will happen. And at face value will look like a lot. And I think like everything else that will level set to a normal amount.
Alicia Kelso:
Okay.
Dr. Joel Davis:
Maybe I can just build on something that Nicole said which I think is quite interesting. I actually think that quite often we’re talking about will the restaurant industry recover? Will it get back to where it was? And I don’t think that that should be their target. I think they should be targeting something much higher than that. And it’s because of something that Nicole said, if you don’t remove those other channels if you continue to deliver like Andrew was saying, if fine dining continues to deliver my steak when I really wanna take it and I really wanna eat it at home. And I still crave those social experiences. And I still crave that closeness with others, then there’s no reason why that sit-down dining, at that upscale restaurant shouldn’t be maintained at what it was pre-COVID. And they should have all these additional channels, to bring in the money even post-COVID. So I think people talking about, will it recover? I think if the restaurant industry is not targeting a significant increase in that because they should be taking share from other people post-COVID because that social experience is very real. I think that’s a really important target for them but I don’t think many of them are thinking that now. ‘Cause it’s just too, right now it’s too raw.
Alicia Kelso:
That’s a good point. I do wanna kind of staying informed on delivery and we’ve talked a lot about Chipotle on this webinar. They’re the perfect example here of a chain that is experimenting with higher menu prices to offset high delivery fees. And we saw that during their last earnings, with their profit margins were down. Do you think that this could deter delivery, be the cause of that correction? Or are we at a point now where our consumers are just willing to pay for higher menu prices on top of fees?
Dr. Joel Davis:
Yeah, I think that question was me, and consumers are telling us that they expect to pay something for that service. So similar to the prior comment, I think that’s something you have to watch really carefully and you have to stay, Andrew mentioned this, really close to your customer to understand. That premium is something you need to watch and manage over time. And as the restrictions ebb and flow, you’re gonna have to manage that new normal to see what that pricing gap should be. I think right now those higher pricing gaps are accepted in some markets, not as accepted in others. And so I think you really do need to pay attention to the data, and what your customers are telling you with your ordering patterns, with those delivery prices. It’s a very double-edged sword. You should be able to charge more … consumers say they can charge more. They don’t always accept more. So it’s something you have to measure constantly.
Alicia Kelso:
Okay, interesting–
Nicole Miller Regan:
Real quick, I’m gonna add, it’s how you do it. I mean, listen, Joel is the expert on the pricing advice. I’m only saying what I see out there but I don’t want anybody walking away thinking they just jacked up prices. That’s not what happened at all. What they did is realize that there’s a huge opportunity and the opportunity is, cover your costs in the marketplace. Why not? And push every guest to your own app, keep the relationship keep the data, keep the pricing equal to the store. And then they do special things like put the which is relatively complex versus a salad bowl through that system. So you can only get it one place and that might cost a little bit more, but net net it depends on where you’re going. It determines how much you’re paying or vice versa.
Alicia Kelso:
Yeah, that’s a good point. I’m glad you clarified that because it does seem like a really good solution here for what they’re having to navigate with higher delivery orders. Andrew, based on your research, I wanna know what you’re seeing toward delivery with the consumers that you researched specifically.
Andrew Reid:
For sure. So we’ve done some research recently that showed that 52% of Americans are saying their eating habits have changed, which is no surprise. And the change, opinions are changing so rapidly. So in the middle of the summer we did some pandemic research that showed that 66% of customers are more comfortable grocery shopping and cooking at home versus ordering from restaurants and going to restaurants. But it’s just changing so fast. So this is something that we did, I’m quoting some research that’s from August which in normal times wouldn’t seem that far away. That seems pretty far away now. And so I’ve shared Nicole sentiment that I hope that we do see that comfort level increase with people going back and socializing and dining in. But there definitely is some shifts that are happening. And again, this is where this idea of continuous discovery of continually going in and checking in with customers and doing it in a way where you feel really good about the quality of data that you have is hugely important.
Alicia Kelso:
Okay, Nicole, I’m gonna pick your brain again because of your unique perspective here. What consumer related questions are institutional investors asking you when you speak about restaurant runs? So what are you seeing emerge as their main concerns at this point?
Nicole Miller Regan:
Yeah, great question. I would say one that is probably obvious and then something that might surprise you the obvious is, who’s gonna win and not just survive, but win and take share, it’s as Joel described is exactly what’s going to happen. It’s going to happen for the reason he expressed. It’s also going to happen as a function of some restaurants don’t make it and someone can and should take up that share. Don’t let the grocery guys get it. Don’t let those dollars go back home. So there’s plenty up for grabs. We’re typically talking about at scale global footprint who has the team to get the data, understand digital and do it the right way and who can accelerate development. If you can accelerate development coming out of this, you’re gonna win a lot faster and a lot bigger than the others. The one that may surprise you, however is who’s little, who’s small and emerging. We are in a consolidation cycle that’s only getting amped up in our industry. It started around 2016, consolidation by way of MNA. We lost 30% of the stocks that would be publicly traded in restaurants and half of what are left would be defined as microcap. So investors, it’s very scarce, there’s a scarcity value, a scarcity premium and evaluations and they’re looking for the next generation leaders. So they’re very interested in studying private, emerging concepts.
Alicia Kelso:
That’s great, good to know. Joel, we’ve touched upon the differences between generations and then how they all sort of merged together. But I am curious about something, because we saw a bunch of research pre-pandemic about how the younger consumers, the gen Zs, the millennials were digital natives essentially. And there was a schism in digital adoption between generations pre-COVID. Again, have those younger consumers have they changed their behaviors during this, for example as much as the boomers have?
Dr. Joel Davis:
Yeah, I think what I would say is that everyone has changed their behavior. So the entire marketplace has shifted in one direction. And so I think sometimes we overweight the answers that those gen Zs and gen X givers or survey takers tell us because they’re just so prevalent. They were already in digital. And so they’re just more in digital now but I think everyone has moved more in that direction. For some people, the friction to get there was a lot less. And so they probably did a little bit more early on but I think they’re catching up now. Maybe building on that, I think when you think about the habits of these different segments I think Nicole had that right earlier, I sometimes think it’s too easy to think about the generation Z or X or millennials, and it’s more helpful to consider like she was saying where these consumers are in terms of their timeline, and their life milestones, things like marriage, kids, moving to the suburbs, going from fast casual to fine dining. These are shifts that every generation makes. And I think what we’re probably seeing is a pause for some of those people moving in some directions and an acceleration in other cases. So there is a schism now but I think it’s probably in their timeline of life and how this affects that timeline is yet to be seen. So I think that’s going to be an interesting trend to watch for in the future, is what really happens to those milestone moments, has there been just a pause for a year or have some of these really accelerated? And I think we’re gonna see both in some interesting ways.
Alicia Kelso:
Okay Andrew, I’m curious to know, one of the things that’s kind of stuck out to me during this conversation is that going back to that data and how much there is now, and I think restaurant brands were trying to figure out how to manage all that data pre-COVID. And now it’s almost a mandate. I’m curious from your perspective with that being said, how have you seen restaurant brands shift how they are engaging and communicating with customers because of this?
Andrew Reid:
Yeah, I think they’re having to rethink the experience. You gotta do, this is not for the weak this is definitely for those that are strong and that are willing to be creative and really rethinking overall their offer, the messaging hierarchy you use, of how you communicate with customers. I think that the top of that hierarchy is now cleanliness. I mean, I think the good news for all of us is guess what? That gross, disgusting restaurant that maybe had great food but you had that moment when you get in and you wanna bring your own hand sanitizer out, or your own wet wipes out to clean off, that restaurant’s kinda changed. There’s gonna be a new levels of standard that we’re all gonna have. Are people going to go back and sit shoulder to shoulder pack in the bars, probably but it’s not gonna happen as fast as we’d want it to. I think this idea of community outreach and empathy it’s very important for brands. And again, that is about this whole idea of that we are in this together and this sense of unity and the brands that actually embrace that I think will make a significant impact. And they’ll be able to feel that impact. And I think it’s a very personal experience everyone’s going through. And so the more you can amplify your sense of personalization to your customers, I think you’re gonna see that as a good direct correlation. People are going through something intensely personal, the more they can feel like that brand they care about is giving them a bit of a personal experience. I think you’re gonna see a leading indicator of brands that are gonna win throughout this.
Alicia Kelso:
Well, that’s interesting. Okay, let’s take a minute and go back and kind of summarize some of this. I wanna take a look back at this conversation and Nicole I’m gonna start with you. If you could summarize some of the key takeaways and challenges that restaurant brands have based on what we talked about and other things, as we enter 2021 I’m really curious to know what your thoughts are.
Nicole Miller Regan:
Yeah, it’s still the year of the restaurant. It is all about culture and capital. You have the team, and you have the balance sheet you’re coming out of this. There’s zero doubt, zero doubt. And those are measurable things, ask the right questions you’ll get the right answer and you’ll make the right investment. I don’t think there’s any challenge beyond the obvious. I don’t want to over … I don’t want to not appreciate those challenges and respect those challenges. So be nimble at opening, be nimble at closing would be an example. You gotta do it fast and you gotta do it right. But at the end of the day the only mistake a restaurant can do is giving up those sales that have been seated to the restaurant, excuse me, to the grocery channel. So, that was always 50 50 in terms of the dollar spent on food. It probably got as high as 60, 65% in favor of grocery. And one thing I’m really proud to be, just even as an analyst, part of this hospitality industry is the way the group has really gotten together and said, we are a safe place, come to us consumer. And that could mean going to the guy next door or the concept down the street, just come to a restaurant. The restaurant industry has done that better, or as well if not best or better than any other industry. And what I mean by that is they’re not trying to crawl over each other to get that sale. They’re just saying we can get all of those dollars, when you try cooking at home and you don’t like it so much, come back to us. We’re safe, we’re here for you. We’re gonna be here. And that is the opportunity.
Alicia Kelso:
Yeah, I love that Nicole and I agree. It’s been kind of inspiring seeing some of the comradery, not just with restaurant companies but restaurant adjacent companies. Joel, what do you think? What would you describe as some of the key takeaways and challenges for restaurants going into 2021?
Dr. Joel Davis:
I’m gonna build on something that Nicole said again, I seem to be doing that a lot today, but I think being nimble is really important. Then maybe I’ll pick that apart a little bit and just say, I think that restaurants really need to look at their decision-making processes. That’s every restaurant from really small, to really large, how they make decisions, on what basis they make that decision. So that’s the data that’s out of their registers in their store, but also to Andrew’s point what they’re hearing from the consumer. And they need to be a lot faster and better at integrating all of that information. The people that have, culture was a word that Nicole used. The people that have the culture of making fast decision making based on the data in front of them are going to come out as very strong. And those that don’t will fail to see the shifts in the marketplace as this ebb and flow continues and they’ll fail to capitalize on those shifts. So I think being nimble with the decision-making is a key competency that I think everyone is gonna have to develop.
Alicia Kelso:
Okay, and Andrew let’s finish strong with you. What do you see as the biggest takeaways and challenges headed into the new year?
Andrew Reid:
I think it’s four or five. So one, as Joel said, and we’ve all been saying, remain agile. Two, continue to explore new revenue streams which everyone’s been talking about on this panel. Three, care about the data that you’re collecting about the quality of data. Is there opportunities to get feedback right in the moment? That is when you wanna be talking to people. And it really matters when you sending someone a follow-up survey two days after they had an experience in today’s world does not cut it. You need to be finding ways right then and there in the moment to be getting that. And you really wanna have that feedback. It’s funny when you talk to some, a lot of people, they wanna hear the good things, not the bad things. You wanna make sure that you’re really taking that feedback seriously. And then the last one that I touched on earlier is this idea of maintaining that connection in the community, fostering and nurturing that sense that we’re in this together. If I had a restaurant, I’d be looking at finding ways to keep my customer engaged and ensure that I am listening and learning and being led by them every way possible.
Alicia Kelso:
Okay, well, that’s all I’ve got. You guys thank you so much. This has been a great conversation. I certainly appreciate all of your insights. As for everybody else stay up to date on the webinars series revenue stream on revenuemanaged.com.
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