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Delivery is driving restaurant industry growth, but that growth is slowing

Delivery is a game-changer on steroids for the restaurant industry, altering the rate and manner that brands grow and thrive. But two Technomic executives presenting at May's NRA Show also added that the rate of growth across foodservice appears to be slowing a bit from previous years.

July 10, 2019 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

If there's a single industry influencer for QSR leaders to keep their eyes on, it might well be delivery and all the industry offshoots surrounding it, according to a pair of Technomic executives speaking at the National Restaurant Association Show in Chicago in May. Delivery is a key force driving industry growth now, according to Technomic Managing Principal Joe Pawlak and Executive Vice President of Development Patrick Noone. 

That said, restaurant industry growth does appear to be slowing a bit across service sectors. For instance, the Technomic executives pointed to the fact that sales growth for the top 500 U.S. restaurant companies for the most recent year slipped to 3.3%, compared to the average 3.8% for the restaurants in the last five-year period.

"Off-premise is affecting everything," Noone said, echoing many others presenting at the nation' largest restaurant show. 

Joe Pawlak of Technomic sees restaurant growth rates slowing.  (Photo: Elliot Maras)

In fact, the increasing importance of delivery to restaurants' bottom lines has prompted brands to explore more transit-friendly packaging, they said, a fact recently also highlighted by Foodservice Packaging Institute President Lynn Dyer in an interview on the QSRweb podcast. 

Similarly, the prevalence and popularity of restaurant delivery is also now causing chains to reconsider their store designs to include a separate entrance for delivery drivers. And restaurants are also investing more in technology, both for the front- and back-of-house, Pawlak said. 

"Tech appears to be the new battleground," he said.

In addition to technology, the top chains were investing in menu bundling and LTOs to improve their traffic, Pawlak said. In the past five years, the number of LTOs has grown 64%.
The best-selling LTOs feature novelty items, Noon said. He offered KFC's pickle-fried chicken sandwich as an example. Other favorites items included diet- and flavor-centric items with broad appeal, as well as "best-in-class" items.

As examples of each of those categories, he said a diet-focused LTO might something like the iced coconut milk mocha macchiato offered at Starbucks, while those focused on flavor might include something like the cheeseburger omelet, IHOP featured. Meanwhile, a best-in-class offering might be a "Dunked Ultimate Chicken Sandwich," like that offered at Sonic.

Noone also said that plant-based food has taken on new importance on restaurant menus, as its popularity has gone beyond the vegan and vegetarian audiences. Likewise, entertainment in foodservice settings has also gained favor. Pawlak added that 20% of restaurant guests indicated that they preferred entertainment for group-meal occasions.

"The consumers never had more choice," Noone said.

Growth slowing, even in fast casual

While the fast casual segment continues to outpace other segments, Pawlak said the double-digit growth that fast casuals have posted in the past has tapered. The fast casual sector posted an 8% sales gain in the past year, compared to an average 9.8% gain for the past five-year period. 

Fast casuals became the key foodservice sector beginning around 2008, Pawlak said, following a period that full service restaurants dominated. But today, consumers want more premium items and service from their fast casuals, Pawlak said. 

Quick-service has also continued to gain, but like fast casual, just not as much as in previous years. Both the quick-serve and fine-dining segments posted a 3.1% gain for the past year compared to an average 3.5% gain for the past five years.

The midscale restaurant segment sustained its 2.2% average five-year gain in the last year, while the casual dining segment posted a 1.1% gain compared to an average 2.1% gain for the five-year period.

"We're on more of a maturation today on a total industry basis," Pawlak said. "They're slowly declining their accelerating growth." 

This is especially noteworthy given the fact that the economy continues to be strong, he said.

Performance varies among biggest players

Around the limited-service sector, performance varied considerably, with Chick-fil-A leading the heap with 13.5% growth, followed by Starbucks at 8.3%, Taco Bell at 5.8%, McDonald's at 2.4% and Subway at -3.6%.

Full-service brands also posted mixed results last year, Pawlak said, with Olive Garden on top with a 3.7% one-year sales gain, followed by IHOP at 3.5%, Applebee's at 2.3%, Buffalo Wild Wings at -1% and Chili's Bar & Grill at -1.5%.

The Top 25 chains outpaced the Top 100, posting around a 4% gain over one year.

Feature photo: iStock

Editor's Note: An earlier version of this story appeared on sister site, fastcasual.com. 
 

About Elliot Maras

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Elliot Maras is the editor of Kiosk Marketplace and Vending Times. He brings three decades covering unattended retail and commercial foodservice.