The U.S. restaurant industry and the real estate it occupies are being reshaped by fundamental industry shifts including the rapid growth of third-party, meal-delivery services, increasing adoption of in-store automation, and the ongoing proliferation of fast-casual concepts, according to a new report from CBRE.
CBRE’s report highlights eight trends, also including the spread of small-format, “eatertainment” concepts, to examine their impact on the food & beverage sector and its real estate. Restaurants now account for 17 percent of U.S. retail sales, more than any other retail sector, and restaurant sales growth has outpaced overall U.S. retail sales gains in recent years.
“Changing customer tastes and the influx of new technology is reshaping the restaurant business and in turn retail real estate,” said David LaPierre, Vice Chairman with the Global Retail Services Team at CBRE. “Fast-casual eateries are now the biggest retail players in the restaurant segment, especially in highly trafficked areas of Manhattan.”
Spencer Levy, CBRE Senior Vice President with the New York Tri-State Region Retail Advisory & Transaction Services Group, added “Technology has helped transform the restaurant business both inside and out. Delivery apps such as GrubHub, Uber Eats and DoorDash have created a more robust customer base, while kiosk, tablets and tableside ordering have changed the eating experience.”
Here is a look at a few of the trends examined in the report, as well as their impact on retail real estate.
Delivery: The New Drive-Thru: Third-party delivery services are claiming a growing share of the meal-delivery market, to an anticipated 70 percent in 2022 from 58 percent last year, according to one measure. The restaurant industry, in turn, is experimenting with strategies to mitigate the cost of these services, which sometimes are high enough to make certain meal deliveries unprofitable for restaurants. A possible solution: enticing more customers to use restaurants’ in-house delivery apps, platforms and services. Another: Sharing more data about orders with third-party delivery services in exchange for revising the price of delivery more in the restaurant’s favor.
With delivery service growing rapidly, restauranteurs and chains are designing their locations with separate areas – and sometimes separate entrances – for meal pickup so as not to inconvenience dine-in customers.
Tech Resets The Table: More food & beverage establishments are embracing technology to streamline their front-of-house services and better manage their back-of-house operations, like inventory. A recent National Restaurant Association survey found that more than half of restaurants responding planned to invest in more front-of-house tech, and many plan the same for their back-end work.
Many national chains have installed hardware such as kiosks, tablets and tableside ordering systems to automate their meal-ordering process for customers. It is anticipated that this technology will help restaurants rein in their labor costs and perhaps reduce space dedicated to queuing customers waiting to make their orders.
The Fast-Casual Frenzy: The fast-casual format – better quality fare than fast food, relatively quick service, and lower prices than full-service restaurants – has dominated restaurant expansion in recent years. Nearly four in five restaurants opened by top-500 chains last year were fast-casual eateries. The challenge for retail-center owners will be to select the right fast-casual operators for their center and avoid loading up on too many.
Eatertainment Goes Smaller: Eatertainment concepts that combine food and beverage service with live and virtual sports already have populated many suburban malls and freestanding locations. Now several operators are testing smaller-footprint concepts to crack urban markets to capitalize on the constant customer traffic generated by densely packed populations of residents and office workers. Topgolf, Dave & Buster’s and Punch Bowl Social are among those experimenting with smaller formats.