The swift transition from full-service to quick-service models within the restaurant industry

The dining landscape is experiencing a significant transformation, shifting from full-service to quick-service models.

While the impact of COVID-19 has hastened this change, the transition from upscale, sit-down establishments to more affordable, faster alternatives is an ongoing trend. In the year 2022, both emerging and established restaurants adapted their business strategies to prioritize convenience, speed, and affordability, aligning with evolving consumer preferences.

Our data team at Tarci has revealed a noteworthy trend since January 2023: quick-service restaurant openings have witnessed a remarkable 32% surge, while their full-service counterparts have experienced a more modest growth of 7% during the same period.

This data underscores a clear and sustained shift toward quick-service establishments in the food industry. Companies engaged with the restaurant sector should be attuned to the timing and mechanisms of this transformation to effectively market and offer practical solutions.

Now, let's delve deeper into the prevailing trend of the restaurant industry shift.

Driving Forces Behind the Shift

Three key factors are steering the move from full-service to quick-service restaurants: economic volatility, safety concerns arising from COVID-19, and the growing popularity of convenience. Consumers now seek reliable, efficient, and safe dining options, prompting restaurants to provide faster and simpler counter-service alternatives.

• Economic Volatility Fuels Downsizing

Even before the pandemic, economic fluctuations were impacting consumer spending habits and budgets. Unpredictable spending patterns made it challenging for restaurants relying on consistent foot traffic and average check sizes to sustain elaborate dining experiences throughout the year.

While a recession isn't currently predicted by economists, the fluctuating income landscape has prompted changes. For instance, Statista data indicates that over $320 billion was spent in the quick-service restaurant sector in 2022, showcasing a clear year-over-year increase despite inflation and economic swings.

Conversely, full-service establishments faced challenges in attracting customers willing to pay premium prices when disposable income fluctuated. Restaurateurs, during uncertain times, tended to adopt $10-15 counter-service models instead of sticking to higher-priced dishes ranging from $40-60.

• Safety Advantages Highlighted by the Pandemic

The public health crisis necessitated swift changes in restaurant operations, introducing unexpected shifts that were not entirely detrimental. COVID-19 brought attention to existing safety features inherent in quick-service models, which consumers now insist on even post-lockdowns.

Counter-service formats proved ideal for social distancing during the pandemic. According to research by the National Restaurant Association, 54% of adults, including 72% of millennials and 66% of Gen Z adults, still consider take-out or delivery food essential even two years later.

Essentially, safety measures implemented during the pandemic, such as face masks, mobile ordering, and grab-and-go formats, have become industry norms. Full-service restaurants find it challenging to compete with these expectations, and offering pandemic-friendly options is crucial for maintaining their reputation.

• Preexisting Traction of Convenience Models

Prior to the pandemic, quick-service restaurants already capitalized on consumers' desire for speed and convenience by offering consistent menus and efficient ordering through drive-thrus and kiosks. These advantages were further honed through streamlined operational formats.

The pandemic accelerated the adoption of convenience-centered business models and platforms. With convenience firmly established in the mainstream, full-service restaurants face increasing pressure to streamline operations, limit menus, and incorporate quick-service features to stay competitive.

Implications and Opportunities

The shift from full-service to quick-service models presents both challenges and opportunities for restaurants and the companies serving them.

• Addressing Restaurant Needs Precisely

As the restaurant industry leans toward quick-service models, suppliers have the opportunity to assist restaurants in upgrading their capabilities. Full-service establishments transitioning to incorporate counter service or drive-thrus require support in areas such as:

1. New hardware installation

2. Improving kitchen speeds and hiring

3. Balancing dine-in and to-go packaging logistics

4. Distribution channels

Leveraging intelligence on specific small and medium-sized businesses (SMBs) becomes invaluable. Detailed data identifying full-service restaurants poised for quick-service expansion allows suppliers to prioritize local upgrade projects based on precise transition timelines.

For food delivery companies, adding these transitioning restaurants to their service can enhance their offerings. Kitchen equipment providers can target sales outreach to restaurants on the verge of menu changes, while architectural contractors can seize opportunities around building redesigns for pick-up counters. Point-of-sale (POS) partners can highlight modular features to accommodate split guest orders across channels.

This shift is not just about changing how restaurants operate; it's an opportunity to help clients meet the demands of the fast-growing quick-service industry and forge partnerships by strategically navigating this transition.

• Realigning Sales Strategies to New Models

With full-service restaurants integrating counter service, drive-thrus, and other quick-service elements, suppliers need to realign their sales approaches. Updating lead generation strategies to include hybrid brands is crucial. Brands and marketing content should showcase support for takeout, delivery, and streamlined kitchen footprints, especially if the focus was previously on full-service venues.

Value propositions should highlight flexibility to appeal to restructuring restaurants navigating economic uncertainty. As the landscape evolves, suppliers must adapt their strategies to remain relevant and supportive of changing industry dynamics.

• Products Aligned to Fresh Demands

The shift toward simpler menus, smaller footprints, and increased reliance on take-out and delivery is influencing product development and market positioning. Distributors can focus on providing durable, tamper-proof transport packaging. Smallware companies can customize recyclable, disposable containers that combine dine-in and to-go functionality.

There is a growing need for compact cooking equipment that optimizes limited kitchen space amidst parallel dine-in and pick-up flows. Understanding and adapting to these emerging product demands ensures that suppliers stay ahead in meeting the evolving requirements of the industry.

Exploring New Virtual and Delivery Models

While adding counter-service elements is the most common strategy for restaurant transitions, innovative models are emerging, such as ghost kitchens and virtual restaurant concepts. These concepts focus solely on take-out or delivery without traditional dining rooms, and they are gaining traction.

Brands adopting these models aim to maximize off-premise capabilities, from order management to courier partnerships. Suppliers with prior experience in these areas gain a strategic advantage in a landscape that is evolving beyond conventional norms. Restaurants are exploring various non-traditional methods to determine the best fit for their available resources.

Focusing your business around the specific requirements of virtual kitchens and off-site ordering presents an excellent opportunity to build a strong brand identity in any industry that serves restaurants.

The Power of Data in Navigating the Shift

Understanding the implications and opportunities presented by this industry shift is only the first step. The next crucial aspect is identifying specific restaurants in your region that are poised for quick-service expansion. Obtaining insight into individual SMBs in transition empowers suppliers to proactively offer tailored products and services.

• Granular Data on Individual SMBs

Tarci's platform serves as a central hub, providing both high-level trend data on the restaurant industry and detailed information on individual establishments undergoing changes in each area. Direct visibility into specific full-service restaurants showing transition signals enables targeted outreach efforts.

• Actionable Operational Insights

In addition to tracking indicators of model shifts, Tarci gathers ongoing operational details, including software changes, licenses, and staffing dynamics. This wealth of information empowers suppliers to align commercial kitchen equipment upgrades or POS add-ons with actual restaurant transition plans.

• Tailored Partnership Opportunities

Combining industry trends, individual SMB intelligence, and operational specifics allows suppliers to identify partnership opportunities that directly meet emerging client needs. Working with data equips suppliers with the granular information needed.