Back on the menu: After steep declines, US foodservice industry set to rebound to pre-pandemic levels by 2023

July 29, 2020
  • The foodservice industry is expected to decline by up to 30% from 2019-2020.
  • Limited-service restaurants (LSRs) will weather the storm best.
  • Walk-up windows and ghost restaurants set to play a larger role.

The latest research from Mintel, the expert in what consumers want and why, shows that after several years of growth, the foodservice industry is expected to decline by up to 30% from 2019-2020, following nationwide dine-in bans/restrictions, restaurant closures, job losses, and lowered consumer confidence. Looking ahead though, Mintel predicts total market sales to rebound to pre-pandemic levels by 2023, with limited-service restaurants (LSRs) including fast food and fast casual restaurants, bouncing back more quickly and representing a notably larger share of the market.

While sales declines will be felt across both LSRs and full service restaurants (FSRs), the majority of these declines will be driven by the FSR segment which has been hit the hardest by pandemic-related closures and restrictions. During 2020, FSRs are predicted to see a 39-42% decline, while LSRs are expected to decline 13-18%.

Amanda Topper, Associate Director, Foodservice said:

“Pre-COVID-19, restaurant industry sales were set to outpace at-home food spending, new restaurants were opening at a rapid pace and operators were challenged by a labor shortage to find and retain workers. In a few short weeks, the global pandemic turned the industry on its head, forcing a complete reset. LSRs are offsetting steeper declines with a focus on value. They were innately better prepared operationally because of established drive-thrus, delivery options and lower price points. Pre-pandemic investments in off-premise technology, including mobile ordering, also set up LSR operators to weather the storm better.

“Dine-in restrictions will shift the focus to off-premise options in the short- and medium-term (end of 2020). During the short term, drive-thru, takeout and delivery options will help mitigate sales declines. In the long term (1-2 years from now), continued investments in off-premise dining will help operators recoup sales, but foodservice will continue to be challenged in a recession as consumers cut back on discretionary purchases.”

Food safety, sanitation and value are top priorities

According to Mintel, two in five consumers (40%)* are looking forward to going to a restaurant once social distancing measures are relaxed, however, there is still concern about doing so. Consumers will demand operators continue to take safety and sanitation seriously, as 42%** of diners want to hear about food safety and sanitation from restaurants. Meanwhile, value will be top of mind for thrifty diners as 68%** of US diners say that they are constantly searching for good restaurant deals.

“Even as dining rooms reopen on a state-by-state basis, consumers are likely to have concerns about dining out and limited budgets to do so. Heightened safety and sanitation practices and value-based promotions will be vital to gain consumer trust and woo back diners.

“While food safety and sanitation were important areas of focus before COVID-19, the outbreak has brought these practices front and center, and ways to continually improve them will be critical moving forward. Even more so, transparency about those measures will help operators welcome diners back, whether on-premise or off. Visual cues demonstrating detailed sanitation programs will be imperative,” continues Topper.

Off-premise set to play a larger role

Even before the pandemic, a sizable percentage (22%)*** of consumers were interested in ghost restaurants – restaurants without a physical dine-in location – and now these concepts have even greater relevance. Curbside pickup and walk-up windows are also well positioned to alleviate food safety and contamination concerns. Almost four in 10 (37%)**** fast food diners are interested in walk-up windows at fast food restaurants and over a quarter (27%)**** of fast food diners are interested in a secure pickup cubby for their food (where they type a code, then grab food and go).

“As the pandemic was unfolding, the actions the industry took to maintain business with safety were swift: operational shifts to cashless payment, contactless delivery, curbside pickup and walk-up windows. Effective communication of these changes on digital channels was vital to reaching diners. Diners will go forward, ordering with caution for both their health and their finances. Promoting takeout and delivery options offer another middle ground where operators and consumers can meet, especially for those who crave the experience of a restaurant meal at controlled costs (eg no tipping, pricey beverages) in the safety of their own home,” concludes Topper.

*2,000 Internet users aged 18+, May 28 – June 4, 2020, Mintel’s Global COVID-19 Tracker – US
**According to Mintel Reports US, Restaurant Marketing Strategies, June 2020
***According to Mintel Reports US, Dining out in 2020, Dec 2019
****According to Mintel Reports US, Quick Service Restaurants, April 2020

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For the latest in consumer and industry news, top trends and market perspectives, stay tuned to Mintel News featuring commentary from Mintel’s team of global category analysts.

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