The Conversation: Navigating the Current Landscape of the Restaurant Industry
In a recent episode of *America’s Commercial Real Estate Show*, show host Michael delved into the current state of the restaurant industry with CEO Darren Tristano of Foodservice Results. Their insightful conversation provided valuable perspectives on the trends, challenges, and opportunities facing both restaurant operators and landlords in today’s market. Discussions include trends for food service labor, rent-to-revenue ratios, areas for growth in the industry, performance trends, expanding brands, concepts to be cautious of, and tips for both landlords and restaurant operators. This discussion is national in scope, providing insights into the commercial real estate sector nationwide, specifically retail restaurant properties. Given the non-local scope, observations may be less relevant or entirely irrelevant to restaurant properties in Miami or South Florida at large.
Resilience Amidst Economic Shifts
Darren Tristano began by highlighting the resilience of the restaurant industry, noting its ability to weather economic downturns and continue growing. Despite challenges such as inflation and high gas prices affecting disposable income, consumer interest in dining out remains strong. Tristano pointed out that while traffic to restaurants has remained relatively flat, it hasn’t declined significantly, indicating stable demand for dining experiences away from home.
Restaurant Rental Revenue Ratios and Market Trends
Michael and Tristano discussed rental revenue ratios, with Tristano suggesting a likely downward trend due to increased pricing at restaurants. Although nominal sales may rise, real growth remains minimal, making it challenging for landlords to raise rents significantly. Tristano emphasized the importance of understanding market trends and consumer preferences, particularly the growing demand for off-premise dining options such as delivery and drive-through services.
Thriving and Struggling Restaurant Segments
Tristano identified the segments of the restaurant industry that are faring well and those facing challenges. Limited-service restaurants with drive-throughs and efficient delivery options are experiencing growth, while full-service establishments are working hard to adapt and recover. Brands offering value-oriented menus, such as Taco Bell and Dunkin’, are expanding, while mainstream casual dining chains like Red Lobster and Applebee’s are facing closures due to oversaturation and changing consumer preferences.
Opportunities for Landlords and Developers
From a landlord’s perspective, Tristano stressed the importance of understanding the restaurant landscape and partnering with operators for long-term success. He advised landlords to assess the fit of potential tenants with the surrounding market and to consider factors such as traffic patterns and demographics. Building strong relationships with restaurant operators and offering flexible leasing options can lead to mutually beneficial outcomes.
Future Growth and Stability
Looking ahead, Tristano expressed optimism about the industry’s stability, citing a potential easing of inflation and lower gas prices that could boost consumer spending. He highlighted the success of chicken-focused brands like Chick-fil-A and Raising Cane’s, as well as the potential for innovative concepts to thrive in diverse settings such as cruise lines and schools.
Conclusion
As the restaurant industry continues to evolve, collaboration between operators and landlords will be essential for navigating challenges and seizing opportunities. By understanding market dynamics, adapting to changing consumer preferences, and fostering strong partnerships, both parties can thrive in today’s competitive landscape.
The insightful conversation between the show host and Foodservice Results’ CEO provided valuable insights into the nuances of the restaurant industry, offering practical advice for stakeholders looking to succeed in this dynamic market.
About Foodservice Results
Foodservice Results, headquartered in the Chicago market, is a prominent market research and consultancy firm spearheaded by Darren Tristano, former President of Technomic. Leveraging extensive expertise in the foodservice industry, the company specializes in delivering tailored solutions for restaurant operators, foodservice suppliers, distributors, and related organizations.
Utilizing a blend of consumer and market research, Foodservice Results offers clients a data-driven approach to comprehensively grasp industry dynamics and identify growth prospects. With a network of industry professionals spanning various domains, the firm provides unparalleled insights from seasoned experts, ensuring clients benefit from a wealth of knowledge and experience.
Exclusive studies conducted by Foodservice Results include:
1. 2020 Future of Fast Casual: This study offers a five-year forecast for sales and unit growth in the fast-casual segment, furnishing actionable insights crucial for strategic planning and competitive analysis.
2. 2020 Leading Restaurant Chain Industry Report: Providing an in-depth analysis of the top 1,000 chain restaurants in the United States, this report offers invaluable insights into industry trends and performance metrics.
3. 2019 Off-Premise 5-Year Study: Focused on understanding consumer attitudes towards takeout, delivery, and catering, this study provides essential insights into evolving consumer preferences and behaviors in the off-premise dining space.