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2021’s Most Important Restaurant Industry Trends

Technology impacts just about every industry under the sun. And the restaurant industry is no exception.

New software and hardware is transforming how food is prepared, served, and delivered.

If you want to learn more about the changes in the restaurant and foodservice space, read on.

1. Delivery is More Important Than Ever

The global food delivery market is making up an increasingly larger part of the restaurant industry.

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Searches for “food delivery app” have grown by 6900% over the last decade.

On the back of widespread restaurant closures, the online food delivery market grew by an estimated 27% in 2020.

The collective revenue of online food delivery companies stood at $136.4 billion by the end of 2020. And it’s expected to grow to $151.5 billion in 2021.

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The global online food delivery market is expected to grow to $182.3 billion in the next four years.

The number of online food delivery service users also rose from 1.17 billion in 2019 to 1.43 billion in 2020. That number is predicted to jump to 1.6 billion by the end of 2021.

China made up the largest segment of the market in 2020 ($51.5 billion), growing by 28% year-over-year. And its 650 million delivery customers made up close to half of the global user base.

In the U.S., online food delivery apps brought in a collective $26.5 billion. That’s 3x more revenue than they generated just five years ago.

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Source: Business of Apps

And the U.S. market is expected to almost double by 2025, reaching about $42 billion.

It’s estimated that, by the end of 2020, the food delivery market made up 13% of the total restaurant sector. This is compared to a predicted 9% before COVID-19.

And this sector of the market isn’t expected to slow anytime soon. Statista predicts that online food delivery’s share of the market will be over 20% by 2025.

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Food Delivery Company Market Share in the U.S as of 2020.

Doordash is the largest food-delivery service in the U.S., capturing 45% of the market.

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Searches for “DoorDash” have grown by 2075% over the last five years, to roughly 5 million a month.

According to its 2020 Annual Report, Doordash has over 450,000 merchants on its platform and 20 million customers (about 18% of the U.S’s 111 million food delivery customers).

And by February of 2021, Doordash’s market share had expanded even more.

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Source: Second Measure

Doordash captured 55% of U.S. food delivery sales made in February 2021. It also saw its revenue rise by about 226% in 2020, blowing past its competitors.

Uber Eats and Grubhub are fighting for second place. And the two are both experiencing consolidation in different ways.

Uber Eats grew its gross delivery bookings by 110% in 2020. And it acquired fourth-place Postmates for $2.65 billion in 2020 as well.

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Searches for “Uber Eats” grew by 4200% over the last 5 years.

Grubhub, on the other hand, is set to be acquired by Danish food delivery company, Just Eat, for $7.3 billion.

2. Ghost Kitchens are Popping Up Everywhere

A ghost kitchen (or cloud/dark kitchens as they’re also known) is a cooking facility that is set up for the sole purpose of preparing food for delivery orders.

There is no dine-in or customer facing experience. And many ghost kitchens contract with multiple restaurants at a time.

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Searches for “ghost kitchen” have grown by 1185% over the last 5 years.

As food delivery becomes all the more common, ghost kitchens are becoming more important than ever.

In 2020, there were an estimated 1,500 ghost kitchens in the U.S. This trails China and India, which have over 7,500 and 3,500 ghost kitchens respectively.

The market may be small, but it is expected to grow very fast. Euromonitor predicts that the entire ghost kitchen market will be worth $1 trillion by 2030.

And there’s no shortage of new companies popping up in this space. The industry itself attracted $5.5 billion in investments over the last year.

CloudKitchens is probably the most well-known of the pure-play ghost kitchen companies.

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CloudKitchens” searches have grown by 2700% in the last five years.

It was started by former Uber co-founder and CEO Travis Kalanick. And it has already raised $400 million from Saudi Arabia’s sovereign wealth fund. The company offers local food-prep services for restaurants and contracts with food delivery companies to offer speedy preparation and delivery.

Kalanick has also reportedly spent up to $130 million buying real estate for CloudKitchen locations over the last two years.

Another promising start-up is Kitchen United.

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Searches interest in “Kitchen United” has jumped by 9700% since 2016.

The company has locations in Chicago, Pasadena, and Austin, among other cities.

Kitchen United offers a multi-restaurant selection, allowing customers to order from popular restaurants like Panera Bread, Wendy’s, White Castle, and other regional or local favorites.

Compared to CloudKitchens’ true “ghost” approach, Kitchen United is more customer-facing. Consumers can order directly from the website and choose any restaurant-partner they want. They can even pick up their food from the Kitchen United location.

Kitchen United is still in its early days. But the CEO has already guaranteed an expansion to 20 locations by the end of 2021 – compared to the current 6.

The CEO also touted the company’s value proposition for restaurant partners. Brands partnering with Kitchen United have experienced, on average, 600-700% growth in order volume.

And 90% of the top restaurant brands in the U.S. have expressed interest in working with them.

REEF Technology is another fast-growing ghost kitchen company.

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Searches for “REEF Kitchens” have grown by 8500% since 2016.

REEF began as a parking lot management company but has since expanded into opening ghost kitchens in its network of more than 4,500 parking lots.

The company has already opened more than 100 of its “neighborhood kitchens” across the U.S. It places its mobile food truck ghost kitchens in its parking lots and licenses them out to popular brands like Nathan’s Famous.

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A REEF ghost kitchen

REEF has already raised $700 million from a variety of investors, including Softbank, UBS Asset Management, and the Mubadala Investment Company.

It has also partnered with Oaktree Capital Management, creating a $300 million real estate investment vehicle in order to expand its presence to 10,000 parking lot locations.

Another ghost kitchen company, JustKitchen, said it is able to cut food delivery times in half for traditional restaurants.

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Searches for “JustKitchen” have grown by 3900% over the last five years.

JustKitchen started in Taiwan, where food delivery penetration was already higher than in the U.S. pre-pandemic (30-40% in Taiwan vs. below 20% in the U.S.).

JustKitchen claims that its restaurant partners experience a 40% monthly increase in sales after using its platform. And it is hoping to launch in California and Washington state in 2021.

Overall, expect the ghost kitchen industry to force major changes in the restaurant and food delivery industry going forward.

3. Virtual Restaurants are Starting to Take Market Share

With the help of ghost kitchens and online food delivery, virtual restaurants experienced their first year of real success in 2020.

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Searches for “virtual restaurants” have risen by 683% since 2016.

By the end of 2020, there were an estimated 100,000 virtual restaurants in the U.S.

Brinker International, the parent company of Chili’s and Maggiano’s, launched the “It’s Just Wings” delivery-only brand in the second half of 2020.

It’s Just Wings now operates out of over 1000 Chili’s and Maggiano’s restaurants. And it’s on pace to bring in over $150 million in its first year of operation.

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Search interest in “It’s Just Wings”.

Chuck E. Cheese also launched its own virtual “Pasquale’s Pizza and Wings” brand in 2020.

In addition, Applebee’s has been testing its “Neighborhood Wings” virtual brand in 700 restaurants throughout 2020. It’s expected to launch the concept in all of its 1,600 North American locations in 2021.

It’s easy to see why these traditional restaurants are going this route. The number of in-house diners declined by 50-60% during 2020. And that number was still down by roughly 30% in March of 2021.

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Year-Over-Year change in seated restaurant diners compared to 2019.

Traditional Restaurants have been using this tactic to recapture lost business during the pandemic.

But creating a virtual brand has also been a great way for traditional restaurant brands to capture a part of the market that they couldn’t get before.

It’s estimated that over three-fourths of customers ordering from spin-off brands on GrubHub have never even made an order from the traditional brand.

In addition, there are now virtual restaurants that aren’t tied to any traditional brands.

Ghost kitchen company JustKitchen has, in addition to serving traditional brands, created its own virtual food brands as well.

The company uses data derived from its ghost kitchen services to decide how and when to launch a new food brand. And since customers use JustKitchen’s software to order from its partner brands, it already has a locked-in user base to sell to.

The YouTube star, MrBeast, has also created his own virtual restaurant – MrBeast Burger.

MrBeast has leveraged his 53 million subscribers to create a successful virtual restaurant, launching in 300 locations as of December 2020.

The MrBeast Burger app also jumped to the top of the Apple Store shortly after launch, surpassing other food industry competitors

The Local Culinary has taken a different route, becoming a sort-of virtual restaurant franchisor.

By partnering with brick-and-mortar restaurants, it is essentially turning them into ghost kitchens.

Here’s how it works: A restaurant signs up with The Local Culinary, and chooses from among 50 virtual, delivery-only brands to partner with. The brick-and-mortar restaurant then cooks and prepares the food for the virtual brand, which delivers it through third-party delivery partners.

The overall business model is designed to expand distribution for virtual restaurants while also helping brick-and-mortar restaurants add to their bottom line without having to establish a delivery business.

4. Automation Offers New Avenues for Improvement

Automation is becoming a larger and larger part of the restaurant industry.

With labor typically making up the largest cost of restaurant operation, many are hoping to cut costs by automating some tasks.

The global food automation market is predicted to grow at an annual rate of 9.5% over the next five years. By 2027, it’s expected to be worth $29.4 billion.

Most of this value is in large-scale food processing and packaging. But automation is starting to reach the restaurant industry as well.

As far back as 2018, restaurants like the Boston-based Spyce Kitchen were using robotic chefs to prepare meals efficiently and cheaply.

A more common mode of automation has taken the form of self-pay tablets. Restaurants like Chili’s and Olive Garden were responsible for installing more than 200,000 of these over the last few years.

Applebee’s has found that over 70% of their customers interacted with these devices.

Ziosk is the leading provider of these tablets.

It has conducted studies finding that the tablets speed up the dining process by six to nine minutes. This can mean increased profits for restaurants as more diners can be accommodated throughout the day.

Darden Restaurants (owner of Olive Garden) also reported that Ziosk tablets are helping close checkouts 7 minutes faster than before. Darden has even seen kiosk usage rise to 92% post-COVID from 71% before.

Ziosk also reported that its customers have found that the table-top tablets increase dessert sales by an average of 30%.

Restaurants like McDonald’s have also been installing self-serve kiosks in many of their locations.

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McDonald’s Self-Serve Kiosks

Because of this, digital sales have grown to $26.8 billion – an increase of 23% over the past three years.

Automation is helping a variety of restaurants achieve greater efficiency as well as expand their services.

5. Restaurants Seek Personalized Customer Experiences

Restaurant chains and brands are increasingly trying to find new ways to personalize the customer’s experience.

For instance, research by PSFK shows that 79% of consumers want personalized menu recommendations based on past data.

To meet this growing need, restaurant chains like McDonald’s are looking to capture customer data.

The fast-food giant acquired AI and data collection company Dynamic Yield for $300 million in 2019. This technology personalizes the customer’s order based on data from past orders.

By the beginning of 2020, McDonald’s had installed Dynamic Yield’s technology in 9,500 of its U.S. drive-throughs. It was expected to expand the technology to every U.S. location by the end of 2020.

Chipotle has also gotten involved in the customer personalization space.

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Search interest in “Chipotle” over the last 15 years.

Chipotle launched its customer loyalty program in 2019. The loyalty program now has 17 million members.

Chipotle selected Microsoft Dynamic 365 Customer Insights to help it implement a personalization program based on the data. Chipotle now uses this data to create profiles of users, in order to personalize their experience.

After hearing this, you may be tempted to think that customers would be skeptical about giving their data to massive fast-food franchises. But the numbers say otherwise.

According to the earlier mentioned PSFK report, 84% of consumers are fine with giving their order history data to restaurants in return for a more personalized experience.

Conclusion

The restaurant industry seems to be changing faster than ever.

The biggest changes are taking place in distribution and customer interactions.

As technology advances, expect the traditional concept of a restaurant to change even more.

Last Updated: 
March 23, 2021
Josh Howarth
Co-founder of Exploding Topics.

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