A slowdown in the back-to-office trend, along with shifting consumer migration patterns between urban and suburban and rural areas, are among the key factors influencing restaurant traffic heading into 2024, according to a Food Institute webinar.
The webinar, titled “The Future of Restaurants: Data and Insights for 2024 & Beyond,” cited research from Placer.ai showing that although urban office buildings have experienced rising foot traffic in the last two years as the pandemic eased, the trend has slowed. In September, office visits were up 7.8 percent over a year ago, but visits were still nearly 41 percent below 2019 levels.
The shift toward working from home during the pandemic has been cited as one of the most significant factors impacting restaurant sales in many urban markets in recent years. As workers have returned to offices, at least part of the time, restaurant sales in those areas have rebounded somewhat, according to R.J. Hottovy, head of analytical research at Placer.ai.
Based on the Placer.ai data, however, which tracks aggregated cell phone locations through partnerships with mobile app companies, about 20 percent of people appear to be permanently working from home, compared with about 10 percent before the pandemic, he said.
As more consumers settle in to working from home, restaurant operators are likely to continue to shift some of their development plans to more rural and suburban areas, he said.
“As we’ve seen migration toward these smaller markets, and markets that were not very attractive before, they are starting to look lot more attractive,” said Hottovy, noting that lower buildout costs, more affordable rents, and available labor in those markets could make them them well-suited to restaurant expansion.
At the same time, some of the consumer migration out of urban centers has reversed in recent months, according to Placer.ai data. This may indicate that some young consumers are taking advantage of available urban residential real estate vacated by older consumers who either retired or relocated during the pandemic.
Another key impact of the pandemic that appears to have had a lasting impact is that the share of restaurant visits to fast-casual and quick-service restaurants had increased during the pandemic, at the expense of full-service locations. While full-service restaurants captured about 35 percent of visits before 2020, that has fallen to about 30 percent in 2023 after the closure of many locations and the ongoing success of limited-service concepts.
Drive-thru and mobile ordering capabilities in particular have driven strong traffic among these concepts, Hottovy said, noting that quick-service restaurants that have added multiple drive-thru lanes appear to be reaping returns from these investments with significantly increased customer traffic.
Among other factors seen impacting the restaurant industry in 2024:
• The quest for value—The data shows that consumers have been visiting a greater variety of food retail and restaurant locations, indicating they may be seeking to find the best deals and prices. In food retail locations, consumers’ dwell times within the store have also increased, Hottovy said, which could reflect their interest in comparing product prices, and looking for private label equivalents.
• A demand for experiences—Not all consumers are defining value strictly around price. “Consumers really do want something innovative for that price,” Hottovy said. “If there’s something unique, they will pay up for it.” He cited increases in visits at both “eater-tainment” concepts such as Top Golf and others, where visits are running 25- to 30-percent higher than at traditional casual dining locations, as well as at smaller, independent restaurants that offer differentiated experiences.
• Retail foodservice expansion—Both supermarkets and convenience stores have added more foodservice offerings, which may be taking visits away from traditional restaurants. At a new, 100,000-square-foot store in Lake Austin, Texas, that includes a bar, a True Texas BBQ restaurant, a SouthFlo Pizza restaurant, and a coffee shop, weekend visits have increased substantially, compared with other locations in the area, Hottovy said. Likewise, 7-Eleven is driving more traffic with its Evolution format that includes branded foodservice concepts such as Laredo Taco Company, along with other restaurant-style innovations such as mobile ordering capabilities and pick-up windows.
• Plant-based remains niche in foodservice—Despite some high-profile product launches that drove consumer trial a few years ago, such as the Impossible Whopper at Burger King, plant-based menu items don’t seem to be playing a major role in boosting traffic at mainstream restaurants. Some specialized plant-based restaurant concepts seem to be performing well, according to Placer.ai data, but the impact of plant-based menu items on traditional restaurant traffic has been minimal overall. “Most restaurants will have some options there … but it works better if plant-based is core to your concept, rather than just an add-on,” said Hottovy.
• Food halls have legs—The food hall concept, which had been gaining traction rapidly before the pandemic, appears sound, Hottovy said. These venues provide opportunities for innovative chefs to test their concepts at relatively low cost, and have strong appeal among today’s young foodies. In urban residential areas, food halls have seen strong customer visitation trends, Hottovy said.
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Image: Wegmans
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