Denny's Research

Part
01
of six
Part
01

Quick Service Restaurant Trends

Two current trends in the limited service/QSR restaurant category are plant-based offerings and food delivery apps. Details regarding these trends have been provided below.

Plant-Based Offerings

  • Fast-food restaurants in the United States have a reputation for unhealthy food as consumers' tastes continue to shift towards healthier options. To address this shift, many QSRs are sourcing healthier ingredients locally with fewer additives.
  • The growing number of people who are becoming vegan and vegetarian has led to the prevalence of plant-based offerings among QSRs. Despite overall demand of such foods being lower compared to animal-based offerings, it will continue to increase due to sustainability and health reasons.
  • Many fast-foods are tapping into the vegan and vegetarian consumer segments by offering plant-based based foods, which has a positive impact on their revenue. For instance, in 2019, Burger King introduced the Impossible Hopper to its menu. Also, in 2020, KFC introduced meatless alternatives made by Beyond.
  • Furthermore, non-dairy solutions are being introduced by major chains. For instance, oat milk and almond milk are gradually making their way into fast food menus. A case in point is Dunkin’ Donuts and Starbucks, which have incorporated oat milk in their creamers and dairy-free beverages.
  • Besides vegetarian and vegan customers, plant-based foods are serving as replacements for customers with dietary restrictions. There is a growing awareness of the adverse effects of salt, fat, and sugar intake on the body, which is leading to an increase in demand for plant-based offerings. Examples of plant-based foods that are growing in popularity include soy milk, plant-based meats, and vegan options.

Food Delivery Apps

  • Food delivery apps range from a restaurant’s own website or app to third-party services. According to eMarketer, over 20% of smartphone users in the United States will use at least one food delivery app by 2021.
  • According to App Annie, a market-data firm, food delivery app downloads have increased by 380% compared to three years ago.
  • Food delivery apps have shown QSRs the importance of having Wi-Fi for guests to support mobile payments and store mobile ordering. Furthermore, to avoid confusion and long lines, QSRs must look at ways of restructuring their physical layout as mobile orders continue to increase.
  • The use of third-party delivery apps increased during the COVID-19 pandemic when apps, such as DoorDash, Uber Eats, and Grubhub, waived their delivery fees. It is expected that these apps will continue to be used even after the pandemic.
  • QSRs that do not have a mobile delivery system are now partnering with third-party food delivery apps to ensure that customers can always have their food delivered. Examples of food delivery apps include DoorDash, Uber Eats, and Grubhub.
  • McDonalds Corp is an example of a fast-food chain that is using food delivery apps. In August 2018, the company announced that it would spend $6 billion in restructuring its restaurants in the US to have designated parking spots for curbside pickups made through mobile orders.” The decision to redesign was driven by the increase in delivery orders.
  • It is noteworthy that third-party delivery apps are becoming more customer-friendly. There are conversations about tamper-proof eating to ensure that deliveries remain safe, secure, and warm. In addition, some companies may have a limited menu when it comes to their delivery offerings to ensure that food reaches the customer without any issues.
Part
02
of six
Part
02

Fast Casual Restaurant Trends

Some current trends in the fast-casual restaurant category are the use of technology, the use of natural/organic ingredients, and limited or seasonal offerings. More information regarding these trends is provided below.

Use of Technology for Customer Experience Enhancement

  • Fast-casual restaurants in the US are adopting technology to offer a better customer experience. These restaurants are implementing new technology to create "seamless" ordering experiences, to collect data and feedback from customers, and to calculate the time that customers spend on ordering, among other uses.
  • This trend is driven by the growing on-demand economy and by the need of restaurants to minimize costs.
  • Wingstop is at the forefront of this trend. This restaurant has recently implemented an ordering extension through Twitch, an online gaming platform. The extension recommends meals to customers and directs them to the Wingstop website to finish the order.

Use of Natural and Organic Ingredients

  • Fast-casual restaurants are making use of natural and/or organic ingredients. Many restaurants intend to use only cage-free eggs and others are committed "to remove artificial ingredients from their menus."
  • This trend is being driven by the increasing demand of customers for natural and organic food. According to a recent report, 41% of consumers consider "organic and natural" important to choose where to eat.
  • Shake Shak, for example, is committed to offering natural ingredients in its menu like 100% Angus beef, non-GMO potatoes, and organic oranges. The restaurant also prides itself "on sourcing premium ingredients."

Limited-Time/Seasonal Offerings

  • Recently, fast-casual restaurants are offering limited-time or seasonal items in their menus along with their respective advertising and promotion. This tactic helps to "improve the perception of value," test new products, and "get real-time feedback."
  • This trend is being driven by the need of restaurants to attract customers and increase sales. Also, with the recent growth of online ordering and food delivery services like Uber Eats, fast-casuals need to give customers reasons to stop by their restaurants.
  • Fatburger, Daphne's, and Steak'n Shake are some fast-casual restaurants that have recently offered limited or seasonal menu items.
Part
03
of six
Part
03

Family Dining Restaurant Trends

Today, restaurants, and particularly family dining restaurants have embraced trends such as incorporating healthy and plant-based menu, and technology takeover, to stay afloat in an otherwise competitive industry.

Healthy and Plant-based Menu

  • Today, more consumers are developing a distaste for what they consider unhealthy meals such as red meat. The distaste is primarily inspired by fear of antibiotics and a general interest in personal and environmental health. Studies indicate that in 2017, US consumers shelled out approximately $700 million on meat substitutes, a 25% jump from 2012.
  • By the end of 2019, annual plant-based sales exceeded $3.5 billion. The restaurant landscape, and particularly family dining restaurant category are experiencing triple-digit growth rate for including meat alternatives on the menu. CoreLife Eatery and Wahlburgers, are some restaurants that have experienced a triple-digit growth after incorporating plant-based options in their menu list.
  • Functional foods are now extending beyond the wellness industry as they continue to go mainstream in the family dining restaurant category. More data indicates that approximately 9,000 customers revealed a 149% increase in healthy foods, particularly for gut health, in 2019, proving that functional foods and beverages are becoming popular.
  • An article published by the HuffPost provides that restaurants that focused on vegan cuisine in the past decade rarely received accolades. In recent times, however, restaurants, and particularly family dining category, have witnessed a massive growth in plant-based menu dishes. These meals are believed to have immense health benefits compared to animal products. In 2019, consumers exhibited a keen interest in health and overall wellness that saw the demand for vegan cuisine and high protein content, go up.

The Tech Takeover

  • Family dining restaurants are today prioritizing and investing in top-notch tech to provide a frictionless customer experience. Restaurant technology companies, alongside restaurant operators, are working with all-in-one restaurant management platforms, as these platforms have proven to be a valuable tool. More so, restaurant technology is primarily looking for tools that can integrate point-of-sale, analytics, inventory management, and online ordering.
  • Through robust technology, family dining restaurants can pay more attention to diners, thus improving customer service experience and keeping up with emerging trends that could take a business to the next level. Restaurants such as COPA, America’s first farm-to-table Cuban restaurant, are using technology to improve the overall management of the restaurant; from staff to menu, as well as reduce product waste and time. Most importantly, the restaurant is using technology to provide guests with quality customer experience.
  • Most restaurants realize that technology trends can be unstable as consumers can either embrace them or become skeptical and eventually resist the implemented technologies. However, most restaurants are implementing a wide range of technologies as a way to improve customer experience through fast, quality service and excellent delivery.
  • Large LCD screens, for instance, provide a range of cuisines on the menu items and wine lists. Consumers are beginning to embrace this technology, as it is time-saving and allows patrons to see what is on the display, any specials or event nights.
  • The voice assistant technology is one of the fastest-growing technologies in, particularly, in family dining restaurants. Even though Alexa and Siri are still in the preliminary stages, it is fast evolving in most restaurants in the US. Biometrics payment technology is also up and coming in many restaurants today, and just like voice assistant technology, it is being tested in venues such as Safeco Field, Seattle, before it becomes full-blown, to ensure concerns such as security are finessed before it is fully embraced.
  • More restaurants, including family-based restaurants, are also using mobile apps to improve and increase customer engagement. Seeing that most people use smartphones, restaurants are taking advantage to create mobile app technologies to engage with customers as much as possible.
  • Research shows that 40% of patrons aged between 18-34 years prefer to pay for their restaurant orders via their mobile phones. Through mobile apps, restaurants can increase awareness about the location of their restaurant, offer loyalty programs to frequent customers, optimize the online ordering process, and allow customers to make remote reservations.
Part
04
of six
Part
04

Denny's Competitors

Based on the list of the biggest family-style restaurants from the Restaurant Business' website and the Technomic's Top 250 list, the largest chains that are competing with Denny's include IHOP, Cracker Barrel, and Waffle House. Some of the factors that made these companies successful include their focus on improving their menu items, leveraging technology such as the use of apps, and providing the best food quality and service to their customers. The section below also provided additional details on what made these restaurants successful, their revenue figures, and the number of their stores to justify their rankings.

IHOP

  • IHOP is a family-style restaurant that is characterized by full table service, high-quality offerings, and moderately-priced menu items. The restaurant boasts of an enticing and cozy family ambiance.
  • The company also attributes its popularity to its award-winning pancakes.
  • It also mentioned that the company is known for adding a surprise twist to its menu using the tagline, "all things breakfast, any time of the day."
  • IHOP also stated that it aims to speed up its growth by continuously innovating its menu, undertaking daypart expansion, and deploying off-premise projects.
  • The company also mentioned that it is leveraging market analytics and brand-centered insights to encourage revenue-generating behaviors such as increased purchase amounts and restaurant visits.
  • IHOP also credited its "Rise N Shine"completed remodeling program for the modern look of its restaurants.
  • The company also deployed its "IHOP N Go" business to encourage more orders. "IHOP N Go" includes an online ordering site, a mobile app, and a U.S.-wide delivery program in partnership with major food delivery companies such as DoorDash, Uber Eats, and GrubHub.
  • IHOP's total revenue was calculated from its franchise restaurant sales (3,174.2 million) and area license restaurant sales ($289.5 million), totaling $3.46 billion.
Cracker Barrel

Waffle House

Part
05
of six
Part
05

QSR Emotional Connection

Two quick service restaurants in the U.S. that have created strong emotional connections with their U.S. customers are Chick-fil-A and Starbucks.

Chick-fil-A

  • Chick-fil-A is a quick service restaurant in the U.S. that has created a strong emotional connection with its customers in the U.S.
  • In fact, an article stated that "[o]ne of Chick-fil-A’s priorities is to make emotional connections with its customers."
  • According to the Brand Intimacy 2020 Study published by MBLM, which is a New York City-based "brand intimacy agency", Chick-fil-A ranked as "the second most favored brand." The study, which included 6,200 participants, was conducted in 2019.
  • Though Chick-fil-A ranked as "the second most favored brand", it actually ranked as the top brand among females and individuals who had incomes below $100,000 in terms of strong emotional connection.
  • Per a November 2019 article published by Linkedin, the Harris Poll Reputation Quotient found that "[i]n terms of emotional appeal, . . . Chick-Fil-A ranks second only to Amazon."
  • One way that Chick-fil-A has created such a strong emotional connection with its customers is through its food. The Brand Intimacy 2019 Study found that among Chick-fil-A customers, 26.7% of them "said they were willing to pay up to 20% more at the chain, compared to 14.5% on average at other fast-food chains." As was stated in an August 2019 article in Entrepreneur Magazine, Chick-fil-A "has extremely high rates of fusing and price resilience, which demonstrates the attachment users have to the brand."
  • Another way that Chick-fil-A has created such a strong emotional connection with its customers is through customer service. Chick-fil-A prioritizes "making customers 'feel like family.'" One way Chick-fil-A does so is by encouraging its store associates to smile at customers to welcome them. Another way that Chick-fil-A does so is by encouraging its store associates to make eye contact with customers when speaking to them.
  • Branding is a third way that Chick-fil-A has created a strong emotional connection with its customers. As an example, in Q3 2018, Chick-fil-A ran a video ad titled "Rewarding Service", which scored "in the top five" among all ads that quarter (the ads were "measured [by] 57 different reactions or emotions"). This link is to the video ad, which is about scholarships the company awarded to its employees.
  • With regard to if/how Chick-fil-A's emotional connection with its customers is evolving as more people order food online, the initial testing that Chick-fil-A conducted when it debuted its "dine-in mobile ordering at 80 locations" found "that 92% of customers who used the service found it 'appealing' due to ease and convenience." That "dine-in mobile ordering" was especially "popular among large parties with children."

Starbucks

  • Starbucks is a quick service restaurant in the U.S. that has created a strong emotional connection with its customers in the U.S.
  • According to the aforementioned Brand Intimacy 2020 Study, Starbucks was the top "fast-food brand that U.S. consumers feel most emotionally connected to."
  • In addition to Starbucks ranking as the top "fast-food brand that U.S. consumers feel most emotionally connected to", Starbucks also ranked as the top brand for such among males, individuals over the age of 35, and millennials.
  • Branding is a key way that Starbucks creates such a strong emotional connection with its customers. As was explained in a Forbes article, "[b]y creating a sense of community in its cafes, the coffee company has formed deeper connections with customers to become a place between home and work."
  • Additionally, the CEO of Starbucks, Kevin Johnson, stated that Starbucks is "in the business of human connection. That is what we’re about—connecting with the human experience."
  • With regard to if/how the emotional connection that Starbucks has with its customers is evolving as more people order food online, we found that in 2020, the aforementioned MBLM agency checked to see if COVID had impacted the results of its Brand Intimacy 2020 Study. In so doing, "the top five brands from the study [were reassessed] during the week of June 15[, 2020,] and found that customers' perception of Starbucks" were unchanged.
Part
06
of six
Part
06

Family Dining Restaurant Predicted Trends

Predicted Trends in Family Dining

The vast majority of recent/future trends in the restaurant industry are centered around the impact of COVID-19. With regard to the family dining category in particular, the top trends for the future are threefold: the offering of grocery service, the expansion of take-out/meal prep menus, and the progressive growth of merger-and-acquisition activity. Our findings are detailed below.

Grocery Service

  • As many restaurants have suffered a downturn with little to no "dine-in" traffic/service, some of them are turning towards individual ingredient/produce sales to bring their profits back up. For example, Urban Grub in Nashville formed an online shop where their patrons can now purchase a variety of their high-quality cuts of meat.
  • This trend started to form for two primary reasons. One is simply that some restaurants couldn't afford to stay open on takeout service alone; the other is that many patrons (Gen Z and Millennials, specifically) have demonstrated a strong interest in supporting local restaurants through the purchase of any grocery products they may be offering.
  • Moe's Southwest Grill and Shake Shack are two prominent chains that have already entered this space, while Denny's has started offering some groceries online.

Menu Expansion and Meal Prep

  • Many businesses have begun to offer more comprehensive takeout menus, with some going so far as to start providing the option to purchase "heat-and-eat" or "make-at-home" prepped meal kits.
  • According to market research from Dataessential, there are several reasons this has started to take hold. One is that it allows families to have "home-cooked" meals without going to the effort of making something from scratch; another is that it's appealing as a sort of entertainment, specifically to households with Millennials and children.
  • California Pizza Kitchen has been a leader of this trend with their introduction of CPK Market back in April.

Bankruptcy, Mergers, and Acquisitions

  • According to some industry experts, this sector is effectively getting hit even harder than many other industries, with some three million jobs and $25 billion in revenue lost in the first three weeks of the shutdown alone, and potentially "tens of thousands" of restaurants that will remain closed in perpetuity. Since many businesses continue to reel from the economic effects of the shutdown, this trend hasn't gotten underway to the same degree as the previous two, but industry experts such as Aaron Allen believe this will be one of the largest-scale concerns going forward.
  • Recovery is proving rather difficult for many local/non-chain restaurants, as social distancing guidelines hamper their ability to be fully staffed which, in turn, lowers their overall service capacity. As such, management in general has trended towards hesitation and conservatism with returning to previous staffing levels, since they want to see if their business can recover with limited capacity before even considering the thought of bringing back their full workforce. What's more is that chains/large franchises in general are better financed, more resilient, and likely to be on the purchasing end of most mergers and acquisitions in the future.
  • Sortis Holdings Inc. recently acquired Sustainable Restaurant Holdings Inc., the parent company of Bamboo Sushi, out of bankruptcy.
Sources
Sources