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How can the restaurant industry keep up with the changing demands of millennials?

30 May 2018

Soon to become the generation with the greatest buying power, millennials are redefining business globally. For the restaurant industry, catering to millennials requires a paradigm shift to keep up with evolving needs. Casual dining restaurant chains such as Applebee’s and TGI Friday’s have reported reduced profits, resulting in the closure of several outlets. Understanding the changing preferences could not only help prevent the latter, but also help restaurants increase visitor frequency, average spend per customer and customer loyalty. The fundamentals remain the same – menu, location and value are still paramount in driving customer attraction and satisfaction. However, several changes in consumer preference have taken place.

The global restaurant industry was estimated to be worth USD 3.5 trillion in 2016. Cafes are said to make up 50% of this figure. One of the largest markets is Asia-Pacific, accounting for 43% of the industry. Each market, however, is different. For instance, France was one of the few countries where the snacking trend wasn’t as popular as the rest of the world.

 

Global retauarant industry worth in 2016

 

cafes are expected to be worth 50% of the global restaurant industry

 

Asia pacific accounts for 43% of the restaurant industry

 

Middle Eastern countries not only have some of the highest GDP per capita in the world, but also have some of the highest food spend per capita in the world. According to restaurant consultant Aaron Allen, the average food spend in the UAE is 32% higher than that of the US. Aaron Allen also mentions that the city of Dubai has 260 people per restaurant, as compared to 320 people per restaurant in the US. The number of restaurants in the region keep growing, which comes as no surprise as the UAE was recently identified as the country with the highest propensity to dine out. Furthermore, the GCC’s foodservice industry was estimated to be worth USD 18.8 billion in 2014 and is said to grow at a rate of 6.8% CAGR to USD 24.5 billion by 2018.

 

average food spend in uae

 

average number of people per restaurant in Dubai and USA

 

uae identified as the country with highest propensity to dine out

 

gcc food service industry growth

 

As the Middle East’s restaurant market continues to grow and reach a point of saturation, existing restaurants must understand and adapt to the preferences of millennial consumers to compete:

1) Emphasis on customer journey

Most customers regard customer journey as the key driver of repeat purchase. The latter suggests that a positive experience will encourage customers to come back to the restaurant. A Deloitte study finds that 60% of individuals would go back to a restaurant that provides good service. This is crucial in a time where customers prefer going to newer places. The study finds that they would go back 6% more often and spend 20% more each time if they have a positive experience.

 

60% of individuals would go back to a restaurant that provides good service

 

McDonald’s has recently introduced self-service kiosks across a number of outlets to improve customer journey by focusing on convenience. Other ways for restaurants to enhance the journey would be through providing regular training programs for staff members to improve the service experience and by remembering details of regular customers to ensure that their order is presented to them the way they like it.

2) Technology-based food

AI and technology were the most talked about trends at the 2017 Global Restaurant Investment Forum (GRIF) which took place in Dubai. This suggests that to engage with millennial customers, restaurants need to utilize social media, AI and mobile technology. This can be done in several ways:

  • Being present on food ordering apps for customers who prefer dining in the comfort of their homes. Studies suggest that 75% of Emiratis in the UAE use apps to order food
  • Engaging with customers on social media by responding to comments and concerns, as well as sharing updates about events and new menu items. This would create an opportunity for restaurants to gather opinions about what customers want and craft menus or decide on future locations accordingly. Furthermore, restaurants would also be able to develop analytics-based marketing campaigns.
  • Using iPad-based ordering systems to reduce chances of error in customer orders, to ensure customers do not have to wait to be attended to and to cut down staff requirement. This could also be used to split the bill by determining what each customer ordered
  • Offer a discount to customers who post photographs of their visit on social media
  • Allowing customers to place take away orders online and having their order ready before they park their car by taking note of license plate number using an automated system
  • Creating an online platform taking note of allergies and dietary preferences and sharing that information across affiliated restaurants. The information can be linked to a name or phone number which the customer can be asked for upon entering. This allows modification of recipes to suit dietary requirements.
  • Incorporating digital payment options and mobile wallets could further help enhance the experience for increasingly tech-savvy customers
  • Introduce robots that act as chefs. The latter helps increase speed and efficiency, whilst improving consistency. For a generation that values dining experience, the consistency and efficiency provided by robots improves customer experience. Boston-based restaurant Spyce uses robotic cooking pots and touch-screen menus. Customers select the items they wish to order on the screen, which sends a signal to the robotic pots. The pots automatically place the right quantity of ingredients, cook the food and place it in a bowl to serve to customers.

 

AI & Technology are the most talked about trends that are disrupting restaurant industry

 

how many emiratis in the UAE use apps to order food

 

3) Experiential dining

Millennials look for unfamiliar experiences when dining. Despite generally being attached to their smartphones, they seek fun social interactions at restaurants. Restaurants must identify what they want people to do at the venue and plan accordingly. For instance, if it is a place to meet up with friends, there should be sharing food options, large booths for groups to sit and music that is not too loud and allows conversation. To create a romantic feel, restaurants would have to focus on ambient lighting, tables that seat two people, etc.

One way to ensure that the experience remains memorable is by regularly changing the menu. This encourages existing customers to continue visiting. It also helps restaurants determine customer preferences.

One way to create a unique dining experience would be through augmented reality (AR) and wearables. A next-generation ordering application based on AR might let people “sit down” to a virtual meal as a way of making a menu selection. For instance, Wagamama, the UK ramen chain, is using Augmented Reality to allow diners to scan their placemats with smartphones to virtually visit music festivals, watch art being made, explore menu details, vote for their favourite dishes and “like” Wagamama on Facebook.

4) Quality over quantity

Millennials value healthy eating and emphasize “eating right”. Therefore, they do not care for portion sizes and instead prefer paying for high quality ingredients. For restaurants, this requires a novel approach to their supply chains with added emphasis on organic ingredients that are free of antibiotics, pesticides and chemicals. Once restaurants adapt their supply chain to suit millennial preferences, they must also ensure that their marketing message makes it clear that they are using quality ingredients.

 

Millennials value healthy eating and emphasize eating eating right

 

IoT will play a significant role in managing quality expectations for millennials. The benefits of using sensory IoT technology will result in the following benefits for chefs, which will lead to the delivery of quality food and experience:

  • With smart pots and pans, the possibility of overcooking or undercooking becomes nearly impossible. By sensing how thoroughly something is cooked, the appliance could alert the chef once the food is ready
  • A challenging aspect of cooking is timing all the dishes so that everyone’s food is fresh and hot when served. Aligning the completion of food for the same table, when one particular dish takes longer to cook than another, can be difficult. With IoT appliances, the chef could better time the preparation with the appliances themselves, accurately estimating the length of cook time
  • Human error increases the likelihood for miscalculation of ingredients. Technology reduces chances for such errors to occur. For instance, a human chef may accidentally add more salt than the recipe requires. Robots, on the other hand, would add perfectly measured salt each time. This allows the food to be perfect each time, improving the overall quality.

5) Desire to support local food

Millennials believe in promoting local businesses and eating local helps them support them. They therefore prefer farm-to-table dining. “Farm-to-table” refers to a movement that aims to minimize the distance that food travels before being consumed. This is typically achieved by partnering up with local farms. This allows fresher food to be served and creates an opportunity for local business to thrive.

 

farm to table

 

6) Value convenience

According to a survey conducted in 2017, 55% of millennials value convenience. It is a top driver for them when purchasing food. Baby boomers, on the other hand, valued taste more.

 

percentage of millenials that consider convenience while purchasing food

 

Due to millennials’ emphasis on convenience, meal kits, food delivery services and food trucks are thriving due to their convenience factor. Restaurants should therefore focus on a convenience factor to encourage repeat purchases from millennials. This can be achieved by setting up delivery systems, starting meal plans and using technology to make the entire dining experience more convenient.

In 2016, LA-based restaurant Mendocino Farms partnered with delivery app DoorDash. The restaurant’s orders surged to a point where they had to turn off the app at times to be able to keep up with orders. The restaurant had to knock down restaurant walls to make room for delivery drivers.

The use of autonomous vehicles for order delivery could allow restaurants to reduce delivery time, creating a positive experience for consumers through fresher food. Restaurants could also use these vehicles for material requisition, which would mean that they are less likely to experience a shortfall of ingredients and customers would not have to be told that their requested items are unavailable. Dominos has been testing Ford’s self-driving cars for its delivery network.

7) Focus on plant-based eating

Although critics identify millennials as the generation that eats out most frequently, millennials are also known for being significantly healthier than other generations. According to the Organic Trade Association, 52% of organic consumers are millennials. They are also said to consume 52% more vegetables than previous generations with 40% of millennials in the U.S. adopting vegan diets.

 

millennials and their healthy eating habits

 

The popularity of veganism has increased demand for “plant-based meats”, which refers to using plant-based ingredients to create foods that typically contain meat such as burger patties and nuggets. In fact, sales of meat alternatives have increased 6% between 2016 and 2017 to USD 554 million. LA-based company Beyond Meat was created in 2009 and focuses on plant-based burger patties. The company received funding from Bill Gates, Leonardo DiCaprio and Tyson Foods – the largest meat company in the US. They are also said to have tripled production in 2017.

 

sale of meat alternatives

 

Restaurants must therefore offer plant-based options to millennial consumers and potentially explore plant-based meats along with other upcoming trends.

 

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