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TAU RES RAN HE T T IN F D O U E S T T A R T Y S

2021 2 3

ABOUT THIS REPORT

The National Association each year prepares a comprehensive overview of the restaurant and provides a look ahead. The Association’s research is considered the most authoritative source for restaurant industry sales projections and trends. It is based on analysis of the latest economic data and extensive surveys of restaurant operators and consumers. See p. 51 for methodology and visit Restaurant.org/Research for the latest industry trends and analysis. HIGHLIGHTS The Association’s research and analysis have a long-standing reputation for the highest * The restaurant industry ended 2020 with total credibility, neutrality, and accuracy inside and sales that were $240 billion below the National outside the industry. The Association is considered Restaurant Association’s pre-pandemic forecast a leading authority on restaurant industry statistics, for the year. analysis, trends and forecasts. * Although restaurant and foodservice sales are Hudson Riehle expected to post double-digit growth in 2021, Senior Vice President, Research and Knowledge it won’t be nearly enough to make up for the Group substantial losses experienced in 2020. Bruce Grindy * More than 8 million and drinking place Chief Economist and Vice President, Research employees were laid off or furloughed during the peak of the lockdowns. Beth Lorenzini Managing Editor, Enterprise Marketing * The eating and drinking place sector finished 2020 Susan Raynor nearly 2.5 million jobs below its pre-coronavirus Senior Art Director level. Dani Smith * By December, 110,000 eating and drinking places Director, Creative and Brand Strategy were closed long term or for good.

RESTAURANT * The majority of permanently closed were ISBN SEGMENT well-established businesses in operation for 16 years; Digital: 978-0-9978029-9-3 DEFINITIONS 16% had been open for at least 30 years. * Restaurants survived by shifting to off-premises foodservice, streamlining menus, setting up outdoor National Restaurant Association dining, marketing discount deals, bundling 2055 L Street, NW and blending , and selling alcohol to go. Suite 700 The survey data in this report categorize restaurants Washington, DC 20036 into two broad segments: fullservice restaurants (with * Operators adopted contactless order and payment (800) 424-5156 table service) and limited service restaurants. Within technologies at an accelerated pace; consumers each segment are three categories of concepts: expect to be able to use their smartphones for more FULLSERVICE RESTAURANTS aspects of the restaurant experience. • Family dining * The vast majority of operators plan to keep at least • Casual dining some of the changes they made to their restaurant • Fine dining during the pandemic. LIMITED SERVICE RESTAURANTS • Quickservice * A source of optimism is that consumers greatly • Fast casual miss dining at restaurants; their pent-up demand • Coffee & for restaurant experiences is high. When responding to the survey, restaurant operators Although 2020 was the most challenging year in were asked to self-classify their operation into one of * restaurant history, this industry full of resilient these six categories. entrepreneurs will recover. 4 5

CONTENTS

PART 1: PART 3: SALES & ECONOMIC & MENU FORECAST TRENDS INTRODUCTION 2020 5 INTRODUCTION 31 INTRODUCTION 2020 was the worst year in restaurant industry Menus and service styles changed, some for good The Most Challenging history … so far 32 TOP MOVES FOR SURVIVAL 6 OUTLOOK FOR 2021 Streamlined menus and focus on off-premises Year for the Hurdles on the road to recovery 34 TOP SELLING MENU ITEMS 7 THE 2021 RESTAURANT SALES FORECAST For fullservice and limited service restaurants Restaurant Industry The breakdown by restaurant segment 35 SMART MENU MARKETING The coronavirus pandemic is 8 CONSUMER OUTLOOK Blended and bundled meals, kits, more Pent-up demand for on-premises dining is high devastating the restaurant industry. 40 ALCOHOL TO GO Mandated closings, capacity limits, Cocktails click with young adults and a cratered economy are putting 42 COMFORT Comfort foods topped the best-seller charts; the industry through the worst healthful held its own business conditions in its history.

PART 2: The economic toll has been staggering. From mid- OPERATIONAL March to the end of 2020, the restaurant and food- TRENDS service industry lost an estimated $240B in sales. During the peak of mandated lockdowns in April, an PART 4: estimated 8M eating and drinking place employees WORKFORCE were laid off or furloughed. Industry employment is 13 INTRODUCTION TRENDS nearly 2.5M jobs below pre-pandemic levels. Never have so many had to change so fast Rather than continue to struggle through an 14 OFF-PREMISES extremely uncertain business environment, many Pivots and preferences on takeout, delivery, restaurant operators decided to close their doors. curbside 45 INTRODUCTION The National Restaurant Association estimates that 21 TECHNOLOGY Restaurant industry is 2.5 million jobs below as of December 1, more than 110,000 eating and Accelerated adoption of touchless technologies pre-pandemic levels drinking places completely closed for business 24 SERVICE OPTIONS 46 JOBS LEVELS IN 2020: A TIMELINE temporarily, or for good. Table service sorely missed, plus data on outdoor The bottom fell out in December The situation is not lost on consumers. In one dining 48 EMPLOYMENT LEVELS BY STATE Association survey, 92% of adults are concerned that 28 MARKETING TRENDS Only 3 states had more jobs in November than businesses in their community, including restaurants, February Loyalty programs and value propositions may not be able to survive the economic fallout 30 IN THE COMING YEAR 50 SHRINKING LABOR POOL from the pandemic and 60% are aware of a Operators report on profits and intentions U.S. labor force has nearly 2 million fewer in the 6 Outlook for 2021 restaurant in their community that permanently 16-34 age range closed during COVID-19. 7 2021 Restaurant Sales Forecast 8 Consumer Outlook Recovery is going to take time. 6 NATIONAL RESTAURANT ASSOCIATION |STATE OF THE RESTAURANT INDUSTRY | OUTLOOK FOR 2021 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | SALES FORECAST 7

The long road to recovery will continue in 2021, both for the economy and the restaurant industry.

While the Association expects the economy to OUTLOOK THE 2021 RESTAURANT grow at a healthy pace in 2021, it will barely be enough to recover the ground lost during the pandemic. To be sure, the restaurant industry will FOR 2021 SALES FORECAST have a much steeper climb out of the crater that was created by the coronavirus. RESTAURANT AND FOODSERVICE INDUSTRY FOOD AND BEVERAGE SALES1: 2019 TO 2021 Overall, total restaurant and foodservice sales were down $240 billion from expected levels in 2020. 2019 2020 2021 ’20-’21 SALES SALES ’19-’20 SALES ’20-’21 REAL % This included the sales shortfall at eating and (billions) (billions) % CHANGE2 (billions) % CHANGE2 CHANGE drinking places, plus a sharp reduction in spending at foodservice operations in sectors EATING AND DRINKING PLACES $615.9 $497.6 -19.2% $548.3 10.2% 6.7% such as lodging, arts/entertainment/recreation, , health care and . FULLSERVICE SEGMENT3 $285.0 $199.5 -30.0% $220.8 10.7% 7.6%

Although restaurant and foodservice sales are LIMITED SERVICE SEGMENT4 $308.9 $290.4 -6.0% $313.6 8.0% 4.0% expected to post double-digit growth in 2021, the business environment for restaurants will BARS AND TAVERNS5 $22.0 $7.7 -65.0% $13.9 80.2% 77.6% likely be a tale of two halves with conditions varying significantly by region. ALL OTHER FOODSERVICE ESTABLISHMENTS6 $248.4 $161.5 -35.0% $183.2 13.5% 10.4% Sales growth during the first half of the year will continue to be constrained by on-premises TOTAL $864.3 $659.0 -23.8% $731.5 11.0% 7.5%

capacity restrictions that stem from elevated Source: National Restaurant Association estimates virus case levels in many parts of the country. 1. Data are given only for establishments with payroll. 2. Percent change calculations are based on unrounded data, and may not match calculations based on data rounded to one decimal point. As the vaccine rollout becomes more wide- 3. Includes family dining, casual dining and fine dining fullservice restaurants. Waiter/waitress service is provided, and the order is taken while the patron is seated. Patrons pay after they eat. spread by mid-year, business conditions will 4. Includes quickservice restaurants; fast casual restaurants; , grill- and buffets; snack and nonalcoholic beverage bars; steadily improve. As local economies reopen and social caterers. Patrons generally order at a cash register or select items from a food and pay before they eat. 5. Includes bars, taverns, nightclubs, or drinking places primarily engaged in preparing and serving alcoholic beverages for immediate restrictions are eased, consumers will be poised consumption. These establishments may also provide limited food services. to burn off their accumulated pent-up demand 6. Includes the following categories: managed services (also referred to as onsite food-service and food contractors); lodging places; retail- host restaurants (health-and-personal-care-store restaurants, general-merchandise-store restaurants, variety-store restaurants, food- for restaurants. store restaurants and grocery-store restaurants, gasoline-service-station restaurants and miscellaneous retailers); recreation and sports (includes movies, bowling lanes, recreation and sport centers); mobile catering; vending and non-store retailers (includes sales of hot food, View the Association’s most recent sandwiches, pastries, coffee and other hot beverages); business, educational, governmental or institutional organizations that operate their own restaurant services; military restaurant services (continental United States only). economic outlook data HERE

RESTAURANT ECONOMIC INSIGHTS In September, the National Restaurant • Restaurant sales SAYING RIPPLE EFFECT: Association Research and Knowledge • Jobs report SUPPLY CHAIN Group launched a member-only • Wholesale food prices GOODBYE TO research resource, Restaurant • Menu prices LEGACIES IMPACT Economic Insights. • Consumer trends Of restaurants that closed for good, the majority were The industry’s supply chain businesses that supply goods Delivered on the last day of each REI provides operators with the intel well-established businesses, fixtures in their communities and services feel the pain. Conditions are far from normal … month, the e-newsletter delivers the they need to make key decisions that • They’d been in business, on average, for 16 years, and 16% • 85% of supply chain businesses reported lower revenues most recent economic indicators optimize their restaurant businesses. of them had been open for at least 30 years. in 2020 compared with 2019. On average, supply chain impacting restaurants including: • They employed an average of 32 people; 17% employed at business revenues were down 30% in 2020. least 50 people before they closed. • 70% say they laid off or furloughed employees during the … and they’re taking their entrepreneurial spirit with them: pandemic. A third say staffing levels are down more than REI is one many exclusive member benefits offered by the • 72% of restaurant owners who closed for good say it’s 20% from usual. National Restaurant Association. Explore becoming a member today. unlikely they’ll open another restaurant concept in the • Profit margins were lower in 2020 compared with 2019 months or years ahead. for 71% of supply chain businesses surveyed and 15% say • Only 48% think they’ll stay in the restaurant industry in it’s unlikely they’ll be in business 6 months into 2021 some form in the months or years ahead. without government relief. 8 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | CONSUMER OUTLOOK NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | CONSUMER OUTLOOK 9

RESTAURANT FANS, WHAT ARE THEIR PLANS? Continuing a pandemic-period trend, these consumers CONSUMER plan to maintain their off-premises restaurant use. 77% of adults say they plan to order restaurant or fast OUTLOOK food for takeout, delivery, or through a drive-thru in the coming months. Roughly half of adults surveyed say they plan to eat on-premises at a restaurant or fast-food place during the CUSTOMERS MISS DINING AT RESTAURANTS next few months, if that option is available. 36% of adults intend to sit inside the restaurant; 25% plan Customers—and their wants—changed dramatically this year. to sit at a table outside. Knowing your customers is the key to keeping your competitive edge. Turns out that can be hard to do because customers today are not the same type of people who walked through the door a year ago. In fact, 3 in 4 operators across 6 major restaurant segments say their customer DINING PLANS FOR THE NEXT FEW MONTHS % of adults who plan to dine off-premises and on-premises base has significantly changed since the onset of COVID-19. 30 TOTAL OFF- TOTAL SIT AT A SIT AT A DEMOGRAPHIC PREMISES ON-PREMISES* TABLE INSIDE TABLE OUTSIDE ALLALL ADULTS 777%7% 449%9% 336%6% 225%5%

GENDER PLEASE ALLOW ME TO Male 77% 52% 40% 26% INTRODUCE MYSELF… Female 77% 46% 33% 25% AGE GROUP % of restaurant operators who say their customer base has significantly changed since the beginning Gen Z adults (18-23) 66% 53% 31% 30% of COVID-19 Millennials (24-39) 76% 50% 37% 28% Best bet for business? Gen X (40-55) 80% 51% 41% 24% Concentrate on customers who are actively using restaurants. Baby boomers (56-74) 81% 44% 31% 23% 81% 78% 77% HOUSEHOLD INCOME 77% 75% 76% To make it through this crisis period, restaurant operators Less than $50,000 74% 43% 30% 19% may want to stop trying to $50,000 to $99,999 80% 53% 44% 28% appeal to everybody. $100,000 ORor more MORE 81% 60% 40% 36% For the 2021 State of the REGION Restaurant Industry report, Northeast 73% 50% 39% 24% we break out survey results by consumers who plan to SouthMidwest 82% 47% 40% 18% continue using restaurants (for MidwestSouth 77% 55% 43% 28% on- and/or off-premises visits). West 78% 40% 20% 27%

Our aim is to help operators SIZE OF COMMUNITY identify the offerings and Urban 74% 48% 32% 28% attributes that will drive Suburban 79% 51% 37% 27% Family Casual Fine Quick- Fast Coffee & these customers’ foodservice dining dining dining service casual snack decisions in the coming months. Rural 79% 46% 40% 17%

Source: National Restaurant Association, Restaurant Trends Survey, Source: National Restaurant Association, National Household Survey, December 2020 December 2020 *Note: Survey respondents were allowed to select both ‘inside’ and ‘outside’ for their on-premises plans. 10 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | CONSUMER OUTLOOK NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | CONSUMER OUTLOOK 11

PENT-UP DEMAND FOR ON-PREMISES PENT-UP DINING DEMAND % of consumers who say they are not using restaurants as often STILL STRONG as they would like WHO MISSES RESTAURANT The early uptick in off-premises DINING MOST? restaurant use during the pandemic 83% Baby boomers really want to return to restaurants, beating tracked with the pent-up demand 74% 71% out Gen Z adults and millennials when they say they aren’t consumers reported. 67% eating on-premises at restaurants as often as they’d like. In January 2020, 44% of adults said Women are more likely than men to say they’d like to 52% 15 eat on-premises and buy food to-go more often. they weren’t ordering takeout or 45% 44% 42% delivery as often as they’d like. This 36% 33% rose to 52% in late April and then PENT-UP DEMAND BY DEMOGRAPHIC trended lower in subsequent months. % of adults who are not using restaurants as often as they’d like

By early December, it settled at 33%. EATINGEATING ON ONTHE THE PREMISES PREMISES PURCHASINGPURCHASING AT RESTAURANTSAT RESTAURANTS AND AND TAKEOUTTAKEOUT OR OR DEMOGRAPHIC FAST-FOOD PLACES Customers are used to DEMOGRAPHIC FAST-FOOD PLACES DELIVERY*DELIVERY Jan. 17-19 Apr. 24-26 Jun. 26-28 Sep. 4-6 Dec. 4-6 ALLALL ADULTS 667%7% 333%3% ordering food to-go. 2020 2020 2020 2020 2020 GENDER Eating on-premises at restaurants Male 60% 27% Purchasing takeout/delivery from Source: National Restaurant Association, restaurants online surveys of 1,000 adults Female 74% 37% AGE GROUP Gen Z adults (18-23) 56% 25% Millennials (24-39) 60% 26% What they really miss is Gen X (40-55) 65% 34% dining on-premises. Baby boomers (56-74) 76% 37% HOUSEHOLD INCOME In late April, 83% of adults said 74% 41% they were not eating on-premises at Less than $50,000 restaurants as often as they’d like, a big $50,000 to $99,999 63% 27% jump from the 45% reported in January $100,000 orOR more MORE 58% 20% 2020, and easily the highest level ever REGION recorded in 20 years of fielding this Northeast 68% 31% survey question. SouthMidwest 74% 35% While the pent-up demand for MidwestSouth 61% 31% on-premises visits settled lower at 67% West 70% 33% by early December, there’s no doubt consumers are ready to return SIZE OF COMMUNITY to restaurants. Urban 59% 31% Suburban 70% 30% Rural 74% 41%

Source: National Restaurant Association, National Household Survey, December 2020 12 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | CONSUMER OUTLOOK NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 13

A LIGHT AT THE END OF THE TUNNEL While customers might venture out less in winter, they’re not gone for good. 88% of adults enjoy going to restaurants and, no surprise, 85% of them say going out to a restaurant with family or friends is a better way to spend their leisure time than CUSTOMERS TO OPERATORS: (and cleaning) at home. “WE’LL BE BACK” ALL GEN Z MILLENNIALS GEN- BABY Restaurants prepare food GEN- BABY

STATEMENT ADULTS (18-23) (24-39) XERS BOOMERS customers crave. Nearly 8 in ALL GEN Z MILLENNIALS XERS BOOMERS (40-55) (56-74) STATEMENT ADULTS (18-23) (24-39) (40-55) (56-74) 10 adults say their favorite You enjoy going restaurant foods deliver You enjoy going to restaurants 88% 83% 88% 86% 90% to restaurants 88% 83% 88% 86% 90% and taste sensations Going out to a restaurant that just can’t be duplicated Going out to a restaurant with family and/or friends in the home . with family and/or friends gives you an opportunity gives you an opportunity OPERATIONAL to socialize and is a better 85% 76% 84% 84% 88% Restaurants are an integral to socialize and is a better 85% 76% 84% 84% 88% way for you to make use of part of our social fabric; 6 in 10 way for you to make use of TRENDS your leisure time rather than adults say restaurants are an your leisure time rather than cooking and cleaning up cooking and cleaning up essential part of their lifestyle. Your favorite restaurant Your favorite restaurant Many restaurants spent much of 2020 in survival foods provide flavor and These feelings will only grow foods provide flavor and mode. Riding a rough sea of ever-changing stronger over the coming months taste sensations that you 78% 76% 78% 81% 75% taste sensations that you 78% 76% 78% 81% 75% regulations and operating conditions, restaurant can’t easily duplicate in until the coronavirus clouds part. can’t easily duplicate in your home kitchen your home kitchen operators tweaked—or completely overhauled— Survive the winter and look their business model in efforts to stay afloat. Restaurants are an essential Restaurants are an essential 60% 59% 65% 61% 58% forward to better days ahead. 60% 59% 65% 61% 58% part of your lifestyle part of your lifestyle We saw a significant and unbelievably fast shift

Source: National Restaurant Association, National Household Survey, December 2020 to off-premises dining. Operators made hefty investments in customer-facing technologies. expanded into parking lots, side- WHAT CUSTOMERS MISS MOST ABOUT DINING OUT walks, and city streets. These were just some of PEOPLE the significant changes restaurants experienced indoors talking in 2020. MEALS Eating family This section highlights areas where restaurant New operators made big changes and how these RELAXING Socialization Service changes will influence consumers’ restaurant Fresh LIFE DRINKSBEING SERVED Ambiance Atmosphere 14 Off-Premises decisions in the coming months. Dressing Up time 21 Technology NO MASK fun 24 Service Options FRIENDSNo COVID-19 not cooking Good Seeing People 28 Marketing Trends Dining no fear greatVARIETY awayfood from home 14 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 15 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS

OFF- CONSUMERS RELY ON TAKEOUT AND DELIVERY % of consumers who say purchasing takeout or PREMISES delivery food is essential to the way they live MONEY’S ON OFF-PREMISES % of restaurant operators who say they devoted more resources to expanding the off-premises side of their business since the beginning of the outbreak in March ALL ADULTS 54% 53% 52% 49% 45% GEN Z GEN ADULTS X-ERS OFF-PREMISES (18-23) 54% (40-55) 57% PREDOMINATES 35% With on-premises capacity limited— 27% and sometimes nonexistent— MILLENNIALS BABY during most of last year, restaurant (24-39) BOOMERS 64% (56-74) 43% operators had no choice but to focus on their off-premises business.

This was particularly true in the Family Casual Fine Quick- Fast Coffee & Source: National Restaurant Association, National Household Survey, December 2020 fullservice segment, with roughly dining dining dining service casual snack Source: National Restaurant Association, Restaurant Trends Survey, December 2020 half of operators saying they devoted more resources to expanding TAKEOUT TAKES OFF the off-premises side of their % of consumers who say they’re more likely to business since the beginning of OFF-PREMISES SALES TAKE OVER Larger proportion of sales purchase takeout food from a restaurant than the COVID-19 outbreak in March. Restaurant operators’ reporting of their current off-premises they were before the outbreak sales compared to pre-COVID-19 levels Smaller proportion of sales The shift was well-received by consumers, as takeout and delivery 74% About the same proportion of 69% 70% sales were already part of their day- 65% Source: National to-day. Now, 53% of adults say 63% Restaurant Association, Restaurant Trends Survey, ALL purchasing takeout or delivery food 56% December 2020 ADULTS is essential to the way they live. 68% Across each of the 6 major segments, GEN Z GEN off-premises dining represents ADULTS X-ERS a larger proportion of sales than (18-23) 62% (40-55) 68% it did pre-COVID-19. This was 27% not nearly enough to offset on- 19% premises sales losses for the vast 18% 18% 18% 17% 18% 16% 15% majority of fullservice operators. 13% 14% MILLENNIALS BABY 11% (24-39) BOOMERS 73% (56-74) 67%

Source: National Restaurant Association, National Household Survey, Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack December 2020 16 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 17 STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS

MEAL MOST MEAL KITS COME KITS OFF-PREM FOCUS: MAKE FROM FULLSERVICE OUTSOURCED DELIVERY % of operators who say their restaurant added meal kits DELIVERY since the beginning of the COVID-19 outbreak in March MORE COMMON COOKING Nearly half of fullservice operators introduced % of restaurant operators who say they added either 3rd-party FUN 23% delivery to reach more customers last year, or in-house delivery since the beginning of the outbreak in and slightly fewer fast casual and coffee & March 20% 20% snack operators reported similarly. 3rd-party delivery In-house delivery Restaurant operators in every segment were 34% more likely to add 3rd-party delivery rather 33% 15% 31% 14% than set up an in-house delivery service. 30% Some added both. 28% 25% 6 in 10 adults say they’re more likely to get 24% their food delivered than they were before 12% 21% 21% the outbreak. For millennials, it’s 71%. 20%

Nearly two-thirds of current delivery 16% MEET YOU OUT FRONT customers say they prefer to order directly % of restaurant operators who say they added curbside takeout from the restaurant; 18% prefer to order OFF-PREM since the beginning of the outbreak in March through a 3rd-party service; 18% don’t have a preference. 7%

FOCUS: 81% Baby boomers (79%) are the most likely to 78% 77% say they prefer to order directly through the CURBSIDE 73% restaurant for delivery. Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack TAKEOUT 64% 58% Source: National Restaurant Association, Restaurant Trends Survey, December 2020 Curbside takeout was one of the WE DELIVER! least capital-intensive offerings that % of restaurant operators who say they added delivery restaurants could add during the since the beginning of the outbreak in March pandemic. 46% 46% A majority of operators say they 44% 44% 42% added curbside takeout this year. 8 in 10 fine dining, family dining and fast casual operators added a curbside option. 31% Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack

Source: National Restaurant Association, Restaurant Trends Survey, December 2020

Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack

Source: National Restaurant Association, Restaurant Trends Survey, December 2020 18 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 19

OFF-PREM FOCUS: DRIVE-THRU Some operators gave the drive-thru an unexpected makeover last year, setting up casual drive-thru lanes in their parking lots. Even so, only between 1% to 3% of operators added drive-thru service since the start of the pandemic. The exception: 6% of fast casual operators. Still, these low percentages are likely due to the capital required. ACTUAL RESTAURANT PREFERRED CONSUMERS* PREFER TO ORDER DIRECT When choosing a place to order food for delivery, how important is it to you that the food comes from a restaurant, deli or place PREFER TO ORDER that has a physical location accessible to the public? DIRECTLY THROUGH PREFER TO ORDER RD DEMOGRAPHIC THE RESTAURANT FOR THROUGH A 3 -PARTY NO DELIVERY SERVICE FOR DELIVERY PREFERENCE DEMOGRAPHIC VERY IMPORTANT OR NOT VERY IMPORTANT OR SOMEWHAT IMPORTANT NOT AT ALL IMPORTANT ALL ADULTS 64% 18% 18% ALL ADULTS 72% 28%

GENDER GENDER

Male 64% 23% 13% Male 72% 28% Female 64% 14% 22% OFF-PREM Female 72% 28% AGE GROUP AGE GROUP FOCUS: Gen Z adults (18-23) 77% 23% Gen Z adults (18-23) 58% 22% 20% GHOST Millennials (24-39) 76% 24% Millennials (24-39) 57% 27% 16% Ghost kitchens, also called virtual or dark Gen X (40-55) 75% 25%

Gen X (40-55) 65% 17% 18% kitchens, let restaurants offer delivery Baby boomers (56-74) 64% 36% from a location that doesn’t serve Baby boomers (56-74) 79% 3% 18% REGION on-premises guests. They’re billed as a Northeast 82% 18% REGION way to cut operating costs and can help MidwestSouth 70% 30% Northeast 71% 20% 9% operators expand their delivery footprints. MidwestSouth 73% 27% MidwestSouth 72% 15% 14% Still, less than 5% of operators say they added delivery from a virtual or ghost West 64% 36% South 62% 19% 19% Midwest kitchen since the beginning of the TYPE OF COMMUNITY

West 56% 19% 25% coronavirus outbreak in March. And Urban 74% 26% it’s telling that 72% of adults say it’s TYPE OF COMMUNITY Suburban 71% 29% important their delivery orders come Rural 71% 29% Urban 57% 28% 15% from a location that they can visit in Suburban 68% 15% 17% person. Source: National Restaurant Association, National Household Survey, December 2020 Rural 71% 6% 24%

Source: National Restaurant Association, National Household Survey, December 2020 Note: Rows may not sum precisely to 100% due to rounding. *Adults that ordered food for delivery during the past 9 months 20 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 20 21 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 21

OFF-PREM FOCUS: PACKAGING TECHNOLOGY Maintaining in transit became more important RESTAURANT TECH INVESTMENT than ever for restaurants relying % of restaurant operators who say they devoted more resources to customer- on off-premises service. A solid facing technology since the beginning of the outbreak in March majority of operators—including 86% of fine dining operators— say they upgraded their takeout 52% and delivery packaging. 50% 50% 48% 46% TECHNOLOGY 39% QUALITY UPGRADES Roughly half of fullservice, fast % of restaurant operators who say they upgraded their casual, and coffee & snack takeout and delivery packaging since the beginning of operators say they devoted the outbreak in March more resources to tech including online or in-app ordering, mobile payment and delivery 86% management since March.

78% 76% While the technology itself 70% hasn’t changed much since pre-COVID-19 days, tech 63% 63% adoption rates accelerated. What might have been “nice to Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack have” became “need to have.” Operators implemented changes Source: National Restaurant Association, Restaurant Trends Survey, December 2020 with increasing focus on safety and convenience to help keep the business from going under.

Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack

Source: National Restaurant Association, Restaurant Trends Survey, December 2020 22 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 23

TECH FOCUS: TECH FOCUS: QR CODES IN-APP ORDERING Since the beginning of the COVID-19 outbreak in March, To enhance customer safety and roughly 1 in 4 operators across all segments say they added reduce cost and waste associated tech to let customers order through mobile apps. with disposable menus, some 1 in 5 customers who plan to eat at a restaurant and 1 in 4 operators turned to a nearly customers who plan to order food to go say that app-based forgotten piece of technology: the ordering would influence their choice of one restaurant over QR code. Half of fullservice another, with Gen Z adults leading that pack. operators reported adding digital TECH FOCUS: menus accessed by scanning a CONTACTLESS & QR code since March. MOBILE PAYMENTS DIGITAL NATIVES HAVE Still, just 1 in 5 customers say To help avoid person-to-person contact, some 40% of APPS-PECTATIONS the option of accessing the operators across all 6 segments say they added a % of customers* who say the option of ordering and payment menu on their phone contactless or mobile payment option since March. through a smartphone app would make them more likely to through a QR code would choose one restaurant over another during the next few months TECH FOCUS: make them more likely to It’s particularly valuable for off-premises dining. For those planning to order from a restaurant soon, 29% would ONLINE ORDERING choose one restaurant over 20% choose a business that offered contactless or mobile ALL Nearly half (48%) of consumers planning to order another during the next few CUSTOMERS* payments over one that didn’t. 26% months. takeout or delivery say the availability of online 21% of guests planning to dine in say this option would ordering would make them choose one restaurant Perhaps codes are more factor into their restaurant choice. 37% over another, though Gen Xers were the least likely expectation than influencer. GEN Z to agree (41%). Many restaurants, including over half ADULTS 40% (18–23) of fine dining operators, added the option in recent GOING CONTACT FREE months. % of customers* who say the availability of a contactless or 25% mobile payment option would make them more likely to choose MILLENNIALS DIGITAL MENUS (24–39) one restaurant over another during the next few months 30% % of restaurant operators who added a QR code-accessible NEW ONLINE ORDERS menu since the beginning of the outbreak in March 21% ALL % of restaurant operators who say they added online GEN XERS 15% CUSTOMERS* 29% (40–55) ordering since the beginning of the outbreak in March 54% 23% 50% 48% GEN Z 29% ADULTS BABY 15% (18–23) 45% BOOMERS 51% (56–74) 24% 45% 24% MILLENNIALS 42% 32% (24–39) 41% Customers that plan to eat on-premises Customers that plan to order takeout/delivery 31% Source: National Restaurant Association, National Household Survey, December 2020 35% *Consumers that plan to either eat on-premises or order takeout, drive thru or delivery 18% during the next few months. 31% 21% GEN XERS (40–55) 27% 13%

BABY 21% BOOMERS (56–74) Family Casual Fine Quick- Fast Coffee & 28% dining dining dining service casual snack Family Casual Fine Quick- Fast Coffee & Source: National Restaurant Association, Restaurant Trends Survey’, dining dining dining service casual snack December 2020 Customers that plan to eat on-premises Customers that plan to order takeout/delivery Source: National Restaurant Association, Restaurant Trends Survey, Source: National Restaurant Association, National Household Survey, December 2020 December 2020 *Consumers that plan to either eat on-premises or order takeout, drive thru or delivery during the next few months. 24 STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDSNATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 25

SERVICE FOCUS: SERVICE SERVER VS. TABLET Given a choice, most consumers prefer table service when they’re a restaurant; only 1 in 5 say the OPTIONS option of ordering and paying through a tablet or smartphone at the table would influence their restaurant choice.

Despite tech’s role in convenient, contactless ordering, so critical in today’s Among customers that plan to dine in a restaurant or environment, customers miss personal service. Given the choice of ordering fast food place in the next few months, 64% say from a server or ordering from their phone or a tablet at the table, most want they’d choose to sit in the section with traditional the server. Only 1 in 10 customers say the option of ordering from a self- table service. This preference was strongest with the service kiosk would influence their choice of restaurant—self-service is not older set, with nearly 69% of baby boomers and 67% necessarily a huge influencer. of Gen-Xers saying they’d go for the section with traditional service. Longing for on-premises dining, many customers are very willing to dine For Gen Z adults, tech was more of a draw; 55% say outdoors, on patios, parking lots and even in the street, though they they would choose to order and pay electronically appreciate a tent and may draw the line if temps dip below 60°F. from their table.

TRADITIONAL SERVICE IS THAT BOOTH FREE? % of on-premises customers* who say the option IS STILL TOPS of picking their exact table from a seating chart How on-premises customers* would prefer to be served at a on a website when making a reservation would tableservice restaurant make them more likely to choose one restaurant SERVICE over another during the next few months FOCUS: PREMISES PREMISES MILLENNIALS BABY BOOMERS CUSTOMERS GEN Z ADULTS GEN-XERS (18-23) (24-39) (40-55) (56-74) CHOOSE SEATING OPTION ALL ON-

YOUR TABLE ALL Traditional table ADULTS service, where a About 1 in 5 consumers server takes the 19% 64% 45% 57% 67% 69% planning to dine in soon order and brings the bill at the would pick one restaurant over GEN Z GEN end of the meal another if they could choose ADULTS X-ERS (18-23) 23% (40-55) 21% their table from a seating chart Customers order food and while making a reservation. Gen beverages and pay the bill using Z adults were the most likely to 36% 55% 43% 33% 31% either a computer show interest in this option. tablet at the table MILLENNIALS BABY (24-39) BOOMERS or an app on their 18% (56-74) 19% smartphone

Source: National Restaurant Association, National Household Survey, December 2020 Source: National Restaurant Association, National Household Survey, *Consumers that plan to eat on-premises at a restaurant during the next few December 2020 *Consumers that plan to eat on-premises at a restaurant during the months. next few months. 26 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 27 STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS

MEAL FROM EATERY TO MOST MEAL KITS COME STREETERY KITS % of restaurant operators who say they added outdoor FROM FULLSERVICE seating on a sidewalk, parking lot or street since the beginning of the outbreak in March MAKE % of operators who say their restaurant added meal kits COOKING since the beginning of the COVID-19 outbreak in March FUN 23% 45% 45% 41% 20% 20%

28% OUTDOOR EXPANSION 26% % of restaurant operators who say they devoted more resources to developing or expanding outdoor dining areas SERVICE FOCUS: since the beginning of the outbreak in March 20% OUTDOOR DINING INSIDE, BUT OUTDOORS As the pandemic cut indoor dining capacity, 62% % of consumers* who say they’d likely go to a restaurant and be seated outside in an enclosed and temperature- Family Casual Fine Quick- Fast Coffee & operators looked to expand outdoors. 62% of dining dining dining service casual snack 56% controlled ventilated tent, if social-distancing measures fine dining and 56% of casual dining operators are in place Source: National Restaurant Association, Restaurant Trends Survey, December 2020 devoted more resources to developing and 48% expanding outdoor dining areas since the beginning of the pandemic. 37% Seating areas went way past the patio. In many cities, restaurants were allowed to expand onto 30% the sidewalk, into a closed-off section of street, 23% ALL or into an adjacent parking lot. ADULTS More than 4 in 10 fullservice operators took 70% advantage of these outdoor options. GEN Z GEN The expansion of outdoor seating capacity may Family Casual Fine Quick- Fast Coffee & ADULTS X-ERS dining dining dining service casual snack (18-23) 74% (40-55) 69% have given operators a lifeline during the warmer

months, but as temperatures dropped, so did Source: National Restaurant Association, Restaurant Trends Survey, business. December 2020 On average, 60.5°F is the lowest temperature BABY diners say they’ll tolerate to eat outside (Gen Zs MILLENNIALS (24-39) BOOMERS 64% will tolerate 57.3°F; Boomers 63.4°F). But, add a 76% (56-74) little shelter and 7 in 10 adults would take a table outside in a temperature-controlled, ventilated tent, provided standard social-distancing ALL ON- measures are in place. 85% of those planning PREMISES 85% to dine on-premises in the coming months say CUSTOMERS* they’d be willing take those tables.

Source: National Restaurant Association, National Household Survey, December 2020 *Customers that plan to eat on-premises at a restaurant or Source: National Restaurant Association, National Household Survey, fast food place during the next few months December 2020 STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS 28 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY |OPERATIONAL TRENDS 29

MARKETING FOCUS: MARKETING VALUE PROPOSITIONS Value has always been a key factor when consumers choose restaurants. In today’s challenging economic environment TRENDS for many households, value is more important than ever. CONSUMERS LOYALTY 4 in 10 customers planning to dine out soon would choose a restaurant that offered discounted dining during PROGRAMS the less busy days of the week over one that didn’t. % of customers* who say the availability of a customer Throughout the pandemic, restaurant operators in all segments scrambled to 3 in 10 on-premises customers would be more likely loyalty and reward program would make them more likely maintain sales. In addition to an array of new services and adapted business to choose one restaurant over another during the next few to choose a restaurant that offers discounts for models, marketing initiatives helped them win customers. Particularly effec- months dining at off-peak times of the day or that had an tive were those that rewarded customers with discounts for brand loyalty and option to order smaller portions for a lower price. 34% a newer approach, meal subscription programs, is emerging (see p. 38). ALL The same value propositions influence the takeout and CUSTOMERS* delivery choices for off-premises customers as well. 36% NEW LOYALTY PROGRAMS 29% % of restaurant operators who say they added a GEN Z CUSTOMERS LIKE A DEAL loyalty or frequent customer program since the ADULTS (18–23) beginning of the outbreak in March 35% Value propositions that would make on-premises and off- premises customers more likely to choose one restaurant over another during the next few months 31% MILLENNIALS 12% MARKETING FOCUS: 12% (24–39) LOYALTY PROGRAMS 35% 10% 38% VALUE PROP BABY BOOMERS BABY PREMISES MILLENNIALS MILLENNIALS (56-74) (18-23) (24-39) (40-55) CUSTOMERS* GEN Z ADULTS GEN-XERS Loyalty programs were a popular and common industry ALL ON- GEN XERS practice before the pandemic, driving traffic and encour- 9% (40–55) 35% Discounts for aging repeat visits. Still, some operators added new dining on less busy 39% 39% 40% 39% 43% days of the week programs in 2020. 39% BABY 7% 7% Discounts for Roughly 1 in 3 on- and off-premises customers say the BOOMERS dining at off-peak 32% 29% 26% 33% 37% Source: National (56–74) 39% availability of a customer loyalty and reward program Restaurant times of the day Association, would make them more likely to choose one restaurant Restaurant Trends Survey, Option of smaller- over another during the next few months. December 2020 Customers that plan to eat on-premises Customers that plan to order takeout/delivery sized portions for 29% 25% 23% 28% 37%

Family Casual Fine Quick- Fast Coffee & Source: National Restaurant Association, National Household Survey, December 2020 a lower price dining dining dining service casual snack *Consumers that plan to either eat on-premises or order takeout, drive thru or delivery during the next few months.

VALUE PROP PREMISES MILLENNIALS MILLENNIALS BABY BOOMERS (18-23) (24-39) (40-55) (56-74) CUSTOMERS** CUSTOMERS** GEN Z ADULTS GEN-XERS ALL OFF-ALL

Discounts for ordering on 35% 54% 34% 30% 35% less busy days of the week

Discounts for ordering at off-peak 34% 34% 35% 33% 35% times of the day Source: National Restaurant Association, National Household Survey, December 2020 Option of smaller- *Consumers that plan to eat on-premises at a restaurant during the next few months sized portions for 25% 33% 23% 21% 29% **Consumers that plan to order takeout, drive a lower price thru or delivery during the next few months 30 31 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | OPERATIONAL TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD AND MENU TRENDS 31 IN THE COMING YEAR

SOME CHANGES WORTH KEEPING % of operators likely to keep changes made to their restaurant after COVID-19 has subsided 76% 74% 71% 68% 68% 69% Restaurant operators made significant changes to their operations to weather the pandemic, and many of those changes will stick. Most operators across all 6 segments plan to keep at least some of the changes; fewer than 5% say they won’t keep any.

And though many of the changes they 28% 26% 28% 27% made improved efficiency and productivity, 23% 22% those benefits didn’t mean more profit this year. Most operators say their restaurant’s FOOD & profit margin is lower than it was prior 4% 4% 4% to the COVID-19 outbreak. In all, the 3% 3% 2% industry faces a lot of recovery ahead Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack MENU and savvy operators will figure out how

to take the most effective lessons they Keep all of the changes Keep some of the changes Keep none of the changes learned this year to speed that process. Source: National Restaurant Association, Restaurant Trends Survey, December 2020 TRENDS PROFIT LOSSES Operators streamlined menus and pivoted to EFFICIENT BY NECESSITY Restaurant operators’ reporting of their profit margin compared to off-premises business, selling alcohol-to-go, pre-COVID-19 levels meal kits and groceries to make it through 2020. % of restaurant operators who say their operation The year tested the limits of operator , has become more efficient and productive since 91% 90% 90% 86% 87% the beginning of the outbreak in March accelerated trends, and raised customer demand for their favorite restaurant meals. 63% 71% These trends didn’t offset the industry’s 60% 57% 58% devastation; it’s down nearly $240 billion and 52% finished the year with 2.5 million fewer jobs than 49% pre-coronavirus levels. But they do show restaurateurs’ resiliency, creativity and commitment. The following are the top food and menu means by which restaurants survived 2020, from a survey 15% 14% of 6,000 restaurant operators and 1,000 adult 10% 9% 7% 7% 5% 32 Menu Styles & Services consumers. Until virus-related dining restrictions 3% 4% 3% 4% 4% 34 Top Selling Items are in the rear-view, many of these food and Family Casual Fine Quick- Fast Coffee & Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack menu trends are likely to continue. dining dining dining service casual snack 40 Alcohol To Go

Source: National Restaurant Association, Restaurant Trends Survey, Higher profit margin Lower profit margin About the same profit margin December 2020 Source: National Restaurant Association, Restaurant Trends Survey, December 2020 32 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS 33 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD AND MENU TRENDS

FINE DINING PIVOTS MOST TO OFF-PREMISES % of operators who say their restaurant added menu FOOD & MENU items that are specifically designed for takeout or delivery* TRENDS 56%

OPERATORS MOST LIKELY TO … More menu items CUT MENU OFFERINGS FROM 36% 37% PRE-COVID-19 LEVELS Fewer menu items 33%

Number of menu offerings now compared to pre-pandemic About the same 27% number of menu items 63% OFF-PREMISES 56% 55% 22% 53% PREDOMINATES 50% 47% 48% Prior to the pandemic, roughly 80% of fullservice STREAMLINED 42% traffic was on-premises, according to NPD/CREST. 38% As on-premises dining restrictions went into effect, MENUS 35% 34% off-premises customers made up most of the traffic. With a slowdown in business and 30% Fullservice operators adapted operations to meet that on-premises dining restrictions, many demand shift. fullservice operations got lean fast, Family Casual Fine Quick- Fast Coffee & reducing inventories and developing 56% of fine dining operators say theyadded menu Source: National dining dining dining service casual snack menu items they could make well 12% 12% Restaurant items made for takeout or delivery, as do nearly 4 in 10 Source: National Restaurant Association, Restaurant Trends Survey, 9% December 2020 7% Association, with a smaller crew in the kitchen. 5% 5% Restaurant family dining and casual dining operators. *since the beginning of the COVID-19 outbreak in March Trends Survey, 63% of fine dining operators and December 2020 roughly half of casual and family Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack dining operators say they have fewer SHIFTING TO OFF-PREMISES items on the menu than they did % of operators who say their menu is more tailored to More menu items before coronavirus hit. STAYING THE COURSE IN THE off-premises than it was before COVID-19

The trend was less dramatic in limited MONTHS AHEAD Fewer menu items 55% service where half of operators kept Number of menu offerings in 6 months compared to now their menus about the same. About the same number of menu items 47% 47% 71% More than 60% of operators surveyed 67% 68% plan to keep offerings where they 65% 63% 62% 39% are in the coming months. 36% 34%

30% 31% 30%

22% Source: National 20% 21% Restaurant Association, 13% Restaurant 11% Trends Survey, 8% December 2020 6% 7% 7% Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack Source: National Restaurant Association, Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack Restaurant Trends Survey, December 2020 DEMOGRAPHIC

All Adults 77%

Gender 34 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS 35 Male 77%

Female 77%

AGE GROUP

Gen Z adults (18-23) 66% CONSUMERS CRAVE HANDHELD FOOD Restaurant operators’ reporting of their most popular food item right now Millennials (24-39) 76%

Gen X (40-55) 80% LIMITED- FULLSERVICE SERVICE 81% TOP SELLERS FOOD ITEM Baby boomers (56-74) OPERATORS FOOD ITEM OPERATORS Most operators surveyed REGION SANDWICHES / SPENDING MORE TIME AT HOME say their current best- BURGERS 19% 18% % of consumers who say they’re more likely to stay home and watch 73% SUBS / WRAPS Northeast selling food and beverage on-demand TV and videos than they were before COVID-19 SEAFOOD ITEMS PIZZA South 82% items were already 13% 14% PIZZA BURGERS Midwest 77% on the menu before 11% 12% coronavirus hit. CHICKEN ITEMS West 78% STEAK 9% 7% BLENDED MEALS In the fullservice segment, (EXCL. WINGS) TYPE OF COMMUNITY CHICKEN ITEMS AT HOME burgers and beer are the 8% ICE CREAM / 7% ALL Urban 74% (EXCL. WINGS) COOKIES / CAKES ADULTS most popular food and With travel discouraged, 77% of adults Suburban 79% beverage items; for ITEMS 8% BAKED GOODS 7% 77% say they’re more likely to stay at home limited-service operators, Rural 79% PASTA 6% BREAKFAST ITEMS 7% and watch on-demand TV and videos sandwiches and GEN Z GEN MEXICAN FOOD 5% MEXICAN FOOD 5% than they were before COVID-19. ADULTS X-ERS soft lead orders. (18-23) 84% (40-55) 79% SANDWICHES / To satisfy restaurant cravings (and Fine dining operators (11%) 5% BBQ ITEMS 3% SUBS / WRAPS maybe relieve cooking duties), 52% of were the most likely to say CHICKEN WINGS 4% SEAFOOD ITEMS 3% adults (63% of millennials) are more that their current top-sell- Source: National Restaurant Association, Restaurant Trends Survey, December 2020 likely to incorporate restaurant ing menu item was newly BABY fare—say a main dish, side or — MILLENNIALS added to their menu after (24-39) BOOMERS 79% (56-74) 72% the outbreak in March. into their home-prepared meal. WASH IT DOWN WITH SODA AND BEER Restaurant operators’ reporting of their most popular beverage item right now Source: National Restaurant Association, National Household Survey, December 2020

LIMITED- FULLSERVICE BEVERAGE SERVICE BEVERAGE ITEM OPERATORS ITEM OPERATORS BEER 29% SOFT DRINKS 44% BLENDED MEALS ON THE RISE % of consumers who say they’re more likely to mix restaurant items— SOFT DRINKS 16% COFFEE 25% such as a main dish, side, or dessert—into their home-prepared meals WINE 15% BEER 8% than they were before COVID-19 COFFEE 9% BOTTLED 5% MARGARITAS 6% ICED 4%

Source: National Restaurant Association, Restaurant Trends Survey, December 2020 ALL ADULTS 11% 52% TOP SELLERS: Most popular food items on menu GEN Z GEN MORE TRIED ADULTS X-ERS AND TRUE (18-23) 58% (40-55) 58% Most popular beverage THAN NEW 7% items on menu % of operators who say their restaurant’s 5% 5% 5% 5% MILLENNIALS BABY (24-39) BOOMERS current top-selling food 63% (56-74) 40% and beverage items 4% 4% 4% 4% 4% Source: National Restaurant Association, were newly added to 3% the menu after the National Household Survey, December 2020 outbreak in March

Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack

Source: National Restaurant Association, Restaurant Trends Survey, December 2020 36 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS 37

BUNDLED MEALS: CONSIDERED FULLSERVICE OPERATORS DEALS MOST LIKELY TO ADD BUNDLED MEAL The offer of a bundled meal, a deal that might OPTIONS KITS include appetizer, side, entrée and dessert in either % of operators who say their restaurant added family or MAKE family packs or for individual meals, can influence bundled meals since the beginning of the COVID-19 customers’ restaurant choice. Bundling is good outbreak in March COOKING business. 50% of fine dining operators and more 50% than 4 in 10 family dining and casual dining FUN operators say their restaurant added family or 45% More than half of adults say bundled meals since the beginning of the pandemic. 43% they’d likely purchase a meal Looking ahead, 30% of off-premises kit if it was offered by one of their favorite restaurants. The customers* say they would be 35% number rises to 75% for more likely to choose a millennials and Gen Z adults. restaurant that offers meal MOST MEAL KITS COME 28% Kits package pre-measured bundles during the next ingredients and instructions to FROM FULLSERVICE few months. make the restaurant meal % of operators who say their restaurant added meal kits at home. since the beginning of the COVID-19 outbreak in March

14% 23% of fine diningoperators and 20% of family dining and 23% casual dining operators say their restaurant added meal 20% 20% Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack kits since the beginning of the COVID-19 outbreak in March. Source: National Restaurant Association, Restaurant Trends Survey, December 2020 15% 14% ONE STOP FOR YOUNGER CONSUMERS LIKE DIY 12% % of off-premises customers* who say they’re more likely to RESTAURANT MEALS MOST choose a restaurant that offers multi-course meal bundles, % of consumers who say they’d be likely to buy a meal such as an appetizer, entrée and dessert % of off-premises kit if it was offered by one of their favorite restaurants customers* who say they’re more likely to choose a restaurant that offers multi- ALL Family Casual Fine Quick- Fast Coffee & ADULTS course meal bundles, ALL dining dining dining service casual snack ADULTS such as an appetizer, Source: National Restaurant Association, Restaurant Trends Survey, 30% 56% December 2020 entrée and dessert GEN Z GEN ADULTS X-ERS GEN Z GEN (18-23) 34% (40-55) 30% ADULTS X-ERS (18-23) 75% (40-55) 56%

MILLENNIALS BABY BABY (24-39) BOOMERS MILLENNIALS 27% (56-74) 31% (24-39) BOOMERS 75% (56-74) 38%

Source: National Restaurant Association, National Household Survey, December 2020 Source: National Restaurant Association, National Household Survey, *Consumers that plan to order takeout, drive thru or delivery from a December 2020 restaurant or fast food place during the next few months. 38 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS 39 STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS

MEAL KITS MOST MEAL KITS COME MAKE FROM FULLSERVICE % of operators who say their restaurant added meal kits GROCERIES STOCKING THE SHELVES COOKING since the beginning of the COVID-19 outbreak in March % of operators who say their restaurant started offering grocery items for sale since the beginning of 23% SUPPLEMENT SALES the outbreak in March FUN Seems like anything that saves a trip gets a thumbs 20% 20% up. More than half of consumers surveyed—and nearly 70% of millennials—would buy groceries 14% 14% (fresh, uncooked items such as meat, produce, 15% dairy, bread or pasta) if restaurants offered them. 14% 12% Some restaurants have complied, helping to 12% draw business and boost sales. 14% of fine dining 11% 11% and fast casual operators say their restaurant started selling grocery goods since the virus’ SIGN ME UP! onset, as did roughly 1 in 10 casual dining, % of consumers who say they would be likely family dining and coffee & snack operators. to participate in a meal subscription program 7% if it was offered by one of their favorite SUBSCRIBE restaurants AND SAVE PICKING UP A PIZZA … Family Casual Fine Quick- Fast Coffee & Through restaurant meal subscrip- AND MILK AND EGGS dining dining dining service casual snack tion programs, customers sign up ALL Source: National Restaurant Association, Restaurant Trends Survey, ADULTS December 2020 to receive a set number of meals % of consumers who say they’d be likely to purchase fresh, 55% uncooked food items such as meat, produce, dairy, bread each month, for pickup or delivery, or pasta, if they were offered by one of their favorite at a discounted menu price. GEN Z GEN ADULTS X-ERS restaurants (18-23) (40-55) While meal subscription programs 67% 60% aren’t widespread—only 1% of family dining, quickservice, casual dining and coffee & snack, 2% of

fine dining and 3% of fast casual MILLENNIALS BABY ALL ADULTS (24-39) 71% BOOMERS 36% operators added them—they (56-74) 52% appear to be an attractive option.

More than half of consumers GEN Z GEN surveyed say they’d likely partici- ADULTS X-ERS (18-23) 61% (40-55) 54% pate in a meal subscription Source: National Restaurant Association, National Household Survey, December 2020 program if it was offered by one of their favorite restaurants; for millennials and Gen Z adults, it’s MILLENNIALS BABY roughly 7 in 10. (24-39) BOOMERS 69% (56-74) 35%

Source: National Restaurant Association, National Household Survey, December 2020

Source: National Restaurant Association, National Household Survey, December 2020 40 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS 41

ALCOHOL TO GO As more and more jurisdictions allowed restaurants to include alcoholic beverages in takeout and delivery orders, beer, wine and cocktails became increasingly ALL SEGMENTS ARE INTO COCKTAILS CLICK MOST WITH important across all restaurant segments. ALCOHOL TO GO MILLENNIALS % of operators* who say their restaurant started offering % of off-premises customers* who say they included an alcoholic beverage Roughly 7 in 10 fullservice alcoholic beverages for takeout or delivery since the with a takeout or delivery order from a restaurant since the beginning of the operators who offer alcoholic beginning of the outbreak in March outbreak in March beverages say they started selling them with takeout or delivery 20% orders since the beginning of the 72% 73% ALL 68% CUSTOMERS* outbreak in March, as did more than 18% half of quickservice and fast casual operators who serve alcohol. Alcohol to go might be one of 53% 52% 33% those trends—accelerated by the MILLENNIALS (24–39) pandemic—that is here to stay. 44% 28% 35% of off-premises customers age 21+ (53% of millennials) say they’d be more likely to choose a restaurant if 20% GEN XERS they can get an adult beverage with (40–55) their food order. 22%

9% BABY ALCOHOL SALES KEY FOR Family Casual Fine Quick- Fast Coffee & BOOMERS CAN I GET A BEER WITH dining dining dining service casual snack (56–74) FULLSERVICE RESTAURANTS 1% THAT? With a takeout order With a delivery order % of operators who say their restaurant serves Source: National Restaurant Association, Restaurant Trends Survey, % of off-premises customers* who say they’re more alcoholic beverages December 2020 Source: National Restaurant Association, National Household Survey, December 2020 likely to choose a restaurant if it offers the option of *Base: Restaurants that currently serve alcoholic beverages *Consumers age 21+ that ordered takeout/delivery from a restaurant since the beginning of the outbreak in March. including alcoholic beverages with the to-go order 98% % of off-premises 93% customers* who say they’re more likely to ALL 79% choose a restaurant OFF-PREMISES that offers multi- CUSTOMERES* course meal bundles, 35% such as an appetizer,

entrée and dessert MILLENNIALS GEN X-ERS 52% (24-39) 53% (40-55) 39%

BABY BOOMERS 13% 24% 24% (56-74)

Family Casual Fine Quick- Fast Coffee & dining dining dining service casual snack Source: National Restaurant Association, National Household Survey, December 2020 Source: National Restaurant Association, Restaurant Trends Survey, *Consumers age 21+ that ordered takeout/delivery from a December 2020 restaurant since the beginning of the outbreak in March. 42 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | FOOD & MENU TRENDS 43

HEALTHY AND COMFORT FOODS ARE CALLING -SPECIFIC % of customers* who say the availability of comfort food on the menu would make them more likely to choose one restaurant FOOD over another during the next few months To the same degree the availability of comfort foods influences restaurant choice, so do healthful menu options. Diet-specific items (gluten-free, vegan, etc.) 38% however, are of less importance right now. ALL CUSTOMERS* Fewer than 1 in 7 customers say the availability of 33% diet-specific food would impact their restaurant CUSTOMERS CRAVE choice for either on- or off-premises dining. GEN Z 38% ADULTS COMFORT FOODS (18–23) 38% BABY BOOMERS MOST Stress and anxiety call for comfort food. Nearly a third of fine dining operators, and 1 in 5 family LIKELY TO CHOOSE PLACES and casual dining operators added comfort items 36% MILLENNIALS WITH HEALTHY CHOICES to menus since the onset of the coronavirus. (24–39) % of customers* who say the availability of healthy 32% And comfort is still calling consumers: 38% of options on the menu would make them more likely to on-premises and 33% of off-premises customers choose one restaurant over another during the next few months say their restaurant choices over the next few 38% GEN XERS months will be influenced by whether the menus (40–55) 27% 38% include the comfort foods they crave. ALL CUSTOMERS* 42% 33% BABY ADDING COMFORT TO BOOMERS (56–74) 38% GEN Z 36% THE MENU ADULTS % of operators who say their restaurant added comfort (18–23) food to the menu since the beginning of the outbreak Customers that plan Customers that plan to 34% in March to eat on-premises order takeout/delivery Source: National Restaurant Association, National Household Survey, December 2020 36% MILLENNIALS 31% *Consumers that plan to either eat on-premises or order takeout, (24–39) drive thru or delivery during the next few months. 29%

30% GEN XERS (40–55) 20% 31% 18%

15% BABY 45% BOOMERS 13% (56–74) 10% 39%

Family Casual Fine Quick- Fast Coffee & Customers that plan Customers that plan to dining dining dining service casual snack to eat on-premises order takeout/delivery Source: National Restaurant Association, Restaurant Trends Survey, Source: National Restaurant Association, National Household Survey, December December 2020 2020 *Consumers that plan to either eat on-premises or order takeout, drive thru or delivery during the next few months. 44 STATENATIONAL OF THE RESTAURANT RESTAURANT ASSOCIATION INDUSTRY || STATEFOOD &OF MENU THE RESTAURANT TRENDS INDUSTRY | FOOD & MENU TRENDS 45 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | WORKFORCE TRENDS 45

DIETARY NEEDS LESS COMPELLING IN RESTAURANT CHOICE % of customers* who say the availability of diet-specific food on the menu, like vegetarian or gluten-free, would make them more likely to choose one restaurant over another during the next few months

14% ALL CUSTOMERS* 12%

GEN Z 12% ADULTS (18–23) WORKFORCE 14% TRENDS MILLENNIALS 18% (24–39) 12% At the start of 2020, the restaurant and food- service industries were projected to provide 15.6 million jobs and would have represented GEN XERS 16% (40–55) 10% of all payroll jobs in the economy making it the second-largest private sector 10% employer in the U.S. BABY Then COVID-19 hit. BOOMERS 11% (56–74) Eating and drinking places are the largest 12% component of the restaurant and foodservice workforce and were projected to provide 12.3 million jobs during 2020. The other 3.3 million Customers that plan Customers that plan to foodservice positions were expected to be in to eat on-premises order takeout/delivery sectors such as 46 Jobs Timeline Source: National Restaurant Association, National Household Survey, • health care December 2020 47 Employment & Staffing Levels • accommodation *Consumers that plan to either eat on-premises or order takeout, drive-thru or delivery during the next few months. 48 State Employment Levels • education • food and beverage stores 46 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | WORKFORCE TRENDS 47 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | WORKFORCE TRENDS

STAFFING WORKFORCE EMPLOYMENT RECOVERY LEVELS: STALLED IN NOVEMBER TRENDS DOWN Number of jobs* at eating and drinking places (millions) 12.2 12.3 ACROSS ALL 11.7 10.2 10.2 SEGMENTS 9.7 9.8 10.0 9.8 9.2 9 in 10 fullservice operators THE RESTAURANT EATING AND DRINKING PLACES – 12,310,000 report staffing levels that are 7.7 Healthcare and social assistance – 570,000 lower than what they would Accommodations – 530,000 6.2 INDUSTRY WAS be were it not for COVID-19. Education – 435,000 PROJECTED TO Food and beverage stores – 400,000 62% percent of fine dining Arts, entertainment, and recreation – 350,000 operators and 54% of both PROVIDE 15.6 Civic/social organizations – 125,000 family dining and casual dining MILLION JOBS Government – 125,000 operators say staffing levels are Employment/temporary help services – 95,000 more than 20% below normal. IN 2020 Convenience stores and gasoline stations – 85,000 – 70,000 In the limited-service segment, Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Distribution of restaurant and General merchandise stores – 50,000 job losses are a little less severe. foodservice jobs by industry All other industries – 415,000 More than 1 in 4 operators Sources: Bureau of Labor Statistics, National Restaurant Association *Note: The BLS monthly employment reports count jobs during the payroll period that includes the report staffing that’s at or above 12th of each month. Changes in restaurant staffing levels—both negative and positive—have occurred Source: National Restaurant Association projections, based on historical data from the Bureau of Labor Statistics normal levels. Still, a majority of rapidly during the pandemic, as restaurants quickly adjust their operating status in response to *Note: The projected 15.6 million restaurant and foodservice jobs includes employment in all eating and drinking place occupations, plus employment in evolving regulatory and economic conditions. As a result, significant changes likely occur during the foodservice positions that are not located at eating and drinking places. limited-service operators report weeks between each measurement period, and the monthly data likely did not fully capture the total job losses experienced during the coronavirus lockdowns. Based on surveys of restaurant operators, staffing levels below normal. the National Restaurant Association estimates that more than 8 million eating and drinking place 2020: A TIMELINE employees were laid off or furloughed during the peak of the lockdowns. January-February: Eating and drinking place employ- November: Employment recovery stalled with eating ment completes its 10th consecutive year of growth and drinking places payrolls remaining essentially flat. STAFFING LEVELS ARE BELOW NORMAL reaching a record 12.3 million jobs in February. Business conditions deteriorated with less outdoor Restaurant operators’ reporting of current staffing compared to normal levels March-April: The restaurant industry suffers far more dining, rising restrictions on indoor dining, and a 29% job losses than any other sector at the outset of the scale-back on holiday celebrations. 25% 25% AT OR ABOVE pandemic, as government-mandated lockdowns leads December: The bottom fell out. Plunging sales forced 13% 11% NORMAL to some 8 million restaurant and foodservice employ- restaurants to cut roughly 400K jobs. The eating and 8% BELOW ees being laid off or furloughed. drinking place sector finished 2020 nearly 2.5 million NORMAL jobs (or 20%) below its pre-coronavirus level. That’s 29% May-June: An unprecedented hiring surge follows, 34% 35% 33% with nearly 3 million restaurant employees returning 3 times larger than the next closest industry: the 39% At or above normal to payrolls in May and June. While a 2-month employ- professional and business services sector at 858,000 41% jobs below its pre-coronavirus level. ment bounce of 3 million jobs is impressive, it only 1%-20% below normal marks the beginning of a long road to recovery. Restaurants have been hit harder than any July-October: Although restaurant employment other industry during the pandemic and have Over 20% below normal 29% continues to trend higher during summer and early fall, the longest climb back to pre-coronavirus 36% 42% the gains are only enough to put a modest dent in the employment levels. staffing shortfall. In total, eating and drinking places 54% 54% 62% add a net 1 million jobs over these 4 months. 62% Source: National Restaurant Association, Restaurant Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack Trends Survey, 2020 48 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | WORKFORCE TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | WORKFORCE TRENDS 49

SPEED OF RECOVERY % of restaurant operators who say they have job openings that are hard to fill VARIES BY STATE 56% Most states remain well below their pre-pandemic restaurant employment levels. As of November 2020, restaurant employ- HELP (STILL) WANTED ment in 47 states and the District of Columbia was below Despite dampened employment 47% February’s reading. Vermont (-40%), Hawaii (-35%) and the conditions, opportunities are available. 43% 42% District of Columbia (-30%) had the largest deficits from their A majority of quickservice operators pre-coronavirus staffing levels. and more than 4 in 10 fast casual, family dining and casual dining 33% Only three states—Oklahoma, Mississippi and Idaho—had more operators say they have job openings eating and drinking place jobs in November than they did in 28% they’re finding hard to fill. February. The majority of operators across all segments say their unfilled job EMPLOYMENT REMAINS BELOW openings are for front-of-house PRE-CORONAVIRUS LEVELS positions. Fullservice operators with hard-to-fill openings say they’re IN 47 STATES AND D.C. having the most trouble finding Family dining Casual dining Fine dining Quickservice Fast casual Coffee & snack November 2020 restaurant employment compared to February 2020 applicants for back-of-house

positions. Source: National Restaurant Association, Restaurant Trends Survey, 2020

WA

ME MT ND OR VT MN NH ID WI NY KITCHEN HELP NEEDED SD MA WY CT % of restaurant operators* who report they’re having difficulty filling open positions in the MI RI following areas PA NV IA NE NJ OH FAMILY CASUAL FINE QUICK- FAST COFFEE & UT IL IN DE MD EMPLOYEE CATEGORY DINING DINING DINING SERVICE CASUAL SNACK CA CO WV VA DC KS MO KY FRONT-OF-HOUSE 65% 62% 65% 70% 62% 67%

NC BACK-OF-HOUSE 82% 81% 81% 78% 73% 51% TN AZ OK NM AR SC MANAGER POSITIONS 28% 24% 29% 54% 41% 37% +0.1% or more MS AL GA Source: National Restaurant Association, Restaurant Trends Survey, 2020 Figures are based on restaurant operators who say they have job openings that are difficult to fill. LA TX -0.1% to -9.9% AK

-10% to -19.9% FL HI -20% or lower

Source: Bureau of Labor Statistics, National Restaurant Association; figures are seasonally adjusted 50 NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | WORKFORCE TRENDS NATIONAL RESTAURANT ASSOCIATION | STATE OF THE RESTAURANT INDUSTRY | METHODOLOGY 51

A LOOK PART OF THE AHEAD PROBLEM: METHODOLOGY A SHALLOWER LABOR POOL Between February and November 2020, the number of people in the U.S. labor force plunged by 4.1 million, according to data from the Bureau of Labor Statistics. This represented a 2.5% decline during the 9-month period. The labor force shrunk among all age groups. There are nearly 2 million fewer 16-to-34- SURVEYS year-olds in the labor force. That’s a problem; National Household Survey, 2020: The National this age cohort makes up nearly two-thirds Restaurant Association commissioned Engine to of the restaurant industry workforce. conduct an online survey of 1,000 adults in December 2020, asking questions about their personal finances 4.1 MILLION FEWER PEOPLE and interaction with restaurants. Restaurant Trends Survey, 2020: The National IN THE LABOR FORCE Restaurant Association conducted an online survey Change in the U.S. labor force between February and of 6,000 restaurant owners and operators in November 2020 November-December 2020, asking questions Each year in this report, the Association provides about their business and operating environments. projections of restaurant employment by occupation. Definition of Generations in this report (based on -0.1 -0.4 -1.4 -0.3 -0.9 -1.0 Like so many things, this year is different. Given the volatility in survey fielding dates): restaurant employment throughout 2020, there simply isn’t a Gen Z adult (18-23) stable data set on which to base projections for the coming year. Millennial (24-39) Until a vaccine is widely available and distributed, restaurant Gen Xer (40-55) job growth will likely be uneven due to the uncertainty

MILLIONS Baby boomer (56-74) associated with spiking COVID-19 case levels along with the potential for state and local authorities to impose renewed dining restrictions in many parts of the country.

% Change -1.8% -2.8% -3.7% -1.0% -2.6% -2.6% The restaurant industry’s return to pre-coronavirus employment levels will likely be measured in years, 16-19 20-24 25-34 35-44 45-54 55 or older not months. AGE GROUP To regularly follow the latest trends in restaurant employment, click here.

Source: Bureau of Labor Statistics, National Restaurant Association; figures are seasonally adjusted