How has the COVID-19 pandemic affected your sales and revenue? While some brands have capitalized on the new normal, many businesses have faced adverse repercussions of quarantine and physical distancing norms.
The pandemic has been particularly harsh on food service establishments, including fine dining restaurants, cafes, and fast food joints. With consumers retreating into their homes, the restaurant industry has had to pivot and brainstorm new ways to stay afloat.
From increased adoption of technology to changes in purchasing behavior - there’s been a drastic shift in restaurant business operations. That makes it imperative for restaurant equipment suppliers to adapt to the latest buying trends in the industry.
In this blog, we’ll explore key changes in restaurant business owners’ buying behavior and preferences. But let’s first delve deeper into how the pandemic has affected the restaurant industry.
Impact of the Pandemic on the Restaurant Industry
To say that restaurant industry sales have plunged due to the pandemic would be an understatement. Restaurant operators across the U.S. have had to deal with temporary and permanent closures, as well as layoffs and furloughs.
As of April 2021, there’s been a 13.4% year-over-year decline of seated diners in U.S. restaurants since 2019. It isn’t surprising considering that social distancing and self-isolation regulations compelled consumers to stay indoors. Also, the pandemic has made them skeptical about dining in public places.
But the pandemic hasn’t weighed down equally on all restaurant industry segments. On the one hand, casual-dining and fine-dining restaurants have witnessed a dip of more than 70% in sales. Pizza chains, on the other hand, have been lucky enough to maintain, and even increase their revenue.
Image via McKinsey & Company
The National Restaurant Association’s survey of 6,000 restaurant operators across various segments gives further insights into the industry’s present state. Of the 600,000 foodservice establishments, more than 110,000 businesses had to close their doors temporarily, or for good.
Moreover, the restaurant industry sales in 2020 were $240 billion less than what the Association had forecast for the year. Foodservice establishments also had to make drastic changes in staffing levels. Nearly 8 million employees were laid off or furloughed at the peak of the pandemic in 2020.
Restaurant employment had fallen below pre-pandemic levels by more than 2.5 million jobs at the end of 2020. The survey concludes that restaurants took the hardest hit during the pandemic compared to other businesses.
How Are Restaurants Dealing with the Pandemic?
Despite the initial setback, foodservice businesses have leveraged technology and innovation to generate revenue. Many restaurant chains, including Applebee’s, have started using QR code-based menus to minimize direct contact between consumers and staff.
Similarly, POS systems have become commonplace across all restaurant industry segments, particularly in cafes and coffee shops. Also, restaurant operators are focused on offering off-premise services, such as curbside pickups and takeaways, as well as in-house and third-party deliveries.
Restaurants are also experimenting with outdoor seating for on-premise dining. Many businesses are also changing their offerings to include more meal kits and single-serve meals. They’re developing menus that can be executed with reduced inventories and smaller crews.
Moreover, restaurant operators are keeping up with changing consumer preferences by dishing out more comfort foods. With more consumers facing financial setbacks, restaurants are also offering various money-saving options, including deals and coupons.
Key Changes in Purchasing Behavior of Restaurant Business Owners
Maintaining and upgrading equipment is one of the most crucial aspects of running a restaurant. Likewise, such businesses need to invest in attractive furniture, crockery, cutlery, packaging, and other supplies. But the combination of diminished sales and decreased cash flow has significantly altered the buying behavior of restaurant operators.
According to Credit Key’s Key Insights Report on the Restaurant Equipment Industry, nearly 80% of restaurant owners had to rely on their emergency funds and credit cards to cope with reduced cash flow. Also, it has compelled 70% of businesses to put major purchases on the back burner until things get better.
Even when restaurant operators are making expensive purchases, their buying behavior isn’t the same as pre-pandemic patterns. Let’s take a closer look at how restaurants are approaching big purchases during the pandemic.
Rise of Online Shopping
There’s no denying that the pandemic has escalated e-commerce adoption rates across the globe. According to McKinsey, the e-commerce industry achieved 10 years of growth within 90 days at the height of the pandemic.
Nearly 14% of buyers have already purchased a digital version of an experience that they would’ve preferred in-person earlier. Also, it’s worth noting that roughly 49% of buyers believe they’ll continue to purchase online even after the pandemic is over.
Credit Key’s Restaurant Key Insights report reveals that restaurants have also hopped on the bandwagon of online shopping. 90% of restaurant owners claim that purchasing equipment and supplies online will be their preference after the pandemic as well.
Image via Credit Key
Reduced Brand Loyalty
The growing adoption of online shopping doesn’t come as a surprise considering the convenience and flexibility it brings. Restaurant owners can compare different vendors in terms of pricing, product quality, and customer service. This, in turn, means they’re less likely to remain loyal to specific vendors.
Instead, 70% of restaurant establishments prefer to use comparison shopping over relying on their go-to vendor. On the contrary, less than 20% of restaurant operators are loyal to their go-to vendor.
Image via Credit Key
The propensity for comparison shopping is an outcome of the absence of human interaction in online purchases. Restaurant operators will no longer choose a brand because of its vision, values, or people. Instead, they prefer to evaluate multiple vendors and choose one that offers the best products and pricing.
Demand for Flexible Financing
In the pre-pandemic world, restaurant equipment suppliers offered conventional financial methods, such as:
- Quarterly equipment lease
- Semi-annual, annual, and seasonal lease
- Lease to own
- Fair market value lease
These payment options no longer work for an industry that’s gravitated toward shopping online. Instead, restaurant operators want a variety of flexible payment options when purchasing equipment and supplies.
Image via Credit Key
Moreover, a slower pace of sales and tighter cash flow have made installment financing a favorite among restaurant owners. They want the convenience of “buy now, pay later” options while purchasing expensive equipment.
Also, restaurant businesses want financing programs with longer payment terms to increase workflow capital. More than 45% of them would prefer a payment term of six months.
Image via Credit Key
The Future of the Restaurant Industry
The new normal has already become a reality for businesses and consumers alike. Restaurant operators are now gearing up for the next normal, i.e. the post-pandemic world.
The Silver Lining
Even though things are looking bleak for restaurant businesses right now, there’s a ray of hope. The National Restaurant Association’s survey indicates that there’s a huge pent-up demand for dining out. While customers have adapted to takeouts and deliveries, they still desire the on-premise dining experience.
6 out of 10 adult consumers claim that restaurants are an indispensable part of their lifestyles. That means the demand for in-restaurant dining experiences will escalate once the pandemic is over. Things look particularly bright with the ongoing vaccination drives and the lifting of restrictions in various states.
The Role of Vendors
Equipment suppliers and distributors must follow suit and cater to the changing demands of restaurant owners. The most crucial step equipment vendors must take is to provide a seamless online shopping experience. You need to leverage modern technology to help buyers evaluate, compare, and purchase products online using any device.
Moreover, you must offer installment financing options with optimal payment terms. According to the Restaurant Key Insights report, brands that are offering installment financing have witnessed a 58% increase in average order value. Also, they’ve seen a 30% rise in checkout conversion rates.
While 49% of restaurant equipment distributors are using e-commerce platforms, only 2.4% of vendors provide financing options. It highlights the need for using a point-of-sale financing payment option, such as Credit Key.
Credit Key’s instant financing solution integrates with leading e-commerce platforms and order management software. It can even approve buyers in real-time from their cart, and helps merchants increase the average order value and conversion rates.
The pandemic has dealt a severe blow to various segments of the restaurant industry. But restaurant operators have adapted to the change by overhauling their operations and offerings. It has also led to a drastic shift in the way they purchase equipment and supplies.
Restaurant owners have gravitated towards vendors that offer a flawless online shopping experience with installment financing options. Restaurant equipment suppliers must keep up with the change by adopting e-commerce platforms and instant point-of-sale financing solutions.
Do you want to implement buyer-friendly payment options for your e-commerce business? Check out Credit Key and schedule a demo today.