Changing Restaurant Paradigms?

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I remember when getting pizza meant going into town and sitting down at the Pizza Hut, where we had a waitress and a pitcher of Pepsi. There was a Space Invaders game, and if I had been good, my dad would give me a quarter to play a game while we waited for the pizza to arrive. Also, the Book-It program gave my family one more reason to go to Pizza Hut and gave me an incentive to get better grades

The model evolved and Carryout became more common. And we ate Pizza Hut more frequently. There was no pitcher of Pepsi and no Space Invaders at home, but we had pizza. Pizza that wasn’t as hot and fresh as we had it at the store, but my parents didn’t have to load us all up and drive into town.

Enter Domino’s and the delivery model. Even though my family lived outside the area where pizza delivery was practical, we knew the paradigm had changed. As time went by, the Pizza Hut lost more and more in-store business. They hired drivers and tried to compete on two fronts. Dine In and Eat at Home.

Now, for a chain pizza place to be solvent, delivery is a given. A dine in pizza place seems quaint, and it must have superior food and service to attract enough customers to stay in the black. The market has changed. The dining location for pizza is now the home, not the dining room.

My wife and I picked up dinner tonight at Biaggi’s, a family favorite. Due to the Wuhan virus, all dining must be done outside an eating establishment, otherwise we would have enjoyed the experience in the dining room. The waitstaff is always helpful and attentive. The drink refills come quickly, the specials are described, special orders are no problem, and so on.

Our dinner was not a disappointment at all. It wasn’t as hot as it would be due to the drive home and setup at our own kitchen table. To offset this, and to keep their business going in this environment, Biaggi’s gave us 20% off the order. At a first glance, that seems like a huge cut! Restaurant profit margins are usually pretty tight.

But there are expenses associated with running a restaurant. They didn’t have to pay their wait staff, the bartenders, the table bussers, the hostesses and other positions I’m unaware of. The dishwasher could focus on the kitchen utensils, without worrying about any customer dishes and silverware. The cost savings they experienced may or may not match the 20% discount they offered, but a businessperson would need to factor that in.

Now picture a restaurant in the same category as Biaggi’s but without inside dining. Better food (by far) than an Applebee’s, but without any need to cater to a dining room full of customers. No need to hire staff to seat them, to clean up their messes, to serve them really at all. And then factor in the much smaller customer parking you would require and the smaller taxes that would be levied on your establishment due to the smaller footprint.

I don’t think nice mid-range restaurants are a thing of the past. I couldn’t imagine that! People in the US will continue to look forward to an evening of being served, of eating freshly cooked food and not having any dishes waiting when they are done eating. But I could see a delivery and/or carryout option available for people who want a nice meal for a lower price than the mid-range restaurant and who don’t mind cleaning up after themselves.

As a hobby, I like to forecast market trends. Not anything specific enough to buy shares of this or that stock, but enough to look at macro trends and forecast what the next stage might look like. I’m no expert in this, but I could imagine some company coming up with an option like this. There are Americans who would like an upgraded dinner, but who may not want to pay the price for the upgraded experience or who just want to eat their restaurant meal in their own homes.

Most restaurants already offer carryout and delivery via GrubHub and similar third party services. This viral event has opened my eyes to a new business model that specializes in the cost savings of carryout/delivery and doesn’t even bother with the dining room at all. As long as these restaurants are seen as a new model and not as one that replaces the affordable once in a while visit to a family favorite, I think it could be a regular thing in a post-Coronavirus world.

And I believe the advancements that a specialized restaurant could make in this category could become something pretty special.

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