The Era Of Breakneck Efficiency In Foodservice Is Here
Gone are the days of twenty percent gross profits, a lively labor pool, and accessible funding to lengthen runways to profitability. Foodservice margins are down across most categories, hiring is the great headache for most organizations, and the market is only getting more saturated.
We’ve turned a corner. Welcome to the era of breakneck efficiency.
Digitization, automation, and intelligent management of resources are no longer optional but essential components of a resilient foodservice strategy. But efficiency in today's foodservice industry is not just about cutting costs; it's about creating new opportunities, embracing innovative practices, and adapting to a rapidly changing world.
Like layers of an onion, efficiency has multiple dimensions, each layer revealing more complexities and challenges that modern foodservice operators must navigate. As we peel back these layers, a deeper understanding emerges of what efficiency truly means in today's foodservice world, and why, ten years from now, not embracing a digital food business model could mean being left behind.
Let’s take a look around this new era.
Articles in this series:
The Era Of Breakneck Efficiency In Foodservice Is Here (you are here)
The Role of Technology in Foodservice (coming soon!)
New Supply, New Demand, New Everything
In traditional economics, supply and demand govern the market, forming a balance that determines prices and availability. The two forces respond to each other, dancing to maintain a somewhat-stable balance. But today, and for the last couple of years, the balance is all out of whack.
Labor is a shrinking pool against rising needs. While the demand for skilled culinary talent is at an all-time high, the available pool of workers is shrinking (hospitality is down two million people since 2020). The reasons are multifaceted, from the immediate impact of a global pandemic to long-term changes in career preferences. This mismatch creates a hiring crisis, forcing businesses to do more with less, innovate in training and development, and even turn to automation to fill the gap.
A crowded market defying saturation. The surge in virtual brands, culinary innovation, and a lower barrier to entry has crowded the market. Normally, a saturated market would self-correct, forcing out the less competitive players. However, a lower-cost barrier to entry with virtual brands, evolving consumer tastes, social media virality, and investment into ingredient innovation has maintained a feverish level of competition. Far from reaching an equilibrium, this landscape continues to flourish, challenging businesses to constantly adapt and innovate. A purge of under-performing brands is incoming, eventually.
Food supply chain in disarray. Climate change, global events, and consumer demands for localized, seasonal, and diverse options have disrupted traditional supply patterns. Chefs face demands for new ingredients, and customers crave novelty. This movement away from the static menu towards a rapidly changing one has altered the dynamics of ingredient supply and demand, increasing pressure on food businesses to research and develop new dishes continually.
Customers crave more choice, and data. Consumer expectations are a form of demand that’s not being met with supply. Limited time offers, seasonal recipes, new ingredient innovations, real-time nutritional data, the ability to order foods across a variety of channels. Supplying these demands means increased headcount at a minimum, but most likely new production facilities and tech back-ends.
The ways we used to create products, pay scales, and purchase orders to make supply and demand work for our organizations must be re-calibrated to our new economic reality.
Also Read: The Grammar of Food: How to AI-ify the Culinary Operation
Competition With Everyone, Everywhere, All At Once
The lines that once created distinction between restaurants, caterers, noncommercial foodservice, CPG companies, delivery-native brands, and even c-stores are gone. A good example of this is Chick-fil-a and Whataburger. The two QSRs no longer compete only on the roads, but in grocery store aisles, corporate catering, delivery marketplaces, and university partnerships.
Most restaurant kitchens struggled to become the back-end for delivery operations as a second business model at the start of the pandemic. Adding virtual restaurants, catering operations, and other brand interfaces? Few are equipped or organized to handle this added complexity, but the multi-channel future of food organizations seems inevitable now.
Where Have All The Margins Gone?
All of these factors are actively taking a toll on bottom lines. Foodservice organizations of all kinds experienced a profit recession in 2022, as captured by FES Magazine, reporting on a Datassential report:
“QSRs saw a seven-point margin decline, which is in line with the industry norm. In contrast, corporate feeders experienced an 18-point decline, lodging a 13-point dip and college foodservice saw margins drop by 10 points.
The report predicts similar outcomes over the next two years. According to the report, business leaders have differing opinions on which factors have the largest impact on their shrinking margins:
37% said inflation
33% said labor shortages
30% said supply chain issues
“Do more, with less” may as well be the mantra of the era. More speed, more options, more channels—with far fewer dollars to make it all work.
Also Read: The One Thing That Runs The Food World (And Why Galley is a Recipe-First System)
A New Framework For Foodservice Efficiency
Across the industry, organizations are moving to digitize their recipes, inventories, and other systems in an effort to increase efficiency and do more with less. But the era of breakneck efficiency demands more than creating digital versions of existing processes. It requires an entirely new framework for understanding and managing the culinary operation.
Enter the culinary operating system, a new kind of software that’s built specifically for food operations.
The culinary operating system (COS) stands as the foundational data layer for all things culinary. It doesn't just capture and consolidate essential culinary data and processes but becomes the linchpin for understanding and using them across various systems and platforms. It’s the central place where your recipes, menus, inventory, vendor costs, and kitchen tasks all talk to each other with the same culinary language
By unifying the many silos of the culinary operation into one connected (and open) system, we can access types of efficiency gains that have never been accessible before:
Automating the most mundane data entry and communication tasks by giving everyone access to the right, always-updated information
Create proprietary datasets that enable AI tools to read the data of your entire operation and identify new areas for improvement
Enable a pace of recipe development and adaptation that helps you move quickly for the next big consumer trend, or the next global supply chain destruction
Doing what we already do faster, or better isn’t enough. Especially as innovations like artificial intelligence widen the gap between the tech-enabled and analog organizations, a new architecture for how we collect, connect, and use culinary data will be required to remain viable.
If you have any doubts that you’re equipped and ready for the era of breakneck efficiency, please reach out to us at Galley. We’d love to show you how our culinary operating system is already helping some of the largest food organizations in the world operate at unprecedented levels of efficiency and future-proof their technology.