The restaurant of the future is smaller. It might not have seats. And employees will likely need to take an extra walk after work to get their steps in.
In their never-ending search for improved speed and efficiency, restaurant operators have been cutting the size of their buildings. A string of new prototypes revealed over the past two years have featured fewer seats, or no seats at all, and kitchens reconfigured so employees walk less.
All of it is designed to improve unit economics. The pandemic shifted much of the dynamic inside restaurants away from dine-in sales and toward a variety of new takeout options, including mobile ordering and delivery. Yet post-pandemic challenges, including labor shortages, higher wage rates and higher costs for food and energy, have increased the need for brands to look everywhere to find efficiencies in their restaurant designs.
In December, restaurant menu prices rose 8.5%, but restaurants’ costs rose at an even faster rate. Wholesale food costs, for instance, were up more than 14% year over year in December. Wage rates spent most of the year rising in the double digits annually, though they were up just more than 6% in December after easing in recent months.
In addition, higher real estate costs, especially for the type of drive-thru-centric sites many of these brands prefer, make it necessary for companies to get as much as they can from a smaller amount of square footage.
As such, in addition to opening new restaurants that integrate digital and make space for mobile order pickup, delivery and a drive-thru window or two (or four), restaurants are cutting space and looking throughout their building for efficiencies, all to improve profitability.
“If you can build something that’s 25% to 30% less expensive, that’s intriguing,” Tom Stager, the CEO of the burger chain Krystal, said last year. The chain introduced a new prototype with seats that is 300 square feet smaller than its traditional prototype.
Jimmy John's is one of several restaurant chains testing smaller, drive-thru-only locations. / Photo courtesy of Jimmy John's.
No seats
Krystal also has an even smaller prototype with no seats at all. Dozens of restaurant chains have been at least testing such ideas, believing they can generate strong revenues with less up-front and ongoing costs.
In Oklahoma City, for instance, Jack in the Box introduced a drive-thru-only site featuring a walk-up window and a lane dedicated for mobile and delivery orders. The location is just over half the size of a traditional location but it also helps shave one-fifth from the buildout cost.
The Cheyenne, Wyo.-based Taco John’s, meanwhile, has two drive-thru-only locations that executives believe could prove a model for future development. One of them generates $1.7 million in annual revenues, far higher than the chain’s $1 million average.
Numerous other chains are testing or opening seatless restaurants, one of the biggest post-pandemic trends in the industry. And that includes restaurants that weren’t even known for their drive-thrus to begin with.
In Michigan, the sandwich chain Quiznos is testing two, 650-square-foot, takeout-only locations that are prefabricated and put together on site. Schlotzsky’s, another sandwich chain, is also testing a drive-thru-only unit. So is Jimmy John’s. Many coffee chains, such as Caribou, have shifted development attention to such units.
This trend is also taking place in urban markets where drive-thrus are not practical and real estate is expensive. Chipotle, Panera Bread, Sweetgreen and Wingstop are all working on digital-only pickup locations.
But many companies believe smaller will be better in the future, period. U.S. customers want their restaurants to focus and operational challenges demand it.
The Canadian coffee-and-doughnut chain Tim Hortons struggled to gain a substantive foothold in the U.S. market. The company blamed the problem in part on its decision to open larger units with broader menus that work in Canada. It is now testing several smaller restaurants with pared-down menus that executives believe fit better with the market.
The company is testing these restaurants in Ohio and Texas. Some are drive-thru-only. Early results suggest improved unit economics.
The company is testing such locations in Ohio and in Texas. “We’ve seen really good success both in terms of the capital outlay, the top-line growth and the flow-through, which turns out to be really strong from a [return-on-investment] standpoint and a payback standpoint,” Jose Cil, CEO of Tim Hortons parent company Restaurant Brands International, said last year.
Wendy's new restaurant design features a reconfigured kitchen so employees have to walk less to make an order. / Image courtesy of Wendy's.
In the kitchen
To be sure, it’s relatively easy to cut seats from a prototype when most people are taking their food with them or ordering delivery. But much of the cost is in the kitchen, and it’s not exactly easy to remove kitchen space from a restaurant—food must still be prepared, after all. Yet that’s where much of the work must be done to improve speed and efficiency.
These efforts include new equipment that removes some tasks from the kitchen. At the Taco John’s Support Center in Minneapolis, a reconfigured “kitchen of the future” features automated dispensers for its Potato Oles that simplify the process of putting frozen potatoes in a basket.
It also features a tortilla maker that connects directly with the point-of-sale system so it starts preparing tortillas automatically. The new equipment and reconfigured kitchen shaves 20 seconds from average order times.
At Starbucks, demand for cold beverages has soared in recent years, and they now make up more than 70% of the chain’s beverage sales. Yet these beverages are highly customizable and, while that’s a $1 billion business for the chain, it has made matters complicated for workers. It’s one of the most oft-cited reasons that a business that long prided itself on its relationship with workers faced an unprecedented unionization campaign.
The brand is investing $450 million in equipment such as new coffee brewers. The brewers ensure that workers no longer have to take time to brew a new batch of drip coffee, where sales have been falling off, so they can focus on other orders.
But it is also investing in new devices to simplify the creation of cold beverages, which take numerous steps to make. A Grande Mocha Frappuccino traditionally takes 16 steps and 87 seconds to make. The new machine cuts that down to 13 steps and 36 seconds.
Those aren’t the only types of steps companies are cutting out of their kitchens. Companies like Wendy’s are developing prototypes that reconfigure kitchens so workers walk less when compiling an order. Company executives believe a new digital-focused prototype will cut on labor costs, and increase speed, simply by bringing equipment closer together.
“I personally walked it,” Wendy’s CFO Guntcher Plosch said last year. “It’s a very different design. The kitchen is reconfigured. So literally, you have to do way less steps to get all your tasks done. That drives operating efficiencies.”
It remains to be seen how much of an impact all this has on restaurant operations over time. But in their never-ending search for better unit economics, operators are not ignoring their actual restaurants.
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