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The human element in F&B's digital transformation... further change will come about at breakneck speed. Image Credit:

Although e-commerce continues to impact brick-and-mortar outlets F&B is one sector that continues to provide value and excitement in a traditional physical environment and is of key importance to the Middle East’s growing leisure and entertainment landscape. One global trend that will play a key role in the sector is technology, and the incorporation of data and automation.

Not only can digital solutions control rising costs and limit consumer price hikes by streamlining operations, they can also be used to enhance customer experience through quicker delivery and the ability to more readily customise orders. We examine expected changes that will impact the fundamental operations and real estate strategies of the global restaurant industry.

Growth in the restaurant category fuelled many exciting concepts, cuisines and expansions. However, competition is fierce and if too many competing restaurants open, sales growth may erode. While third-party delivery will dominate, restaurants will invest in the physical and technological infrastructure required for a direct-delivery platform to control the brand experience; build upon loyalty programmes and collect consumer data.

Industrial and logistics also will increasingly support restaurant operations, particularly as delivery volume increases. Cold storage will see growth trajectory not only from the home delivery of groceries, but the proliferation of restaurants with highly perishable farm-to-table offerings.

Taking on the virus

Challenges arising from COVID-19 likely accelerated the use of existing and new technologies as millions were forced to work from home, and digital connectivity took even more of a hold on everyday habits.

Food and beverage companies - from cafe and restaurant owners to big-name food manufacturers and retailers - found themselves on the front-lines of the crisis, with many forced to close due to city-wide lockdowns or a drop-in custom as a result of social distancing. Where possible, businesses are continuing to offer - or quickly develop - take-out and delivery options, meeting the consumer move to stay at home and opt for online delivery solutions instead.

Some direct-to-home F&B businesses that deliver directly to customers’ homes have seen a spike in orders.Currently, retailers are operating in crisis management mode as a result of significant losses, wherein procedures such as furloughing and/or letting go of employees, shutting down stores and, in more extreme cases, declaring bankruptcy are seen.

Awaiting the ‘ghost’

Delivery-only restaurants, known as “virtual” restaurants or “ghost” kitchens, will become a primary growth vehicle of restaurant delivery platform. This marks a shift in delivery-only restaurants locating and operating in industrial and secondary retail space for lower costs. This is leading to the reuse of under-utilized real estate in shopping centers, sometimes carved out of repositioned anchor or big-box spaces, so long as the ghost kitchen is within quick-delivery range of a major consumer trade base.

Restaurant operators will continue investing heavily in consumer facing and “back-of house” technology to help control rising costs through automation. As restaurants use more technology, the physical layouts of restaurants will change. For example, the installation of check-in kiosks will help streamline the arrival process and seating of customers thereby reducing the amount of space devoted to host areas.

Rework real estate usage

Historically, the barriers to entry for regional players and startup fast-casual concepts were prohibitive given the cost of real estate and high failure rates. As landlords seek to fill vacant retail space and improve place-making, deals have become more palatable. This will give rise to a new generation of operators and create a very competitive sector restaurant world.

Fast food will continue to evolve to meet consumer demand for healthy food options. Providing healthier menu options and redesigning portfolios to connect with consumers are imperative to recapture lost market share.

As operators open new smaller prototypes with technologically-enhanced services, more expansion opportunities will arise. The F&B sector has been of key importance to the Middle East’s leisure and entertainment landscape and still has a unique ability to influence brick-and-mortar retail locations.

— Anthony Spary is Head of Retail at CBRE - UAE.