In this Weekly Wrap, we’re looking at how delivery has changed dining culture, renovations are Starbucks, another stellar quarter for Chili’s, and more.
Is Takeout Killing Restaurants?
What You Need to Know: “The Innovation That’s Killing Restaurant Culture”
The Source: The Atlantic
What You Need to Know:
In 2024, nearly three out of every four restaurant orders were not eaten in a restaurant, according to data provided to me by the National Restaurant Association, a trade group. The share of customers using delivery specifically, as opposed to picking up takeout or going to a drive-through, more than doubled from 2019 to 2024. In a recently released poll by the association, 41 percent of respondents said that delivery was “an essential part of their lifestyle.” For Millennials and Generation Z—the apex consumers of today, and of tomorrow too—it’s apparently even more essential: More than half of adults under 45 use delivery at least once a week, and 13 percent use it once a day. Five percent use it multiple times a day. But the delivery boom isn’t confined to young people or to urbanites: About one in eight Baby Boomers uses delivery once a week, and so does about one in five rural dwellers. We are a nation of order-inners.
For as long as fast-food and pizza joints have existed, certain restaurants have been defined by, and designed for, takeout and delivery. But delivery has now come for what industry analysts call “full-service restaurants”—that is, the types of places where a server guides you through your meal from start to finish, or at least used to. These days, 30 percent of those restaurants’ orders are consumed somewhere else, according to the National Restaurant Association. The fanciest, most famous restaurants are still doing mostly table service, but just about every other establishment has been conscripted into the army that ferries hot food out of professional kitchens and into American mouths 24 hours a day, 365 days a year. Meanwhile, the longtime industry analyst Joseph Pawlak told me, “you could shoot a cannon” through many dining rooms on a Tuesday night.
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But mostly, restaurants are losing out. Delivery companies charge at least 5 percent commission and often much more, up to 30 percent. They typically charge for payment processing, for in-app advertising, and for favorable placement in search results. They charge for pickup orders. And the restaurants are thrashing. That’s the word Wallace used: “It’s like not swimming or treading water,” he said—“it’s just thrashing to survive. You spend more and more on the platforms trying to advertise, but it doesn’t fundamentally help other than subsidizing the platforms.” (A Grubhub spokesperson told me in a statement that restaurants use the platform because it helps them reach new customers, and that restaurants are “in control every step of the way, and only pay when an order is placed.”)
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The food itself is changing too. Some restaurants are trying to save on labor costs by turning toward less intensive dishes—this is part of the reason everything is a bowl now. Many have reworked their menus to account for the simple physical fact that anything warm put into a container immediately begins to steam in its own heat, getting soggy. “It does not taste as good as it did when the restaurant put it into the box,” the writer and restaurant expert Hillary Dixler Canavan told me—it can’t. Chefs told me they’re doing fewer fried items, more braises, more dressings on the side. Everyone is trying to account for the subversion of a dynamic that has defined restaurants since they were invented: that the person cooking the food largely got to decide how it was consumed. “At a great restaurant,” Canavan said, “the flow and timing of how food and drinks arrive at your table is a major part of enhancing that experience.” Now there is no experience, and restaurants cede control as soon as the bag leaves.
Canavan is concerned—for restaurants, on a financial level, and for the food itself. “If a high percentage of any given restaurant’s sales is happening in delivery, that will inevitably shape menus to be more delivery friendly,” she told me. “What does that mean for culinary innovation and experimentation and creativity?”
Our Take:
I am in the camp that delivery is a driver that can help and, at times, save a restaurant. I have watched it happen with friends at restaurants. I witnessed it in my own world as well.
That being said, there are two very valid points here that need to be considered.
First, unless delivery is a primary driver of the business, operators need to ensure that their dine-in food options are driven by the identity of the business, not delivery. It is one thing to have a few items that are more delivery friendly, but the meat of the menu needs to stick to the spirit of the restaurant. On the flip side, labor is an issue and items still need to be both cost- and labor-efficient. In times of constraint and hardship, some of the best innovations happen. I do not agree with the idea that innovation across the board is being stifled.
Second, the delivery fees are predatory. They are brutal and something needs to be done. The other option is to hire in-house drivers, which for most restaurants is not a viable option, which is why so few offered delivery prior to the delivery apps. Predatory as they may be, delivery still adds to the top and bottom line.
People are dining out less. It is a fact. Is delivery the death knell or even the main driver? No. There are myriad factors ranging from inflation to economic uncertainty to be considered, and delivery's ease of use does contribute, but on a minor level.
2025 Dining Report
The Headline: “Check, please: US dining out report 2025”
The Source: YouGov
What You Need to Know:
37% of US diners say they are dining out less frequently than they used to a year ago. Of these, 69% cite a perceived rise in expensiveness as a reason for them visiting restaurants less often.
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8 in 10 American diners feel restaurant prices have risen in the past 12 months. This sentiment is consistent across genders and generations
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37% of American diners say they dine out less frequently now. Among lower income diners, this share rises to 44%. A third of middle income diners and just over a quarter of higher income diners report eating out less frequently now than they did a year ago.
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Only 28% American diners feel restaurant prices are fair. This increases to 44% among higher income American diners but drops to 21% among their lower income counterparts. A third of diners (32%) overall feel that prices today are too expensive relative to quality.
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Among diners who are altering their preferences to cut costs, choosing cheaper restaurants is the most prevalent option (60%). More than half of them also seek out discounts (53%) or simply order fewer items (51%).
Our Take:
Again, people are dining out less across the board — low income, middle income, high income. They are all dining out less to differing extents, they are spending differently, and they are looking for value. Not everyone is looking for the same type of value, but they are all looking for some sort of value proposition.
Whether there is a recession coming or not is not for me to say, but all indicators show a decrease in dining out. There was a similar downturn in 2008-2009 and it was tough, but the industry survived. Quality and value won out in 2008-2009 as well, and chances are they will do the same this time around.
Starbucks Renovations
The Headline: “Starbucks plans 1,000 store renovations by end of 2026 and tests out new budget prototype”
The Source: Nation’s Restaurant News
What You Need to Know:
Starbucks is on track to complete 1,000 café renovations by the end of 2026, CEO Brian Niccol said during Wednesday’s Q4 earnings call. The previously announced new store designs emphasize improved lighting, seating, and a welcoming aesthetic, and have already been implemented in a few stores in select New York and California markets.
Additionally, Niccol said that the company is piloting a new store prototype with, “lower build cost and optimized space utilization that still delivers a full coffeehouse experience.” This newer prototype appears poised to take the place of the now-discontinued pickup-only cafes. Niccol said that one of the former pickup locations in New York was just converted to this nimbler, budget-friendly design.
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“We made much needed investments in staffing and hours to put more partners on the floor at the right times, we reassessed and extended hours of operations for about half of our US. company operated portfolio so that nearly all are now open consistently at or before 5 a.m.,” Niccol said. “We expanded rosters and maintained healthy hours per partner, and as a result, we had strong partner engagement, record low hourly partner turnover and improved customer experience scores in the fourth quarter.”
Additionally, Niccol said, since implementing the new smart queue sequencing algorithm, more than 80% of Starbucks cafes have gotten their service times down to four minutes or less, though last year Niccol predicted that they’d be able to get customers a cup of coffee in 30 seconds or less.
While Starbucks has been criticized for its pricing, its value scores have gone up as the company emphasizes the non-pricing parts of value, like café experience, shorter wait times, and menu innovations like the new protein beverage platform.
“Value perception strengthened across all generations in the fourth quarter and for the fiscal year, driven by our investment in green apron service and our proactive moves to bring back the condiment bar, simplify our pricing architecture and remove the extra charge for nondairy milks,” Niccol said. “We know our value equation extends beyond pricing, and when we provide great customer service, alongside handcrafted personalized beverages, made with high quality ingredients, we provide unmatched value to our customers.”
Our Take:
Very few people outside of owners in the industry truly understand the cost involved in opening a new restaurant. But it is not just new restaurants. Renovating old ones can be just as expensive.
The fact that Starbucks is putting an emphasis on this is important. Franchises and chains have a playbook when they build out new spaces and while they are streamlined and focused, they are not immune to the cost of buildouts. With construction materials increasing for a variety of reasons, it is important to note that even if you have built out restaurants in the past, materials are far more expensive than they were even a year ago. One needs to be thoughtful and prepared as they remodel or build out. I have watched far too many operators go through their contingencies and cash reserves in the past year than I ever have before, and that is saying something, because it has always been an issue. To sum up that point, if Starbucks is being uber conscious about their buildout costs, so should you.
The other takeaway has to do with investing in their staff. Better trained and supported employees generally produce better service. With better service, guests will be more forgiving with other aspects of the business, in this case value. The prices have not gone down, but because the service has gotten better, people see the value differently.
Chili’s Has Another Great Quarter
The Headline: “Lower-income consumers are flocking to Chili's”
The Source: Restaurant Business Online
What You Need to Know:
Same-store sales soared 21.4% at the casual-dining chain last quarter, its sixth straight quarter of double-digit same-store sales growth. It came on top of a 14% increase a year ago, and included 13.1% higher traffic. And it outpaced the broader casual-dining segment by 1,650 basis points. Restaurant-level margins jumped by 270 basis points as a result, to 16.2%.
The performance was driven by growth across every customer income level, but particularly among lower-earning consumers. Households making less than $60,000 a year are Chili’s fastest-growing cohort, said Kevin Hochman, CEO of Chili’s parent Brinker International.
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“It's clear that the ‘Better than fast food’ campaign we've been hammering over the past two years has positioned Chili's as an important value leader in the industry,” Hochman said during an earnings call Wednesday. “And we are gaining market share with low income households while others are reporting softness with that group.”
Value is not the only thing driving growth for Chili’s. The chain’s revamped baby-back ribs have been a hit, as have new frozen margaritas. Rib sales rose 35% in the quarter and were 29% more profitable, Hochman said, and food scores were also up for the new product, which was reformulated with a crispier exterior and a more tender inside. Frozen margs, meanwhile, are selling twice as fast as the old ones, despite a higher price point.
Our Take:
At some point we will be writing about Chili’s stagnating and having flat sales — there is only so much each store can increase, only so many guests that can be served, and only so many take out orders. This is not that point.
Chili’s continues to be a model for operators big and small, they just get it. They understand value and how to attract guests across income brackets. They offered a value proposition that has blown QSR out of the water. They have increased quality on other items that outperformed their cheaper predecessors.
They have hit on the two most important factors guests are looking for: quality and value. It does not matter whether a business is in a small market or a large market, those two things will always win.