In this Weekly Wrap, we’re looking at the loss of human touch in hospitality, buying beef from Argentina, how the government shutdown is affecting restaurants, and more.
Hospitality Trends: AI and the Consumer
What You Need to Know: “Hospitality guests’ No. 1 AI concern: the loss of human touch”
The Source: Restaurant Dive
What You Need to Know:
One in five consumers now use generative AI apps like ChatGPT for online research about a bar, restaurant or similar venue, Reputation found. That share is fast approaching other common sources, such as third-party review sites like TripAdvisor and social media platforms like Tiktok, which one-quarter of consumers use.
More than half of consumers — 55% — trust AI-generated review summaries. But familiarity with AI doesn’t mean that they trust all use cases of the technology, especially when it may replace human touch.
Guests embrace automation for the things that cause friction, according to Carter. That includes information on accurate wait times, order status updates, seamless payments or even basic sentiment triage. But people can’t be an afterthought.
“You must keep humans central to the moments that carry genuine emotion — service recovery, special occasions, complex complaints,” Carter said. “To protect that integrity, set strict brand-voice guardrails on AI replies and ensure there is an easy, immediate path for a customer to reach a person.”
Our Take:
This article focuses on just one small aspect of the Reputation study it’s based on. With that being said, this is no different than what we and everyone else in the industry have been saying. Utilize facets of AI and tech to open up your time to focus on the intangible part of this business that oftentimes drive the traffic: the human touch.
The fact that consumers are already concerned that AI will erode the humanity in restaurants tells me that many have already experienced a loss of humanity in their interactions. One only has to look at McDonald’s pulling the plug on their AI drive thru ordering bot. Taco Bell has had similar issues, with one customer ordering 1000 waters just so he could talk to a real person.
Automate what you can, but never at the expense of the part of this business that makes people want to show up in the first place.
Argentine Beef in the U.S. Market
The Headline: “'A slap in the face': Ranchers feel betrayed by Trump's plan to buy Argentine beef”
The Source: NPR
What You Need to Know:
Beef prices have been soaring in the U.S. as a result of a shrunken cattle supply. On Sunday, Trump suggested buying beef from Argentina could be one way to lower costs. It comes as the president already agreed to a $20 billion currency swap to boost the South American ally's struggling economy.
American cattle ranchers and agricultural groups swiftly opposed the possible deal, arguing that it would hurt ranchers. But Trump defended the move while talking to reporters on Sunday, asserting that "Argentina is fighting for its life." He also claimed on Truth Social that his global tariffs have helped ranchers.
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The U.S. cattle inventory is at its lowest levels in decades — a trend driven by drought and rising operation costs, which has forced many ranchers to shrink their herds.
In August, the cost of ground beef per pound was about $6.63 — about two dollars more than it was four years ago, according to the Bureau of Labor Statistics. At the same time, higher prices have offered a path to recovery for some ranchers like Weeks.
"I wanna make it very clear, when we say it's profitable, no one's riding off into the sunset in a yacht," she said. "We're healing up."
Meanwhile, some ranchers argue there's another key player shaping beef prices: the four meatpacking firms that control over 80% of U.S. beef processing.
" The American rancher is not in control of the price of beef in this country," said Christian Lovell, an Illinois cattle producer and senior director of programs at Farm Action, a nonpartisan advocacy group.
Recently, two of those companies — Tyson Foods and Cargill — agreed to pay a combined $87.5 million to settle a class-action lawsuit accusing them of fixing beef prices. It's a big reason why Lovell called the cattle market "broken."
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John Boyd Jr., a cattle and crop farmer in Virginia and the founder of the National Black Farmers Association, has already been reeling from Trump's trade war with China, which has caused it to stop buying U.S. soybeans. Now, Boyd is concerned about his cattle business.
"Everything that the president is messing with and interfering with affects my farming operation," he said.
Our Take:
The root causes of “beeflation” are primarily composed of outside pressures not related to political actions, though there has clearly been some market manipulation in regards to the large beef conglomerates.
We will not really know the effects of the increased importation of Argentinian beef. Will it bring beef prices down? Maybe. The jury is out on that, with parties on both sides giving conflicting projections.
The one consensus across the board is that the American cattle rancher loses. If the prices drop too drastically, it could be the nail in the coffin for many small ranchers. If prices remain stagnant or drop only a little, ranchers may be less likely to invest in increasing their herds, which would then have a long term impact on the domestic cattle supply and make us more dependent on foreign beef imports instead of more independent.
All of this puts restaurants in a wait-and-see status. Our bottom line hopes that beef prices drop, but not at the expense of the U.S. cattle industry.
Taco Bell’s Beverage Push
The Headline: “Taco Bell tries to woo younger customers with Live Más Café’s flashy beverages”
The Source: CNBC
What You Need to Know:
The Yum Brands chain unveiled the drink-focused store format last December, with the first location in Chula Vista, California. Ten months later came the second location, near the University of California, Irvine campus. By the end of the year, Taco Bell is projecting that it will have 30 Live Más Cafés in its portfolio, across Southern California, Dallas and Houston.
Unlike McDonald’s now-defunct CosMc’s spinoff, which had its own standalone locations, the Live Más Café lives inside existing Taco Bell restaurants. Customers order at kiosks and can watch the “bellristas” assemble their drinks from behind the designated counter, which takes prime real estate in the store. The drink menu includes a range of beverage options, from blended coffees to lemonade-based drinks.
The beverage-focused concept is supposed to help the Mexican-inspired chain reach its goal of generating a $5 billion drink business by 2030. Taco Bell first disclosed that target in March at an investor day, where the chain shared more about its plans to keep growing as it fuels Yum’s operating profit growth.
So far this year, Taco Bell has sold more than 600 million beverages, up 16% from the year-ago period, according to the company. More than 60% of the chain’s orders this year have included a drink, Taco Bell said.
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The number of beverages sold by the top 500 chains has climbed more than 9% in the last year, according to Technomic. The swell of beverage innovation follows the speedy expansion of a number of a specialty drink chains, from upstart 7 Brew Coffee to dirty-soda inventor Swig.
″[Quick-service chains] have seen that there’s a big opportunity with an entire generation and how they’re interested in that ‘little treat’ culture,” said Claire Conaghan, “trendologist” at Datassential, which tracks menu trends. “There’s options to kind of go beyond their focus area of core meal and really lean into that snacking moment.”
Generation Z and millennials are driving the trend, according to Varchasvi Singh, a foodservice analyst for Mintel. Younger generations enjoy customizing their food and beverage orders.
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Since its opening day in September, the Irvine location has been selling more than 900 drinks per day, according to Taco Bell. More than a third of orders include an item from the Live Más Café menu.
Meanwhile, the Chula Vista location — which exceeded its initial sales forecast by four times — is selling more than 750 beverages a day nearly a year since its opening, the company said. A quarter of all transactions include a Live Más Café beverage, according to Taco Bell.
Our Take:
There’s a huge takeaway here. We are not talking about alcoholic beverages, we are talking about innovative NA options at one of the largest QSRs out there.
McDonald’s tried this with its CosMc’s beverage-focused restaurant concept, but it failed likely because of its insistence on being standalone as opposed to working in tandem with McDonald’s.
Numbers do not lie. Taco Bell beverage sales are up 16 percent, which is massive, and beverage numbers at the Top 500 restaurant chains are up by 9 percent.
As the industry grapples with downturns in visits and total dollar spends, this shows that there is room to grow and increase profits and traffic. Beverage, specifically NA beverage, has not always been at the forefront of our minds. But these numbers are proof that NA is here and it is driving much needed sales.
It does not matter whether you are a QSR, fast casual space, fine dining, or casual sit down dining. You need to pay attention to your NA offerings. They could be a lifeline, especially as consumers dine out less and are more thoughtful with their choice of restaurants. The inclusion of a thoughtful NA program could be the difference.
Federal Shutdown’s Effect on Restaurants
The Headline: “The ongoing federal government shutdown is expected to take a toll on some chains”
The Source: Restaurant Business Online
What You Need to Know:
The third quarter was rough, according to early accounts. The ongoing federal government shutdown will make the second half of the year even rougher for some restaurant chains, in particular.
Cava and Sweetgreen have a big presence in the greater Washington, D.C. market, and at least one Wall Street analyst said Monday that the extended shutdown is likely to take a toll.
Sharon Zackfia, a partner and group head of the consumer sector for investment firm William Blair, said in a report that the shutdown—which was in its 20th day on Monday—is likely to contribute to negative trends more broadly for the second half after the third quarter “ended with a whimper,” she wrote.
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Particular areas of weakness were lower-income, Hispanic and younger consumers, a theme that has been echoed by other reports this year. Zackfia said Sweetgreen and Wingstop are expected to see the softest trends, among the chains she follows.
And now, going into the fourth quarter, Cava and Sweetgreen are noted for their exposure to the Washington, D.C. metro area, where thousands of federal workers have been furloughed and laid off amid a partisan impasse over funding the government. Both brands have low-double-digit percentage of units in the region, Zackfia said.
Our Take:
I can’t think of anyone who would say that the current government shutdown is good for restaurant spending, especially in the D.C., Maryland, and Virginia (DMV) area. Even outside of the DMV, we are seeing decreased spending wherever there is a major federal employee presence. Atlanta is being hit hard and foot traffic is down 20 to 30 percent in Huntsville, Ala.
If the shutdown continues, we can expect this dip to creep further into more markets and have deeper, more lasting effects. Smaller businesses in these markets need to batten down the hatches. Many simply don’t have the resources or capital reserves to survive a prolonged shutdown. This comes on the heels of an already tumultuous two-year stretch, specifically for D.C. restaurants.