Water Tower Hour Recap
We recently attended the ICR Conference from January 8 to 10, 2024, in Orlando, Florida. We met with multiple private- and public-company management teams. Some key takeaways are included below, with further discussion on this week’s Water Tower Hour Podcast. Those interested can listen to the episode on Apple Podcasts, Google Podcasts, Spotify, or on our website. Links in our full report. Restaurants Unit growth is expected to accelerate for restaurants in 2024. Multiple companies noted the backdrop for unit development is improving, with development costs stabilizing and permitting delays lessening. The outlook for restaurant demand is somewhat mixed. However, most expect negative guest traffic for the restaurants will continue in 2024 given increases in supply and the cumulative effect of aggressive menu pricing coming out of COVID-19. Given these concerns around traffic, menu pricing will likely be more conservative in 2024 with anticipated price hikes in the low to mid-single digit range. As such, the pricing/cost relationship for restaurant operators will likely be neutral in 2024 after being favorable in 2023. While food costs are expected to be relatively benign except for beef, the line item to watch in 2024 will be labor. We estimate that minimum wages in nearly 30% of the country are going up at a high single-digit clip and another 12% (including California) will be seeing 20% to 25% increases for restaurant quick service workers. Digital transformation and automation continued to be a topic of discussion with many restaurant companies. The pandemic accelerated the adoption of digital technologies, and companies showcased how they are leveraging data, analytics, artificial intelligence, and the cloud in order to improve their customer experience, and operational efficiencies.
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