From unicorn drinks to CEO shake-ups: These are the 5 biggest restaurant stories of 2017

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From unicorn drinks to CEO shake-ups: These are the 5 biggest restaurant stories of 2017

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From executive departures to quirky menu innovations, a lot happened in the restaurant industry in 2017. These events shaped how restaurateurs operate their business and show what brands have to do in 2018 to continue to compete.

This year, technology and delivery became key sales drivers for companies, as customers demanded easier and faster ways to pay for and pick up food. Brands were forced to invest or lose diners to more innovative companies.

Amazon was just one of several companies to acquire a popular brand, scooping up Whole Foods Market for about $13.7 billion and threatening to shift the balance between grocery and restaurant in favor of the grocers.

Not to mention, Starbucks' Howard Schultz departed the CEO position to focus on the brand's Roastery locations as executive chairman.

But, that's not all. Here's a look at the biggest stories of the year:

  • Technology growing pains

    From kiosks to mobile ordering, restaurant companies have been pulling out all the stops to make buying food easier for consumers. But these innovations have not come without growing pains.

    Early in the year, Starbucks reported that mobile order and pay transactions had spiked in its U.S. stores, with 1,200 of its stores experiencing a 20 percent jump in mobile pay and ordering during peak hours.

    However, the increased sales volume actually hurt the company's same-store sales growth, as congestion at the hand-off counter caused incoming customers to leave without making a purchase.

    This bottlenecking was a warning sign to Starbucks' competitors.

    In creating McDonald's digital ordering platform, CEO Steve Easterbrook said the burger giant had to be "mindful" of the demands that come with mobile ordering and create a platform that suited the needs of both its customers and the kitchen.

    McDonald's hoped to add delivery to 5,000 U.S. restaurants by the end of this year.

    No company has done this better than Domino's, which has been at the forefront of digital ordering for the last few years. The pizza chain continues to dominate the industry, often operating more like a tech company than a restaurant company.

    The brand learned early on that mobile and digital orders not only offer customers an easier way to pay, but their average check is higher than those generated from in-store orders.

    Going forward, expect to see more innovation in technology in the restaurant space. Fast-food chains and fast-casual chains, in particular, have already begun to utilize kiosks to speed up ordering and decrease the number of staff mistakes.

    These innovations "replace a manual, flawed process," said Jeremy Goodman, head of North American sales for SimpleOrder, a restaurant inventory management software company.

    While Panera was at the forefront of adding digital kiosks, other brands have begun to adopt this practice, including Shake Shack, McDonald's and Subway.

    McDonald's delivery scooters.
    Issei Kato | Reuters
  • Amazon threat looms 

    Amazon's acquisition of Whole Foods Market will likely send ripples through the grocery and restaurant segments for years to come. The tech giant acquired the grocer in June for $42 a share, in a deal valued at $13.7 billion.

    The e-commerce behemoth has long been pushing to expand its online grocery business, seeing it as an emerging opportunity. Currently, few people purchase their groceries online even as more shoppers switch to buying other goods that way.

    However, the addition of Whole Foods affords Amazon the opportunity to aggressively target fresh-food delivery companies and meal-kit brands. As the grocery and restaurant sectors battle for share of consumers' stomachs, Amazon could prove to be the tipping point.

    "Amazon is like the Death Star," said Aaron Allen, founder and CEO of global restaurant consulting firm Aaron Allen and Associates. "It goes planet to planet, vertical to vertical, blasting everything to extinction."

    Amazon's sheer size has already allowed it to lower its prices, winning over customers who traditionally wouldn't have shopped at Whole Foods. In addition, the tech company's commitment to data gathering has helped it learn more about its customers and at a faster pace than its competitors. This has allowed it to adapt to changing customer shopping habits and provide its shoppers with a better online ordering experience.

    "It's not about what Amazon has done, it's about what they can do," Allen told CNBC.

    Allen said Amazon will be "the bane of the restaurant industry" in the future. So, while the industry hasn't seen much of a drag from the acquisition this year, headwinds loom.

    Produce at a Whole Foods store in Berkeley, Calif.
    Jane Wells | CNBC
  • Chipotle's troubles can't be fixed with queso

    While it seemed like Chipotle Mexican Grill's turnaround was gaining a foothold in 2017, the burrito chain continued to struggle. It's been two years since a string of food safety incidents first battered the chain's sales and slashed its stock in half. Yet, Chipotle hasn't been able to win back diners' trust.

    The chain has been slammed by analysts and customers for its "arrogance," and recurring reports of sick customers this year haven't helped its reputation.

    Chipotle responded by implementing a new paid sick-leave policy and holding a number of meetings with its employees to reiterate food preparation practices. Meantime, the chain mixed up its menu, hoping that new offerings would bring in new and lapsed consumers.

    At first, it seemed that Chipotle's introduction of queso was just what the brand needed, but the cheesy dip quickly received tepid reviews from consumers. In December, the company tweaked its recipe to give it a creamier texture.

    CEO Steve Ells announced in late November that he will step down from the position as soon as a suitable replacement is found. He will remain with the company as executive chairman.

    In 2018, the company must focus on selecting a CEO who can change the brand's image.

    How much autonomy the new executive would have, however, remains a question since Ells will still be in charge of its board, said Allen. He anticipates Ells could return to the role in as little as 24 months once the brand gets back on track.

    One thing that won't help: fast-casual chains are expected to see same-store sales slow. The segment has been growing at double-digit levels for nearly a decade and growth began to ebb in 2017.

    Chipotle Queso
    Source: Chipotle Mexican Grill.
  • Howard Schultz's new focus

    In April, Schultz stepped down from his role as CEO to focus on turning Starbucks' Reserve Roastery-branded coffee bars into destination restaurants. The move, which was first announced last December, was a surprise to some investors.

    However, many were quick to point out that the last time Schultz vacated the role, he managed to revitalize the company's international market growth.

    The company operates two Reserve Roastery locations, in Seattle and Shanghai, which opened earlier this month.

    Starbucks has said it could open as many as 20 to 30 Roastery stores around the world. Currently, five more are expected to open before 2020, with Milan and New York slated for 2018 and Tokyo and Chicago planned for 2019.

    Starbucks' Shanghai Roastery has three coffee experience bars
    Starbucks
  • Unicorn magic

    Limited-time offers and menu items have always been a way for restaurants to lure in customers, but Starbucks took it to a new level in 2017.

    In late April, the coffee giant sold Unicorn Frappuccinos for four days only,driving significant traffic to chains and bolstering brand awareness and affinity.

    The "Instagramable" drink quickly sold out at Starbucks chains across the U.S. and trended on social media sites.

    Limited-time items are "very important and increasingly important," Allen said.

    He said Starbucks' unique Frappuccino was "well-conceived" and proved that the company understands its customers better than most other brands.

    Such items generate huge traffic and buzz for restaurants and also set them apart from their competitors. Yum Brands' Taco Bell is another example of this. The Mexican chain has seen sales and loyalty grow tremendously because of the buzz around taco shells made from "naked" chicken or eggs.

    Expect more menu innovation in 2018, with brands exploring quirky iterations of traditional menu items.

    Starbucks' Unicorn Frappuccino
    Source: Starbucks