Even the most optimistic of restaurateurs did not expect the second quarter of 2017 to look all that different from the first. Restaurants are in a period of transition. Grocery store prices are falling and consumers are becoming more selective with their wallets. Meanwhile, competition is flooding the market and blurring the once distinct lines between foodservice segments.

Fast casual restaurants remain in a state of flux, however, as sales fell 1.7 percent.  Industry consultant Pentallect Inc. said in July that it expected fast casual sales growth to slow between 6–7 percent from about 8 percent in 2016. In each of the previous five years, sales boomed between 10–11 percent.

“We continue to see higher labor costs due to several factors. While saturation in the fast casual segment has affected same store sales, it has also had an effect on the cost of labor as the industry is dealing with a shrinking labor force,” says Adam Berebitsky, co-leader of BDO’s Restaurant Practice. “This all is taking place while some restaurants have to deal with an increase to the minimum wage in states they operate in. It will be important for fast casual restaurants to be creative in how they combat higher labor costs while attracting and retaining quality employees from a limited pool. Most likely they will need to utilize technology in order to do more with less people”

But it wasn’t all stormy. Chipotle might be dealing with a decline in investor optimism on the stock market, as well as soaring avocado prices that could take a bite out of its bottom line moving forward, but the chain’s same-store sales have steadily climbed since a 2015 food safety crisis erased around half of its market cap.

“Most brands are focused on getting into the good graces of millennials. Those who have gotten the stamp of approval are more tech savvy and have stronger delivery systems than their peers. This is especially important for the oversaturated fast casual segment where it’s easy to get lost in the crowd,” Berebitsky says.

Overall, BDO says that delivery services are disrupting the industry, “particularly as companies invest in new ways to get food from their kitchen to your door and third-party services fight for market share.”

The leading segment across foodservice was the pizza field, which reported same-store sales growth of 3.5 percent at publicly traded companies. “As technology continues to play a deciding role in restaurant success, consider looking to Domino’s for a sneak peek at what might trend next. From smarter delivery to its easy-to-use app, Domino’s is building a reputation on scratching consumers’ convenience itch by offering speedy delivery and allowing users to place and precisely track orders,” BDO says.

Quick service grew 0.3 percent in the quarter thanks, in part, to Yum! Brands’ healthy growth at Taco Bell (6 percent sales bump) and KFC (3 percent). Cost of sales were 29.9 percent, labor 30.1 percent, and prime costs 60 percent. All of those numbers are slightly up from the full-year 2016 (29.7 percent, 28.9 percent, and 58.8 percent, respectively). Quick service also had same-store sales growth of 0.9 percent that year.

As far as commodities and cost of sales go, BDO says, “Heightened costs led to the rollback of discounts and promotions for many to make up for steeper costs.” Vegetables and poultry prices rose 6.2 and 1.6 percent, respectively.

“The industry experienced several years of favorable commodity pricing, which appears to be changing. To offset these expenses, some restaurants are re-engineering their menus and promotions to focus on high-margin items. Specifically, classic chicken and chicken wing-centric restaurants are drawing attention to other menu items as poultry prices experience inflation,” BDO says.

An example: Buffalo Wild Wings decision to swap boneless wings in for its traditional product for its half-price Tuesday wing deal.

Average workforce costs grew 0.8 percent across the industry in the quarter compared to the end of full-year 2016.  “Many attribute this rising cost to wage pressures and worker shortages, forcing restaurants to pay top dollar to retain quality employees. For most, it’s challenging to offset this growing line item without increasing prices for consumers,” BDO says.

BDO also adds that technology continues to offer solutions, sometimes in the form of robotics or automated products capable of replacing some positions. Kiosks, tablets, and on the other end of the spectrum, robotic kitchen assistants, are becoming more prevalent.