The pandemic has upended the restaurant industry. Lockdowns and the need for social distancing may have closed physical doors, but they have opened digital windows.
Combine that with growing disposable incomes, an Internet user base, which Kantar says will reach 900 million in three years, and customers’ mastery of technology, and it’s created a brave new world of fast service.
Yes, consumers are still eating out, but the preference for ordering online from virtual brands and ghost kitchens has also surfaced. For both, quick service has become the obvious choice, giving businesses the impetus to move from traditional full-service restaurants to quick-service restaurants (QSRs).
Ingredients for the rise of the QSR
An Oracle study estimates that 64% of consumers do not want to wait more than 5 minutes to order at the counter. Similarly, when dining in, 71% found waiting longer than 10 minutes painful.
This insistence on fast service has changed restaurant priorities. They now cater to convenience, which means drive-thru, take-out, fast food and delivery have become more important than casual dining.
Customers of all generations want faster options and food available on their terms. Luckily, all of the ingredients needed to start or convert to QSR are readily available.
QSRs require low capital investment
Fast food restaurants, virtual brands or dark kitchens require a bit of capital compared to fine dining. The cost of renting or buying a physical location is lower because they need smaller areas to build a business. In the case of dark or ghost kitchens, which have no showcase, the capital investment is even lower.
Additionally, the cost of running the restaurant is significantly reduced since the operational footprint is minimal. There is no expense for decoration or fancy tableware. Overhead costs are further reduced with fewer servers, hosts and other employees. All this makes QSR the ideal bet to test new food concepts or international cuisines. Suffice to say that unique food trends can be launched without being economically prohibitive and if they are successful, introduced on a larger scale.
QSRs have higher profit margins
In a traditional restaurant setup, there are three main expense categories: food, labor, and location-related expenses. In total, they consume about 78% to 93% of revenue, leaving a profit margin of 22% to 7% or even less when a franchisee has to factor in point of sale fees.
For QSRs, since location and labor expenses are not as significant, profit margins are higher. The rise of third-party delivery services is helping to thicken this margin. They have proven to be a boon for quick service restaurants by promoting healthier sales and profitability compared to regular restaurants.
QSRs can expand their footprint faster
Speed is the key to QSR’s growing popularity. When customers order food, they do so with a sense of urgency, so even the best meals can go to waste when delivery comes at a snail’s pace. QSR solves this customer’s problem.
But it’s not just fast delivery that has become an ingredient in the industry’s boom. It’s also how quickly they can expand their brand presence. With real estate needs negligible, restaurants can open in multiple locations with relative ease. Therefore, compared to traditional cafes, restaurants and fine dining restaurants, they can be scaled up faster.
QSR meets food hygiene
Food safety has always been important, but after COVID it has become a critical factor. A recent Deloitte study shows that out of 5 consumers, 4 would frequent a restaurant with better cleanliness and food safety. And they would be willing to pay more for this hygiene.
It is evident that more and more consumers would like to see clean kitchens that put their health first. This is another reason for the growth of QSR brands. Because their units are smaller, it’s easier to implement a robust food safety process, effectively maintain hygiene, and stay compliant.
QSR is the safest bet
Quality, service and in-house experience have been the pillars on which the restaurant industry has stood for decades. Today, these can only carry a business so far. To win the battle and get a slice of the customer’s plate, they must respond to convenience and speed.
This is why quick service restaurants have such potential. The fast food experience, coupled with affordable prices, makes them appealing to people, becoming QSR’s recipe for growth. Nevertheless, there are caveats for the model to work.
Pricing and supply chain management must be balanced. While value for money is essential for any business, in the QSR industry it is even more so. This point deserves to be underlined.
Simply relying on a method defined as First In, First Out (FIFO) is not enough. Before launching a QSR, research the target audience’s taste preferences, food presentation, and what makes for a good experience, and keep these as a guide. Because when you take care of your customers, your customers will take care of your business.