The Recipe for Growth for QSR Industry

The pandemic turned the restaurant industry on its head. Lockdowns and the necessity of social distancing may have closed physical doors, but they have opened up digital windows.

Combine this with growing disposable incomes, an internet user base, which will reach 900 million in three years as per Kantar, and the tech-savviness of customers, and it has created a brave new world of quick service.

Yes, consumers are still eating out, but the preference to order online from virtual brands and ghost kitchens has also surfaced. For both, quick service has emerged as the obvious choice, which has given businesses the impetus to transform from traditional full-service to quick-service restaurants (QSR).

The Ingredients for the Rise of QSR

A study by Oracle estimates that 64 percent of consumers do not want to wait more than 5 minutes to order at a counter. Similarly, when dining in-house 71 percent found it upsetting to wait for over 10 minutes.

This insistence on quick service has shifted priorities for restaurants. They now cater to convenience, which means drive-throughs, takeaways, fast food, and deliveries have become more important than laid-back dining-in.

Customers of all generations want quicker options and food available on their terms. Fortunately, all the ingredients required either to start or convert into QSR are easily available.

QSRs Need Low Capital Investment

Fast-casual restaurants, virtual brands, or dark kitchens require a sliver of capital compared to fine dining. The cost of renting or buying a physical location is lower, as they need smaller areas to set up a business. In the case of dark or ghost kitchens, which do not have a storefront the capital investment is even smaller.

Additionally, the cost of running the restaurant is dramatically decreased since the operational footprint is minimal. There is no expense for décor or fine dinnerware. The overhead cost is further reduced with fewer servers, hosts, and other employees. All of this makes QSR the perfect bet for testing new food concepts or international cuisines. Suffice to say, unique food trends can be launched without being economically prohibitive and if they meet with success, introduced on a bigger scale.

QSRs have Higher Profit Margins

In a traditional restaurant setup, there are three primary categories of expenditure: food, labor, and location-related. In total, they consume about 78 percent to 93 percent of revenue, leaving a profit margin of 22 percent to 7 percent or even less when a franchisee has to factor in outlet fees.

For QSRs, since the location and labor-connected expenses are not as considerable, the profit margins are higher. The rise of third-party delivery services helps make this margin thicker. They have proven to be a blessing for quick-service restaurants by supporting healthier sales and profitability as compared to run-of-the-mill restaurants.

QSRs can Expand Footprints Faster

Speed is the linchpin of the growing popularity of QSR. When customers order food, they do it with a sense of urgency, so even the best meals can be ruined when delivery is at snail's speed. QSR solves this customer's pain point.

But it’s not just quick delivery that has become an ingredient in the rise of the industry. It’s also the speed with which they can expand their brand presence. Since the real estate needs are negligible, restaurants can open in multiple locations with relative ease. Consequently, compared to traditional cafés, diners, and fine dining, they can be scaled faster.

QSR Caters to Food Hygiene

Food safety was always important, but post-COVID it’s become a critical factor. Recent research by Deloitte shows that out of 5 consumers, 4 would patronize a restaurant with better cleanliness and food safety. And they would be open to paying more for this hygiene.

It’s apparent that more and more consumers would like to see clean kitchens that keep their health a priority. It is another reason for the growth of QSR brands. Because their units are smaller, it is easier to implement a robust food safety process, effectively maintain hygiene, and remain compliant.

QSR is the Safest Bet

Quality, service, and in-house experience are the pillars the restaurant industry has relied on for decades. Today, these can carry a business only so far. To win the battle and get a portion of the customer’s plate, they have to cater to convenience and speed.

It is why quick-service restaurants have such high potential. The fast-dining experience, coupled with affordable prices, makes them attractive to people, thus becoming the recipe for growth for QSRs. Nevertheless, there are caveats to making the model work.

Price and supply chain management needs to be counterbalanced. While value for money is pivotal for any business, in the QSR industry it is even more so. This point deserves to be underscored. 

Simply relying on a set method like First In, First Out (FIFO) is not sufficient. Before launching a QSR, research the taste preferences of the target audience, food presentation, and what makes for a good experience, and keep them as your guide. Because when you take care of your customers, your customers will take care of your business.