While the pandemic caused turmoil in much of the restaurant industry last year, the QSR industry was another story. With its ability to pivot and innovate quickly to meet changing consumer demand, the quick-service restaurant industry had a record year. It’s poised for continued revenue growth in 2021, making it a good restaurant investment opportunity for both current and prospective Franchise Owners.
Quick-service Restaurant Analysis
The restaurant industry outlook is good for traditional restaurants and even better for quick-service restaurants. According to Restaurant Business Online, quick-service and fast-casual restaurants are predicted to see an 8% increase in nominal sales and a 4% increase in real revenues in 2021. The QSR industry’s total intake is forecasted to beat total 2020 sales for the segment by $23.2 billion, as well as beat the 2019 tally by $4.7 billion. That’s impressive, and a key reason to consider a restaurant franchise investment.
QSR Industry Trends
TRENDS SHAPING THE RESTAURANT INVESTMENT OPPORTUNITY
Unlike their sit-down dining counterparts, QSR restaurants tend be relatively resilient in any market condition since they provide quick, convenient and affordable food options to busy consumers. Analysts at the iCapital Network believe that several overarching trends will bolster growth in the coming years, including:
Less time for cooking
Time spent on traditional household activities such as cooking continues to decline as consumers devote more time to their careers. According to data published by Pew Research in June 2019, the percentage of dual-income households in the U.S. has risen to 66%, up from 49% in 1970. Furthermore, technology keeps workers connected to their jobs 24/7, leaving less time for meal preparation and sit-down meals. Many people are choosing to spend more income on takeout and delivery. Data from the USDA shows that food-away-from-home accounted for 54% of total food expenditure in the U.S. in 2018, up from 50% in 2009, and around 25% in the 1950s. This trend is especially strong for younger consumers, as eating out represents a greater share of total food spend for each successive generation.
Cooked-to-order, quality menu items
While speed and efficiency will always be the name of the game for QSR restaurants, that doesn’t mean the overall quality of the food needs to be compromised. Today, more QSR restaurants are implementing cooked-to-order processes for the food they serve, ensuring that everything is freshly made throughout the day. While it may take a bit longer than traditional “fast food” restaurants, consumers have shown a willingness to wait for the added quality at more “fast-casual” inspired locations.
Technology offers easier food delivery and provides additional revenue opportunities
Even before COVID-19, technology innovation in the food service industry has made takeout and delivery easier than ever. Delivery startups like Bite Squad, DoorDash, Postmates and Uber Eats have made it simple for consumers to order from their favorite restaurants via online or mobile. Food delivery app usage in the U.S. is projected to reach nearly 60 million people by 2023, while the global market for online food delivery is expected to grow to $365 billion by 2030, a 20% CAGR from 2017 levels.
QSR restaurant owners and operators are investing in technology like never before. Many brands rapidly scaled their mobile and online ordering and delivery or pickup to generate additional revenue opportunities during the pandemic. Because consumers enjoy the convenience of app and online ordering, these trends are likely to continue.
Jason Graf, vice president of product management at Netsurion, a company that helps restaurants keep their networks secure, recently shared insights with QSR magazine about the popularity of digital ordering. “Whether you’re talking about places that used to do sit-down service or you’re talking about quick-service chains, app and web-based ordering platforms are more popular than ever, and that will continue,” he said. “Additionally, now that restaurants have seen how effective digital menus can be, they are realizing how much money they can save by not printing paper menus or signage, so digital platforms are likely to see widespread use beyond the pandemic.”
And these trends are not going away. Nearly 50% of restaurant chains plan to boost technology spend over the next year, with much of that investment going toward artificial intelligence (AI). Brands are implementing AI to power online ordering service or walk-up kiosks that reduce customer wait time and enable targeted upselling. Technology use helps restaurant owners improve profits and reduce costs by helping them more efficiently manage food costs, staff locations and supply chains.
Investing in a Quick-Service Restaurant
If you’re thinking about investing in a fast casual franchise restaurant brand, do your due diligence. Research the brand’s website and financials so you have a clear picture of its culture, values and historical performance. Think about what markets are available—is this a brand poised for growth, or are certain territories saturated?
Freddy’s Frozen Custard & Steakburgers is one quick-service franchise that exceeds the criteria. With an impressive AUV*, broad market availability and an outstanding reputation among both its Franchise Owners and its Guests, Freddy’s is a prime opportunity for Multi-unit owners looking for stability, growth and performance. If you’re interested in learning more, fill out the lead form below to speak with a member of our Franchise Development Team.
*Average Annual Gross Receipts of 29 company-owned and 338 franchised restaurants that were open for the entire 2019 fiscal year. This information appears in Item 19 of our Franchise Disclosure Document (FDD). Your individual results may differ. There is no assurance that you’ll earn as much.