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The QSR Industry Will Face Major Challenges in the Coming Year

Posted by Alan Riney

Aug 8, 2016 11:30:00 AM

QSR challenges in the coming year

Despite a surge in breakfast traffic, the QSR industry is facing flat sales, and some new challenges in the coming year could spell more difficulty. From the growing demand for meal delivery services and food delivery to an overly saturated market and even the difficulties surrounding customers increased demands for sustainability, there are some potential problems looming ahead for the industry.

Loss of Market Share to Takeout and Food Delivery

Anytime people want to stay home or stay indoors fast food and sit down eateries tend to suffer; fewer people out and about equates to fewer customers in the drive-thru and in-house lines. Poor weather and bad conditions have traditionally lead to booming business for pizza chains and other eateries that deliver, according to Nation’s Restaurant News.

Some locations, like bakery-cafe chain Panera Bread, are already adjusting to meet demand; the chain is testing delivery service in about 300 stores nationwide. The delivery service joins kiosk ordering and an increased focus on mobile ordering as changes that Panera has rolled out to improve the customer experience, and it seems to be working. Company-owned stores saw a sales increase of 6.4% after these changes were implemented.

Competition from Meal Delivery Services

A new kind of competitor is gaining ground and could impact the QSR market, according to a recent piece in QSR magazine. Meal delivery services that feature either fully prepared meals or the premeasured ingredients needed to cook a meal at home are targeting — and winning over — the coveted Millennial market. Companies like Blue Apron and Hello Fresh aim to make it easy to prepare a gourmet meal at home, cutting out the shopping time associated with trying a new recipe or cuisine.

By focusing on a diverse group of recipes, including healthy ingredients and appealing to customers on social media (prospects are offered one or more meals free with a subscription), meal delivery services are thriving. While this industry is a relatively new phenomenon, meal delivery services are beginning to make an impact with highly targeted demographics — especially in urban environments — and have the potential to become a real threat to QSR in select markets.

Trouble Differentiating in an Increasingly Saturated Market

With so many quick-service restaurants competing for customers, individual locations are beginning to feel the impact. Even though more customers are heading to fast food locations and spending more money on the industry as a whole, individual store sales are down for the majority of locations.

Analysts link the fall in same-store sales to the sheer number of locations offering convenient food. As customers make the decision to buy food on the go, hit the drive through or even dine in, they have so many options to choose from it can become difficult for a QSR location to stand out — or be found at all. For locations falling short of projections or failing to even meet the previous year’s figures, competition may not be to blame; there could simply be too many units offering the same product to the same customer.

Managing Consumer’s Demand for Sustainably Sourced, Ethical Food

Free range eggs, fair trade coffee, a dedicated recycling program: sustainable options like these help a QSR brand appeal to a highly coveted demographic — but is it becoming too difficult to keep up with consumer demand? According to QSR Web, offering green and sustainable options to customers comes with a hefty investment of time and money.

Consumers who are seeking out more natural and ethically sourced foods have made a mark on the QSR industry, even fast food giant McDonald’s has announced plans to phase out eggs from caged chickens over the next decade. Why the 10-year rollout? While sustainable food options appeal to customers, these ingredients can be difficult to create and obtain and could lead to higher prices. Wired magazine created an infographic that outlines some of the challenges faced by free-range egg providers (in true Wired style, it is both informative and fun) and outlines the reasons why free-range eggs will take almost a decade to arrive at McDonald’s. Opting for quality, sustainably produced items that are more readily available could help satisfy customers without the logistics nightmare.

From the rise of the healthy food subscription to a growing demand for delivery and an oversaturated market, the QSR industry faces real challenges going forward. Being aware of these potential threats and understanding which are most likely to impact your brand can help you navigate these troubled waters going forward.

Win Breakfast Market Share

Written by: Alan Riney

Topics: Food Service, QSR