QSR stands for Quick Service Restaurant. Also known as fast-food, drive-through, on-the-go – whatever you want to call it, the industry has transformed out-of-home dining into a universal and convenient experience. In the U.S., all the states have QSRs – in 2018, California accounted for the highest number, while Wyoming had the least. And the QSR industry revenue has risen by nearly 90 billion U.S. dollars over the past 10 years.
In 2020, while the coronavirus pandemic shut down eat-in restaurants, food and grocery delivery flourished. The QSR industry generated a whopping revenue of 293 billion dollars. McDonald’s and Starbucks typically lead the QSR chains in revenue, while Yum Brands (KFC, Pizza Hut, Taco Bell) also adjusted pandemic strategies to great success.
The Successes: Online Ordering, Low Prices, and Innovations
“The quick service segment as a whole has seen greater demand during COVID-19 than pre-pandemic as consumers [grew] tired of their own cooking and leaned into drive-thru and off-premise for engagement with restaurants,” Bank of America analysts’ report.
With varying degrees of state bans on restaurant dining coupled with consumers’ own fears, ordering food for delivery from the comfort of home (or quarantine) became the norm. Fast-food restaurants normally reliant on drive-through or counter ordering had to adjust their capabilities to app and website delivery or click-and-collect options. Expect discomfort with in-person dining to linger, and a renewed comfort with and expectation of online ordering with live-tracking updates.
The KFC.com ordering portal drove 40% of contactless sales, and Yum! Brands now projects that one-quarter of its 2020 sales could be through digital channels.
Taco Bell promoted its free delivery through Grubhub for orders over $12. Same-store sales increase from 75% drive-thru to nearly 100% drive-thru or contactless delivery, and overall sales increase 1% in 2020.
Chick-fil-A tried new innovations to grab customers’ attention. The chain introduced Family Meal Bundles early on, with collections of entrées, sides, and beverages starting at $13.25. It launched a “Nightly Nuggets” video cooking series that demonstrated easy recipes using its menu items.
McDonald’s also saw success in innovations: partnerships with rapper Travis Scott attracted younger consumers and a renewed interest in a classic product: the Quarter Pounder. The chain also announced a partnership with Latin pop superstar J Balvin.
The Struggles: Breakfast, Eat-In, and Regional Differences
At Pizza Hut, same store sales declined 5% in Q1, partly due to the allure of eating in or stopping in for a slice. The drop initiated a “massive shift in brand messaging,” according to Yum! Brands CEO David Gibbs, focused on food safety, team safety, contactless delivery and giving back to the community. Of course, ordering in pizza became the norm over the course of the pandemic.
QSRs that rely on morning commuters suffered greatly. With so many Americans working from home or not at all, Starbucks, McDonald’s, Dunkin’ and other chains that focus heavily on breakfast and coffee-to-go are struggling.
Starbucks reported a 41% decline in comparable store sales and a 53% drop in the number of transactions during Q2 in the Americas region, compared to the year-ago period. Still, while the total number of transactions declined, customers in the Americas spent, on average, 27% more on each order during the quarter. In June, Starbucks announced plans to close 400 stores in the United States and Canada over the next 18 months, while adding a number of carryout and pick-up only locations.
McDonald’s profits last quarter were the chain’s lowest in 13 years. The company temporarily scrapped its all-day breakfast menu to streamline its operations amid the virus crisis. The fast food giant is up 50% from the depths of the coronavirus crash in March and is up almost 14% year-to-date; revenue is almost back to pre-pandemic levels.
McDonald’s, Starbucks and Dunkin’ sales are all increasing incrementally month by month, which indicates diners across the U.S. are returning.
The Takeaways: Think Digital, Appeal to Local, Create Content
1. Digital and online ordering via websites or through apps will be the norm:
Continuously expand and improve online ordering and contactless pick-up options. Communicate messaging effectively to eliminate confusion and encourage greater comfort with the process.
2. Adjust messaging and target to the local-level:
Re-opening laws and food-service laws differ by region, state, even county. And consumers have a growing sense of localism and pride. It’s imperative to execute digital marketing effectively at the hyperlocal community level. Target local customers with personally relevant and meaningful messages, with products they’re looking for from your local locations, and across all channels (QSR Mag). A platform with effective targeting capabilities will be most successful.
3. Create compelling content to drive traffic to:
Just as Chick-fil-A saw success with their content series and McDonald’s with their partnerships and buzz, QSRs that create compelling content, inspiring products, and exciting innovations will more easily be able to draw traffic to their sites and customers to their order platform.