By Rajat Suri, CEO and Founding father of Presto – 8.23.2022
The previous few years have introduced problem after problem for the restaurant business, and by all accounts, a brand new one is looming: a recession, which threatens to drive down discretionary shopper spending and maintain diners at their kitchen tables moderately than in full-service eating rooms.
If historical past is any indicator, although, a recession needn’t be a loss of life knell for QSRs. Fairly, a recession presents a novel alternative for operators on this section to seize long-term model loyalty by delighting prospects with speedier, higher service whereas contending with among the main challenges going through the business at the moment.
How can eating places do that? By adopting expertise—and quick. Within the coming months and years, QSRs that embrace expertise may have the instruments they should serve a rising quantity of consumers whereas combating macroeconomic headwinds.
The restaurant business faces a number of challenges
Because the begin of the COVID-19 pandemic, the restaurant business has battled a hydra-headed spate of challenges. A pervasive labor scarcity has compelled corporations, together with eating places, to lift wages.
The labor scarcity has led to points on a broader scale. As Restaurant Enterprise reported in a Might article, “The labor market has been the first perpetrator of a lot of the inflationary considerations as a result of corporations have needed to increase wages aggressively to draw employees.” These fears have prompted the Fed to lift rates of interest within the hopes of slowing inflation. “For eating places, [raising interest rates] means increased debt prices, which can lead some operators to decelerate expansions or reduce on expectations for progress.”
Sustained inflation has produced a domino impact of challenges for eating places. Meals costs are up greater than 10% year-over-year, in keeping with the U.S. Bureau of Labor Statistics, and in June QSR Journal reported that each one six main grocery retailer meals group indexes have elevated over the previous 12 months—and 5 of these teams have risen greater than 10%.
Eating places thus face a recession with fewer servers, much less obtainable money, decrease margins, and the specter of decreased demand—notably for full-service eating places.
In a recessionary surroundings, QSRs can really see an enhance in demand
Throughout instances of recession, customers tighten their proverbial purse strings. Meaning quick informal and full-service eating places can anticipate a lower in buyer quantity.
QSRs, although, proceed to draw prospects with their budget-friendly costs. In accordance with QSR, “Through the week of December 13, 2021…visits to full-service eating places had been up 53 p.c, year-over-year, and 43.4 p.c at quick-service places. However as of the week of June 6 [2022], visits to full-service eating places had been down 4 p.c however nonetheless up 7.3 p.c in counter service.” In its 2022 State of the Business Report, the Nationwide Restaurant Affiliation discovered that 63% of adults (and a full 75% of millennials and 70% of Gen Z) consider eating places are “important” to their existence. Even throughout a recession, diners received’t keep away from eating places utterly; as a substitute, they’re extra more likely to commerce down and patronize cheaper choices, like QSRs.
That is what occurred throughout the Nice Recession of 2008. As Oracle famous in a July weblog publish, “[A] pattern the business has seen in current recessions is when prospects commerce down. Maybe a weekly fine-dining outing is changed by informal eating, informal eating turns into fast-casual, and so forth.” In 2013, the Journal of Hospitality Monetary Administration examined how totally different restaurant segments carried out throughout the Nice Recession and located that “the inventory efficiency of the limited-service restaurant section was proof against the recession. No important lower was recognized after the recession began.” Certainly, in 2008, quick informal eating places represented 7% of restaurant gross sales. By 2020, that quantity had almost doubled.
Recession presents a chance
A trade-down market and its related surge in demand presents a chance for QSRs. These restaurant operators want to organize to serve a rising variety of prospects effectively and successfully as a way to capitalize upon this chance. Whereas quick on money and quick on employees, although, delivering fast, high-quality service turns into almost not possible to do with out assistance from expertise.
Expertise will help eating places cut back working bills whereas enhancing the shopper expertise. This, in flip, can enable eating places to satisfy rising demand from prospects whereas positioning themselves to seize long-term loyalty and sustained enterprise.
Eating places have traditionally been sluggish to undertake expertise—maybe partially out of concern that an more and more digitized expertise would detract from the customized service diners have come to anticipate.
They needn’t worry. Presto’s current Pulse of the Business survey revealed {that a} important majority of customers are receptive to expertise of their drive-thrus and at their quick meals counters. Particularly, respondents are receptive or very receptive to:
- Computerized voice help within the drive-thru line (61%)
- Customized menus primarily based on order historical past and dietary preferences (69%)
- Personalized foods and drinks strategies primarily based on preferences (69%)
- Ordering and paying by cellphone (69%)
Basically, respondents reported being receptive to applied sciences that would promise sooner, higher service. Half mentioned {that a} restaurant’s use of expertise may make the eating expertise extra environment friendly, and almost a 3rd (29%) reported that it makes the eating expertise extra pleasant.
What tech can do
When leveraged strategically, expertise is a game-changer for eating places going through macro pressures. This has at all times been the case, starting with using the primary digital point-of-sales system within the Nineteen Seventies. After the Nice Recession, restaurant corporations that had embraced expertise benefited, and the next decade bore witness to the event of game-changing applied sciences like cell apps, self-service kiosks, and digital cost choices. As Restaurant Enterprise reported in 2018, “Shopper-facing expertise has grow to be a should because the business has grown extra aggressive.”
Right now, expertise will help QSRs cut back their reliance on employees, cut back wait instances that frustrate prospects, and ship a sooner, extra customized expertise that delights diners and retains their enterprise. Now’s the time to put money into expertise and degree up the shopper expertise whereas combating ongoing headwinds. QSRs can’t afford to attend.
Rajat Suri is CEO and Founding father of Presto. The corporate’s enterprise-grade contact, imaginative and prescient, and voice applied sciences assist hospitality companies thrive whereas delighting visitors. With over 100 million visitors utilizing Presto every month and 300,000 methods shipped, Presto is without doubt one of the largest expertise suppliers within the business. Rajat based Presto in 2008 whereas pursuing his doctorate at MIT. He has additionally cofounded Zimride (now Lyft), the favored ride-sharing firm. He holds a bachelors from the College of Waterloo and in addition attended a Ph.D. / MBA program at MIT.
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