Technomic’s revised predictions for 2024 revealed a challenging road ahead for the restaurant industry, which has been plagued by rising prices and shifting consumer behavior since the onset of the pandemic. The first half of 2024 saw a decline in traffic that was significant enough that the data and analytics firm reduced its original forecast from a 5.3 percent sales increase by 1.5 percentage points to 3.8 percent. Although these expectations are in line with pre-pandemic growth rates, the projected 3.7 percent rise in prices means that sales growth may barely keep up with inflation.
To combat this, many chains are engaging in a “value war,” by discounting menu items or offering bundled meal deals. While restaurants that successfully pivot to address this demand for value may grow or maintain their sales, these brands could find themselves making other cost-saving operational changes, like reducing portion sizes, to account for this trend.
Instead of engaging in this “value war,” fast casual restaurant concepts should focus on excellence in restaurant operations to increase store traffic and maintain strong margins. Executing consistently at a high level develops a sustainable competitive advantage that gives franchisees a distinctive edge in the highly competitive fast-casual segment. As a franchisor, it’s our mission to ensure that our franchisees have the coaching and support to win, and we strive to create industry-leading support programs to make certain that is the case.
Here are several areas of restaurant operations that franchisors can hone to increase store traffic and maintain strong profit margins for their franchisees,
Technology and Guest Engagement
Being able to engage with your guests across multiple channels helps to create more brand loyalty. Integrating new platforms within a franchisor’s tech stack can help to free up time and allow its team members to focus on enhancing the guest experience. In this competitive environment, it’s clear that we must innovate to stay ahead.
Instead of engaging in this “value war,” fast casual restaurant concepts should focus on excellence in restaurant operations to increase store traffic and maintain strong margins.
After polling more than 1,000 U.S.-based quick-service and fast-casual diners, Tillster found that diners are becoming increasingly more comfortable with kiosks with nearly 60 percent of guests who utilized the technology wishing that restaurants had more available. This is in line with the 44 percent of brands who said they plan to add a kiosk as a new ordering channel this year while keeping an eye on other tech-enabled ordering channels.
We have recently upgraded several of our technology platforms including updated digital ordering kiosks and a next-generation kitchen display systems to improve speed and accuracy, which is featured in our latest kitchen prototype. At the same time, we are always looking to decrease costs to improve the ROI of our franchisees. This extends to both our new prototype designs, including a higher ROI small-format design and our newly launched drive-thru format. In both cases, we are looking at ways to enhance the experience and convenience for guests while reducing the overall cost for our franchisees.
On a similar note, the pressure to increase traffic is likely to accelerate the adoption of digital engagement and loyalty programs. In 2024, 61% of diners reported that they belonged to one loyalty program and 58 percent were likely to recommend a restaurant based on a positive personalized ordering experience. However, 80 percent of brands don’t believe that their current loyalty programs are delivering the satisfaction they desire.
Consistency and Quality
With rising menu prices, consumers are more budget-conscious and selective in their quick-service and fast-casual dining experiences. They demand not only personalization and convenience but also a consistently exceptional guest experience. When these expectations are not met, brands may face negative feedback that can spiral out of control if not addressed correctly.
Considering the challenges facing the restaurant industry, franchisors must be focused on excellence in operations. Investing in new technologies that promote guest engagement is critical in driving traffic and maintaining profit margins for a brand’s franchisees.
