By Rajat Suri, CEO and founder of Presto – 23.08.2022
The last few years have represented challenge after challenge for the restaurant industry and, by all accounts, a new one is looming: a recession, which threatens to reduce consumer discretionary spending and keep diners at their tables. in the kitchen rather than in full-service dining rooms.
If history is any indicator, however, a recession doesn’t have to be a death knell for QSRs. Rather, a recession offers a unique opportunity for traders in this segment to capture long-term brand loyalty, delighting customers with faster and better service while facing some of the major challenges facing the industry today.
How can restaurants do this? Adopting technology and fast. In the coming months and years, QSRs that embrace technology will have the tools to serve a growing volume of customers while battling headwinds at the macro level.
The restaurant industry faces multiple challenges
Since the start of the COVID-19 pandemic, the restaurant industry has been battling a series of hydra-headed challenges. A pervasive labor shortage has forced companies, including restaurants, to raise wages.
Labor shortages have led to problems on a larger scale. How Catering business reported in a May article, “The labor market has been the main culprit of much of the inflationary concerns because companies have had to aggressively raise wages to attract workers.” These fears prompted the Fed to raise interest rates in hopes of slowing inflation. “For restaurants, [raising interest rates] it means higher debt costs, which could induce some operators to slow down expansions or reduce growth expectations ”.
Sustained inflation has produced a domino effect of challenges for restaurants. Food prices rose more than 10% year-over-year, according to the U.S. Bureau of Labor Statistics, and in June QSR magazine reported that all six major grocery store food group indices rose in June. ‘last year and five of these groups have increased by more than 10%.
Restaurants are therefore facing a recession with fewer servers, less available liquidity, lower margins and the threat of reduced demand, especially for full-service restaurants.
In a recessive environment, QSRs can actually see a increase required
During times of recession, consumers tighten their proverbial purse strings. This means that fast casual and full service restaurants can expect a decrease in customer volume.
QSRs, however, continue to attract customers with their affordable prices. According to QSR, “During the week of December 13, 2021 … visits to full-service restaurants increased 53% year-over-year and 43.4% at fast-service locations. But from the week of June 6 [2022]visits to full-service restaurants fell by 4%, but still increased by 7.3% in counter service. “In its 2022 State of the Industry report, the National Restaurant Association found that 63% of adults (and a full 75% of millennials and 70% of Gen Z) believe that restaurants are “essential” to their lifestyle. Even during a recession, diners will not completely avoid restaurants; instead, they are more willing to negotiate lower and patronize cheaper options, such as QSRs.
This is what happened during the Great Recession of 2008. As Oracle noted in a July blog post, “[A] the trend the industry has seen in recent recessions is when clients trade on the downside. Perhaps a weekly fine dinner is replaced by a casual dinner, the casual dinner becomes fast-casual, and so on. In 2013, the Journal of Hospitality Financial Management looked at the performance of different catering segments during the Great Recession and found that “the share performance of the limited service restaurant segment was immune from the recession. No significant decreases were identified afterwards. the beginning of the recession “. In fact, in 2008, fast casual restaurants accounted for 7% of restaurant sales. By 2020, that number had nearly doubled.
The recession offers an opportunity
A bear market and the associated increase in demand present an opportunity for QSRs. These restaurant operators must prepare to serve an increasing number of customers efficiently and effectively to take advantage of this opportunity. Though short on money and staff, however, providing fast, high-quality service becomes nearly impossible without the help of technology.
Technology can help restaurants reduce operating expenses while improving the customer experience. This, in turn, can enable restaurants to meet growing customer demand, positioning themselves to gain long-term loyalty and sustained business.
Restaurants have historically been slow to adopt technology, perhaps partly out of concern that an increasingly digitized experience may detract from the personalized service diners expect.
They don’t need to fear. Presto’s recent Pulse of the Industry survey revealed that a significant majority of consumers are receptive to technology in their drive-thrus and fast food stalls. In particular, respondents are receptive or very receptive to:
- Computerized voice assistance in the drive-thru line (61%)
- Personalized menus based on order history and dietary preferences (69%)
- Personalized food and drink recommendations based on preferences (69%)
- Order and pay by phone (69%)
In general, respondents reported being receptive to technologies that could promise better and faster service. Half said a restaurant’s use of technology could make the dining experience more efficient, and nearly a third (29%) reported that it makes the dining experience more enjoyable.
What technology can do
When leveraged strategically, the technology is a game changer for restaurants facing macro pressures. It has always been like this, starting from the 1970s with the use of the first electronic point of sale system. After the Great Recession, restaurant businesses that had embraced the technology benefited from it, and the next decade witnessed the development of revolutionary technologies such as mobile apps, self-service kiosks, and digital payment options. As reported by Restaurant Business in 2018, “consumer-facing technology has become a must as the industry has become more competitive.”
Today, technology can help QSRs reduce their dependence on staff, reduce wait times that frustrate customers, and deliver a faster, more personalized experience that delights customers and keeps their business going. Now is the time to invest in technology and improve the customer experience by fighting the ongoing headwinds. QSRs cannot afford to wait.
Rajat Suri is the CEO and founder of Presto. The company’s enterprise-grade touch, visual, and speech technologies help hospitality businesses thrive by delighting guests. With over 100 million guests using Presto every month and 300,000 systems shipped, Presto is one of the largest technology providers in the industry. Rajat founded Presto in 2008 while pursuing his doctorate at MIT. He also co-founded Zimride (now Lyft), the popular racing-sharing company. He holds a bachelor’s degree from the University of Waterloo and also has a PhD. / MBA from MIT.
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