In the dynamic world of quick-service restaurants (QSRs), navigating the unique challenges of 2024 demands will require more than just business as usual. As noted in part one of our series, Mark Kuperman, Revenue Management Solutions COO, recently sat down with Michael Halen, Bloomberg senior restaurant and foodservice analyst and host of the podcast “Choppin’ It Up,” to shed light on what operators can do to attract QSR guests who’ve settled into a post-pandemic stance quite different from the idyllic “before times.”
The conversation referenced RMS’ recent study comparing national QSR performance to pre-pandemic levels. While standard indices support claims that customers have returned to their pre-pandemic behaviors, when RMS looked closer, the data told a different story — one that indicates the industry is in uncharted territory.
As operators prepare for the new year, here are some actionable takeaways for QSRs to consider. The full-length episode, packed with invaluable insights, is available here.
- Continue to fine-tune promotions. A $5 promotion will play differently in Alabama than in California, a higher wage state. An offer that works for franchisees in one state might not support the unit economics in another. The question brands need to ask isn’t so much “Should we offer promotions?” but rather “What is the most effective vehicle locally?”
For operators, Kuperman stresses that market-level promotional strategies can help “fill in the gaps” left when deploying national promotions. In other words, managing menu prices locally is critical for a complete picture of promotional success.
- Loyal customers want loyalty programs. Loyalty programs that offer customers the right promotion at the right time (including when they arrive at the restaurant) will be more important than ever for moving the needle on frequency and even add-ons.
- Make 2024 the year of the steal. Kuperman says moving into the next calendar year, brands and operators shouldn’t focus so much on growing traffic but rather on stealing share — and holding on to their own.
Often, there’s an assumption that high-income customers are less price-sensitive than low-income customers. Not necessarily so, says Kuperman. For low-income consumers, QSRs might be their only option for dining out. Higher-income guests, however, have the purchasing power to trade segments and likely will, particularly if they see that QSR prices are similar to fast casual. To counteract trade-out, QSRs need to examine what value means to high-income customers.
- Steal share by making value the star. Price value and abundant value are not the same, nor do they reach the same customers — and brands should find the balance between the two. While some brands may need to pursue only one, others will need to address both. It comes down to understanding the needs of the customer, says Kuperman. Is value found in convenience and experience, or is it product-driven?
One place QSRs might be able to steal share, says Kuperman, is with portion sizes. Fast casual brands are managing portion sizes, and guests are noticing. They recognize they are getting 30% less protein on a smaller plate. This is an abundant value play that QSRs can and should lean into.
- Pricing must support both short- and long-term initiatives. Before making a price change, says Kuperman, operators must know (and plan for) what will happen in 3, 6 and 12 months to determine if a price change supports those actions.
Are you renovating a restaurant? If so, that’s an appropriate time to take price as the value and experience for the customer has changed.
Are you raising prices to accommodate changing segments? This won’t stick. Brands fail when the customer sees no proof. At a minimum, RMS advises clients that they must either re-engineer a product or change the packaging.
Running a Great Restaurant
As customers continue to push back on price increases, the reality is that brands will have to take more price next year. The cost of goods likely won’t go down, and wages will go up. So, how do restaurants deal with that?
According to Kuperman, it comes down to running a great restaurant. A well-run restaurant that increases the value of the customer’s experience can provide the runway to take price.
When the time comes to capturing market share or leveraging your data and that of your competitors, RMS can help. Our solutions empower you to make informed business decisions that result in higher profit gains. Contact our team today to get started.