As we began 2023, much of the restaurant industry believed customers had returned to pre-pandemic dining behavior. Standard indices supported the claims – month-over-month and year-over-year, traffic was stable or growing, and customers seemed to accept higher average checks.
Case in point: In our monthly trends report, August 2023 traffic was down just half a percent compared to 2022.
Then, Revenue Management Solutions dug deeper. We compared sales, traffic and average check Quick-Service Restaurant (QSR) trends in the first halves of 2022 and 2023 to the same period in 2019. And we uncovered a narrative that goes beyond the surface-level statistics.
Let’s explore the essential findings and ways your restaurant can adapt to the new landscape and enter 2024 stronger.
- QSR traffic is on a downward trend. In January 2022, it was 15.5% lower than 2019. In June 2023, traffic was down 18.4%.
- QSR average check is 40% higher than pre-pandemic and as much as 51% higher in specific dayparts.
- Consumer behavior has shifted permanently away from QSR dine-in. Overall dine-in traffic is down almost 50% compared to 2019.
- Drive-thru leads performance by channel, accounting for two-thirds of QSR revenue. Although traffic is down an average of 12% in 2023 compared to 2019, net sales remain positive (+25%) due to average check growth.
- Lunch traffic is consistently down by about 20%, likely due to hybrid work. Similarly, breakfast traffic took a nosedive in 2023 compared to last year.
A Strategic Approach to Pricing Going into 2024
The climbing costs of food away from home are taking their toll. Customers report spending less (31%) or ordering from restaurants less frequently (1 in 2). But price increases are still an option for restaurants – if executed with surgical precision.
- Avoid across-the-board price increases. Instead, leverage item sensitivities and increase prices in small increments over an extended period.
- Understand co-purchases (items frequently bought together) and avoid taking price on both simultaneously.
- Monitor your competitors closely and stay informed about their pricing activities. Consumers are penny-pinching. Don’t let your competitor’s lowball prices or promotions tempt customers. Conduct customized menu item comparisons to remain relevant.
Capitalize on Drive-Thru Demand
Among all revenue channels, the drive-thru is the best performer. Overall net sales were up an average of 24.95% in FH 2023 compared to FH 2019. If QSRs optimize this channel and make the most of any significant investments made—it’s likely to continue to prove worth it.
- Every element of the drive-thru transaction should either improve margins or ease throughput. Are your menu boards steering customers toward the most profitable and easily assembled items? If not, give them a facelift. Limit what the customers see and highlight profitable items with bigger images and eye-level placement.
- Beef up the hype. Take advantage of pre-menu boards to help steer diners to profitable items while still in the order queue.
- Guests make menu decisions quickly and may even come with their choices pre-determined. Nowhere is this more applicable than the drive-thru, so use that time wisely and keep descriptions brief.
- Bundles make it easy for customers to buy margin-improving, easy-to-make items. And customers like them. In a recent survey, 70% said they were keen to use coupons that bundle items.
- Have you implement double drive-thru lanes over the past couple of years? If not, look for ways to optimize drive-thru speed. Be thoughtful with drive-thru offerings and look for the easiest prep combinations.
The Breakfast Challenge
Thanks to the pandemic, some behaviors have changed for good, or at least for the foreseeable future.
The first meal of the day continues a downward trajectory. In 2023, breakfast traffic is down an average of 23% compared to 2019, while average check is up 51% for the same period. These are significant variances: In 2022, traffic was down only 8.1% compared to 2019, while average check was up 33%.
Inflation is not helping either – breakfast is the easiest of all the meals to skip when considering cost-cutting. The most effective way to entice people to come back for breakfast is to give something away. The easiest (and most obvious) item to offer free with purchase? You guessed it – coffee. It’s inexpensive, will have the most minor effect on margin, and is easy to make and assemble.
With all the significant changes the QSR industry has undergone in the past few years, it’s understandable if you feel a little whiplash. But when you leverage your data and that of your competitors, you can make informed business decisions that result in higher profit gains.
Whether it’s analyzing your financial data to unlock cost-saving opportunities, conducting comprehensive consumer choice modeling and a/b tests to pre-determine success of item offerings, or keeping an edge by tracking prices of the competitors that matter most, RMS is here to help. Contact our team today to get started.