By Rajat Suri, CEO and Founder of Presto – 23.8.2022
Recent years have presented challenge after challenge to 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 kitchen tables and not in full service dining. the rooms.
If history is any indication, however, a recession need not be a death knell for QSRs. Rather, a recession offers a unique opportunity for operators in this segment to capture long-term brand loyalty by satisfying customers with faster and better service while addressing some of the key 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 they need to serve a growing volume of customers while battling against macroeconomic headwinds.
The restaurant industry faces many challenges
Since the start of the COVID-19 pandemic, the restaurant industry has faced a number of challenges. A severe labor shortage has forced companies, including restaurants, to raise wages.
Labor shortages have led to problems on a wider scale. like Restaurant business reported in a May article, “The labor market has been the main culprit for much of the inflationary concern, as companies have had to raise wages aggressively to attract workers.” These fears have prompted the Fed to raise interest rates in hopes of slowing inflation. “For restaurants, [raising interest rates] means higher debt costs, which could cause some operators to slow expansions or cut growth expectations.”
Steady inflation has produced a domino effect of challenges for restaurants. Grocery prices are up 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 indexes rose over the past year — and five of these groups have grown more than 10%.
So restaurants face a recession with fewer servers, less cash on hand, lower margins and the threat of reduced demand – especially for full-service restaurants.
In a recessionary environment, QSRs may actually see one up on demand
During times of recession, consumers tighten their proverbial purse strings. This means fast-casual and full-service restaurants can expect a decrease in customer volume.
QSRs, however, continue to attract customers with their budget prices. According to QSR, “During the week of December 13, 2021…visits to full-service restaurants increased 53 percent, year-over-year, and 43.4 percent to quick-service locations. But from the week of June 6 [2022], visits to full-service restaurants decreased 4 percent, but still increased 7.3 percent at 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 won’t avoid restaurants entirely; instead, they are more likely to market 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 down. Maybe a weekly fine dining outing is replaced by a casual dinner, a casual dinner becomes a quickie, and so on.” In 2013, the Journal of Hospitality Financial Management examined how various restaurant segments performed during the Great Recession and found that “the limited-service restaurant segment’s stock performance was immune to the recession. No significant decline was identified after the onset of the recession.” Indeed, in 2008, fast casual restaurants represented 7% of restaurant sales. By 2020, that number had almost doubled.
The recession presents an opportunity
A shrinking market and the associated increase in demand presents an opportunity for QSRs. These restaurant operators must prepare to serve the growing number of customers efficiently and effectively in order to take advantage of this opportunity. However, even though there is no money and staff, providing fast and high quality service becomes almost impossible to do without the help of technology.
Technology can help restaurants reduce operating expenses while improving the customer experience. This, in turn, can allow restaurants to meet growing customer demand while positioning themselves to capture long-term loyalty and steady business.
Historically, restaurants have been slow to adopt technology—perhaps in part out of concern that an increasingly digitized experience would diminish the personalized service they’ve come to expect.
They should not be afraid. Presto’s latest Pulse of the Industry survey found that a significant majority of consumers are open to technology in their drive-through and at their fast food counters. Specifically, respondents are open or very open to:
- Computerized voice assistance at the drive-thru line (61%)
- Personalized menus based on order history and dietary preferences (69%)
- Personalized food and drink suggestions based on preferences (69%)
- Ordering and paying by phone (69%)
In general, respondents reported being open to technologies that could promise faster and better service. Half said a restaurant’s use of technology could make the dining experience more efficient, and nearly a third (29%) reported it makes the dining experience more enjoyable.
What technology can do
When used strategically, technology is a game changer for restaurants facing macro pressures. This has always been the case, beginning with the use of the first electronic point-of-sale system in the 1970s. After the Great Recession, restaurant companies that had embraced technology benefited, and the following decade saw the development of game-changing technologies such as mobile apps, kiosks self-service and digital payment options. As Business Insider reported in 2018, “Consumer-facing technology has become a necessity as the industry has become more competitive.”
Today, technology can help QSRs reduce their reliance on staff, reduce wait times that frustrate customers, and deliver a faster, more personalized experience that delights diners and keeps their business. Now is the time to invest in technology and elevate the customer experience while fighting against persistent headwinds. QSRs cannot afford to wait.
Rajat Suri is the CEO and founder of Presto. The company’s enterprise-grade touch, vision and voice technologies help hospitality businesses thrive while delighting guests. With over 100 million visitors using Presto each month and 300,000 systems deployed, Presto is one of the largest technology providers in the industry. Rajat founded Presto in 2008 while pursuing his PhD at MIT. He also co-founded Zimride (now Lyft), the popular ride-sharing company. He has a bachelor’s degree from the University of Waterloo and also pursued a Ph.D. / MBA program at MIT.
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