Increasing volatility in consumer behaviour- Affecting planned growth projections of QSRs

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What’s needed? : Sharp observations and vigilant moves to ensure sustainability.

Customer is king!! Customer preferences by far have been the ruling cause behind the evolution and development of ever growing business of the food and beverages industry, but industry today is experiencing many such factors which will cause existing restaurant trends to change and keep innovating.

Customers today are well-traveled, very well informed, conversant and savvy. Experimenting with food is something which is now a common practice. The knowledge now is not just limited to what has been served to them, they know their food better and take pleasure and pride in ordering more than just one type of cuisine. The love for food and the curiosity to experiment will give the industry new entrepreneurs who are bound to bring with them, new concepts, themes, and chef-led innovations.

The young strata of the population are one of the major forces behind the expedient growth of restaurant industry. Be it just a friend or a peer group, young people inadvertently get routed to the quick service restaurants, multi cuisine fine dines or the most happening and trending culture which has been one of the critical barriers for QSRs and Multi cuisine restaurants –the cafés, discs and drinks lounge.

According to a recent study done with 2050 outlets in all formats across the country by Tag-Taste, an online community for food professionals, over 650 QSRs and organized dining outlets had shut down between 2013 and 2016 in India, most of them being the Global QSRs.

Before actually diving deep into understanding and analyzing the trend we need to understand: What is QSR? Why are global QSR brands hurting?

QSR is the acronym for Quick Service Restaurant, also known as a fast food restaurant, is a specific type of restaurant that serves fast food cuisine and has minimal table service. The food served in QSRs or fast food restaurants is offered from a limited menu, cooked in bulk in advance and kept hot, finished and packaged to order, and usually available for take away, though seating may be provided at the restaurant. Examples of such restaurants include McDonald’s, Wendy’s, and Burger King; and drink and snack chains, such as Starbucks, CCD, etc.

Why are global QSR brands hurting?

The change in food trends, regulatory restrictions, ill-planned expansion and irrational occupancy costs are some of the critical issues that the industry has been grappling with. As per a social context experiment it was revealed that the amount people eat increases with the size of the group, and it becomes a herculean task for the QSRs to deliver to such groups at a time. According to a study conducted in recent past, following are the reasons for the setback:

  1. Operational inefficiencies and high attrition rate: With options available with the workforce, quality manpower is a big challenge. The amount of restaurants and cafés (casual dining) opening up in the market cannibalizes the available talent pool. The competition woos your trained employees and attrition rate is extremely high.
  2. Mushrooming Standalones: Since last few years India has witnessed a proliferation of fine dining restaurants, cafés, pubs, bars, clubs, lounges, fast food joints and local food entrepreneurs which has gatecrashed the QSR party by focusing on wholesome experience with Lights, music, food, wine etc. The experience standalone restaurants provide QSRs fail to do.
  3. Sky Rocketing rentals: Rentals are a torture especially in the metros, now also in tier 2 cities, making business unviable and are as high as 60-65 per cent of the total turnover.
  4. Corruption and an unfriendly license raj: unethical practices at various levels despite of stringent controls by Government, the rats manage to find loop holes.
  5. Increase in customer’s willingness to pay: Consumers are ready to pay extra for a fine-dining experience. As the price gap between fine dining and QSR comes down, some are switching to the former.
  6. Thoughtless Growth Plans: KFC in 2014 had 395 outlets which is now reduced to 315, Barista dropped down from 225 in 2011 to 196 in 2016, Dominos closed 8 outlets in 2016 itself, 105 Dunkin’ donuts outlets open in FY 2017, 45 less than a year ago, shut 13 in year 2016.
  7. Tight fight by food tech startups: The likes of Zomato, Food Panda and Swiggy have increased food option for consumers. Moreover discounts and offers like BOGO deepens the pain in the neck of QSR structure.

How 3rd Eye Advisory® helped a QSR in increased revenues by 45%?

Our experts from the Marketing advisory helped the QSR to follow the 3 Ps of patience, perseverance and passion to sustain in the long run through process innovation and design thinking. The key learnings from the assignment were:

  1. Just food is not enough: A restaurant or eating point today is not just a place for eating. It is a place to socialize, to unwind and more. Eating out is no more the rich man’s indulgence. There are options, and people, irrespective of economic class, go out to eat and look for complete value for money. People opt for fresh modern vibes, suitable themes, an open kitchen, and a lavish space with a well-stocked bar and a temperature controlled wine cellar, so Innovation and Creativity is the key.

2.    Demand of global-local food: As per a study according to the India Food Services report 2016, brought out by the National Restaurants Association of India (NRAI), Indians are warming up to Western cuisine. American food accounts for 7% of total eating out occasions and pizza counts at 6.2%. For many QSRs serving North Indian and Chinese delicacies serve as cash cows because a typical Indian chooses north Indian food about 28% of the time, followed by Chinese (19%) and south Indian (9%), according to the report. Moreover, these days’ people are addicted to food channels on TV and food boards on Pinterest or websites, and usually want to consume what they see and crave.

3.    One Place fits all: The report divides the Indian eating-out population into four categories- About 36% of them are family bonding seekers; around 25% fun seekers (the ones who like to experiment); about 15% eat out to socialize and the remaining 24% are the discerning urban class—people with higher incomes who are willing to shell out a premium for quality and comfort, thus to retain, strengthen and create new customer base it is essential to strategize on the basis of changing customer preferences and demands.

  1. Customer Comfort and Liking: Customer comfort is defined as enhancement in services like home delivery and cash on delivery. The per capita income of the Indians has increased and there are more working people/couples per household, with more disposable income at hand, they have higher spending power on food which results in exploring home food delivery options more frequently.
  2. Maintaing balance between Healthy and Comfort food: With increased awareness in the young generation about the impact of fast food on the health and environment, on how raw materials or processed food items are sourced and which foods are organic and which are not. The impact they would create on health and environment as a whole is a matter of great concern, thus introducing concepts like Open kitchen, take kitchen tour, organic/unprocessed food, locally grown fresh raw materials etc. acted as a game changer for the QSRs.

It is important for the entire food industry to understand the need of hour and value the shifting trend of consumer behavior. Needless to mention, such understanding will come only when you are able to map your customers’ minds, which is possible through various tools like Comprehensive Market ResearchMystery AuditDigital Media Marketing campaigns, acquiring best technical and web support and adopting finest ERP solutions for optimizing operational efficiency and the think tank who will invest their knowledge, expertise and experience in helping your businesses grow and flourish.

Thanks for reading!

www.3rdeyeadvisory.com

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