Which factors affect demand and popularity in the QSR industry?
The QSR industry globally is populated by several small and big brands. Apart from the industry-leading global brands like McDonald’s, KFC, Domino’s, Burger King, Subway, and others, there are several local brands catering to local demand across various markets.
There are a very large number of brands operating in the QSR sector in the US alone. Demand varies globally depending on various factors like people’s eating habits, preferences in terms of food, and other factors including technological, economic, and social factors.
The size of the QSR industry in the US was estimated to be $279 billion and is forecast to grow to $282 billion by 2021 according to market research and statistics website Statista. The industry was hit particularly hard during the pandemic. While some QSR businesses in the United States were forced to declare bankruptcy, millions of workers employed in the US QSR sector were left unemployed.
However, at the same time, some pizza chains also experienced growth in demand. The pandemic required these businesses to make changes to their operating model. Even as restaurants were empty and people were forced to remain inside their homes, demand was not dead. People still needed food delivered to their homes or could pick up from the restaurant stores.
Companies like Domino’s pizza experienced growth despite the pandemic due to two factors mainly. They were quick to respond to the changes brought about by the pandemic by making changes to their operating model which apart from ensuring staff safety also ensured consumer safety and efficient operations.
Several restaurant stores had to be shut down but in the meanwhile, new demand patterns emerged and particularly take away and home delivery categories experienced growth. Another important factor that enabled some leading brands to achieve growth during the pandemic in the US market was digital technology. The pandemic showed that the QSR brands needed to focus on making their business models resilient to not crumble when a disaster or pandemic struck suddenly.
There are many factors that can alter the existing demand patterns in the QSR industry. QSR brands are not there just to satisfy people’s hunger. People do not like to buy from QSR brands just because they serve food. The consumers’ focus has instead shifted towards the entire experience and that’s how they select their favorite outlets.
While food quality and staff friendliness are still among key drivers of demand and popularity for the QSR brands, there are many more factors that customers value including brand image and availability.
In this post, we will discuss some of the key factors that can drive higher popularity and demand for brands in the QSR sector.
Factors that drive higher demand and popularity in the QSR sector
Food quality is considered to be the most dominant factor affecting consumers’ choice of a fast-food brand. Every consumer wants value for money and good quality food. Consumers are health conscious and lower food quality deters them from making repeat purchases from a brand. If they like the food quality offered by a fast-food brand, the probability of making repeat purchases is higher. Food quality and flavor attract customers and grow brand loyalty.
Food quality also affects the consumers’ perception of the QSR brand and customer loyalty. It is a key factor affecting both popularity and growth of the QSR brands. QSR companies often maintain a heavy focus on sourcing and supply chain management to maintain superior food quality.
Some of them like Domino’s have established their own supply chains in leading markets. Even the brands that have around 98% of their stores operated by franchisees like McDonald’s or Domino’s maintain a strong focus on product quality since it is the main factor that draws customers to their stores. Moreover, food quality offered by a brand affects the brand image and sales and therefore market share and revenue.
QSR brands are trying to bring more variety to their menus since customers can grow bored by limited offerings and their chances of switching to other outlets will grow. Customers can grow bored if they are offered the same or similar food repeatedly. However, if the menu is large enough, and there are new items for customers to try, they will stick with the brand and make repeat purchases. It is why the leading brands like McDonald’s, Domino’s, and Burger King have large and diversified menus that include a large variety of items for both vegan and nonvegetarian customers.
Apart from that, these brands also release new items to attract and engage customers. While Domino’s is mainly a pizza brand, it still has a large and diverse menu that also includes chicken items. This helps the company grow its competitive advantage that comes from higher variety as well as encourage customers to switch to its brand.
Pricing is also a key factor that affects demand and customer loyalty in the QSR industry. In fact, the QSR industry is experiencing a price war. There are several QSR brands in the United States. However, the level of competition has grown so intense over the past several years, that fast food has kept growing cheaper. Apart from the leading brands from McDonald's to Wendy’s, there are several smaller local outlets that are competing with the QSR leaders in terms of prices and food quality.
The leading brands keep reducing prices or introducing highly competitively priced items in order to maintain their marketing dominance. QSR brands generally adopt competitive pricing strategies to grow market share and for market expansion. However, competitive pricing also draws customers in large numbers and can be good to encourage brand switching.
While food quality, pricing, and other factors including menu variety are important to draw and retain customers, the customers are not drawn only toward good quality food, but instead, their focus is on the entire experience. As a result, the focus on customer service and everything else that affects customer experience is higher compared to some years ago. Customers do not just want good food but they are shopping for an experience.
Anything that can spoil their taste will result in brand switching. Leading companies in the US QSR industry focus heavily on customer service and use online as well as offline channels for customer service. Superior customer service translates to higher customer loyalty and superior growth. Customer service is also related to popularity and considered an important pillar of marketing. QSR companies that want to strengthen their brand image, focus heavily on customer service.
As already discussed, customers do not just shop for food but their focus is the entire experience. While several brands closed a large number of stores during the pandemic, the importance of cozy and attractive stores has not diminished.
Nice-looking and cozy stores draw customers for dining. Once the impact of the pandemic is over, the customers will again start flocking to the restaurant stores for dining in. It is why industry-leading brands like Domino’s, KFC, Pizza hut and Mcdonald's have attractive stores in prime locations where the footfall is higher. Starbucks is known for its customer-friendly store environment and service. Other brands that operate restaurant stores like Subway and Burger King also maintain attractive stores in prime locations, which are among their leading drivers of sales and revenue.
Brand image is a critical factor in the QSR industry that affects demand, popularity and brand loyalty. It is why every critical customer facing function including store operations and marketing matters. Companies in the QSR industry have to focus on customer service, food quality, store operations and marketing to maintain a strong brand image. Marketing is a critical factor that helps companies differentiate their image from the rivals in the industry.
QSR brands run marketing campaigns regularly using online channels and social media. Apart from driving sales, the focus of these marketing campaigns is to maintain a superior brand image. QSR brands also invest in CSR and sustainability to maintain a strong image.
Brand image is related to the customers’ perception of a QSR brand and a stronger image leads to superior word of mouth and higher customer loyalty Customers like to buy from brands having a customer friendly image. If the company takes any action that hurts its image, it can lead to a drop in sales and customers switching to other brands at least temporarily. So, companies do not just do everything that can help strengthen their image but also work to combat any negative news in the online environment through the use of social media and other methods and tools.
Marketing is critical for any leading QSR brand that intends to maintain its market share and expand its market size. Since the QSR industry is marked by heavy competition, companies need to invest heavily in marketing to attract and retain customers. Customers switch brands easily since it is not very costly to do so. Apart from that QSR businesses run marketing campaigns and promotions to encourage brand switching.
QSR brands are mostly using digital marketing channels for promotions and customer engagement. Apart from paid digital advertising and in app promotions, they are using social media for promotions and customer engagement. However, the role of marketing is not limited just to growing sales by attracting customers, but to encourage brand recall, brand switching, and maintain market leadership too.
Brands also use marketing to differentiate themselves from the rival brands. In the QSR industry, marketing does not just drive sales but is also a critical source of competitive advantage for businesses. The heavy price wars in the QSR sector also demands that brands continuously run marketing campaigns to avoid losing market share.
Higher availability can also be a driver of higher sales and popularity in the QSR industry. It is why several brands have focused on growing their number of outlets in key markets to grow sales and popularity. Despite the growing popularity of delivery and pick-up models, a large number of customers like to visit the restaurant outlets for dining.
In such a case, a larger number of stores can drive higher sales in various markets. The industry-leading brands like McDonald's, KFC, Dominos, and Burger King have expanded to several international markets. They are providing their customers an omnichannel experience which means they can dine in their nearest outlet, order from their homes, or pick up from the nearest store location.
Imagine a scenario. You are returning from the office in the evening and want to grab a pizza or a burger on the way. You know that on your way back, you come across a Domino’s outlet and you can get a pizza from there without having to wait for long. So, you just bring out your smartphone and order a pizza. If you want to grab a burger but there is no outlet nearby on your route, you will need to wait till it is delivered to your home or change your route to go to a Subway or Burger King. So, availability matters. Several leading brands have grown the density of stores in the larger cities and apart from that also make sure that online orders are delivered in a timely manner. This drives up sales and popularity since customers will buy from the brands if they find it more convenient to order from them.
Technology has emerged as a key source of competitive edge for QSR brands, helping them offer superior service to their customers, delivering superior ROI on their marketing dollars, and growing their popularity through higher customer convenience. A larger number of customers are now ordering fast food online.