Many segments of the restaurant industry are still struggling with the after-effects of the pandemic. However, fast casual brands may have emerged stronger than ever. It may sound surprising that after the difficulties the restaurant industry faced during the height of the pandemic, we would be saying this is a good time to invest—but it is.
To clarify, it’s a good time to invest in a fast-casual franchise restaurant. Franchise restaurants fared better than independents during the recent downturn, demonstrating that there is power in numbers and strength in process. Fast casual concepts with a strong business model were able to position themselves for success compared with independent establishments. That trend continues today with quick-service franchises selling at a faster pace this year and poised to continue at that through 2022.
Fast casual concepts are an appealing prospect for entrepreneurs as they see consumer demand increasing, a thriving business model and continued growth potential. This particular market was valued at $125.6 billion in 2019 and is expected to reach $209.1 billion by 2026, a CACR of 10.6 percent from 2021 to 2027. This growth is fueling investors and job seekers looking for an opportunity, while also driving restaurant sale transactions higher.
As someone with a birds-eye view of the industry, I can say the reason quick-service establishments have rebounded so well with continued forecasted growth is their ability to pivot and re-position. They regrouped during a downturn, improving efficiencies and are all the stronger for it. Fast-casual restaurants had good years in 2020 and 2021, many outpacing the prior years. Reasons for their success include embracing contactless takeout and maintaining and growing the drive-thru, and delivery aspects of their business that were already in place. The model itself was well-positioned for success. They were able to further control costs with closed dining rooms, which meant higher profits.
Fast-casual works well with social distancing—a precaution that will be around for quite a while as COVID-19 numbers rise and fall. Closed dining rooms are not having a detrimental effect on customers for certain restaurants. As long as consumers had the opportunity to enjoy their favorite quick service fare, it didn’t matter that they couldn’t go inside to dine. Carry-out, delivery, and drive-thru were already in place. The pandemic has only accelerated their use. It was a quick fix to incorporate outdoor dining, plastic sanitation shields, and curbside—trends that are gaining momentum along with the emergence of automation.
Quick service isn’t done adapting, however. We are just seeing the beginning stages of the evolution of restaurant mechanization with inventions like contactless payments and ordering kiosks. The quick-service industry is well situated for the advent of automation, which is a natural outcome of the labor shortage. The National Restaurant Association recently reported that four in five operators are understaffed. This includes 81 percent of full-service operators and 75 percent of limited-service operators.
Now, many brands are embracing technology to reduce labor hours and wages, boost the customer experience and cut operational costs, making business more efficient and profitable. Research and Markets predicts that the global food automation market will reach $14 billion by 2025. While the initial investment in AI carries a hefty price tag, new developments will ultimately improve costs for operators and looking down the road, it appears to be worth the investment.
For customers, the changes may barely be noticeable after the rapid-fire adjustments they have adapted for the dining experience. Customers have come to accept and even embrace some of these 21st-century inventions. For example, a recent QSR piece reported on McDonald’s entering a strategic partnership with IBM to help the fast-food chain automate its drive-thru lanes, putting an end to decades of yelling into a speaker. Companies like Miso Robotics and Richtech are developing automated bots for restaurant kitchens and dining rooms alike. Robots are operating fryers and mixing cocktails. And Chowbotics has introduced “Sally” the salad-making robot. She’s efficient, sanitary, and shows up to work every day.
Overall, quick service restaurants are positioned for the future. The advent of automation is one more step in that evolution and is fueling interest by entrepreneurs for this restaurant category. While the market is in the pioneering stages of new technology, adaptation has already occurred, driving profitability and positioning the segment for success. As new technology is embraced, a delicate balance will be formed by both restaurant operators and consumers. On the one hand, operators must keep pace and test the waters while consumers seek and find the right balance for the overall dining experience. Integrating robotics into the food industry might be the necessary next step, but it will never fully replace the human interaction. Food, after all, is not transactional; it is about nourishment and enjoyment. So far, quick service has made all the right moves. It is expected the trend will continue.
Robin Gagnon is the CEO and Co-Founder of We Sell Restaurants, the nation’s largest restaurant brokerage firm and the only national franchise specializing in restaurant sales.