The Growth & Challenges in the Franchise Business for QSR's
The landscape of quick service restaurants (QSRs) brims with opportunities amidst a backdrop of substantial growth and expansion. Despite economic turbulence affecting the wider dining sector in 2022 and 2023, QSRs and fast casual dining offered budget-conscious consumers affordable indulgences and convenient grab-and-go options. However, like all sectors, QSRs have grappled with the repercussions of inflation, pricey retail spaces, and escalating labor expenses. In this blog, the CBC team delves into the world of QSRs, highlighting areas of growth and opportunity while shedding light on challenges in the industry.
According to insights from the International Franchise Association’s 2024 Franchising Economic Outlook, the QSR segment is poised to elevate its total franchised units by 2.2%, reaching 199,808 compared to 195,507 in 2023, equating to 4,301 new franchised restaurant openings in 2024. QSRs are anticipated to trail only the personal services sector in franchising growth this year, signifying promising times for the food service industry.
Placer.ai published insights on the leading QSR’s this year, which finds that Popeyes and Tim Hortons experienced the most positive significant quarterly visit growth in Q1 2024. Additionally, quarterly traffic numbers for Burger King held steady, even as rightsizing efforts boosted the chain’s average number of visits per venue.
Despite this positive outlook, franchisees encounter obstacles due to inventory costs, supply chain disruptions, and material expenses, with 65% of QSR operators citing inflation’s notable impact on their operations.
While many chains like McDonald’s, Del Taco, Potbelly, and Qdoba plan unit expansions in 2024 and beyond, potential challenges remain. The preceding year witnessed QSR bankruptcies for chains like Burger King, Popeyes, and Wendy’s, suggesting continued financial strain. Labor costs and shortages present additional hurdles, with 91% of QSR operators flagging labor as a persistent challenge, even amidst projected employment growth of 2.2% to nearly four million employees.
Embracing technology is one critical strategy QSRs are adopting to alleviate labor shortages and enhance wage and benefit structures to attract talent. Some chains have already integrated self-service kiosks to streamline front counter operations.
Despite facing challenges such as inflation, rising labor costs, and supply chain disruptions, the QSR sector continues to demonstrate resilience and potential for growth. By staying up to speed on trends, developments, and challenges within the QSR industry, investors can identify emerging opportunities and potential risks. Understanding factors such as franchise expansion plans, consumer preferences, and technological innovations allows investors to make strategic investment decisions that capitalize on market trends and mitigate potential pitfalls.