Accounting for about 25% of the total of all U.S. franchise establishments, quick service restaurant (QSR) is the most common franchising segment—not just the most prevalent food franchising segment.
Food production at QSRs, also known as fast food restaurants or limited service restaurants, is focused on immediate consumption. The most popular QSR brands in the United States include: McDonald’s, Burger King, KFC, Subway, Taco Bell, Pizza Hut, Domino’s, Chipotle, Panda Express…and many, many more.
Nowadays, you can find QSR franchises all over the globe, serving all types of cuisine—but burgers still reign supreme. According to MarketResearch.com, hamburger restaurants account for about 40% of sales among U.S. fast food establishments, while sandwich, pizza, chicken, and Mexican food restaurants each account for about 10%.
While some quick service franchises offer limited on-site seating and/or delivery, a common feature of QSR franchises is the drive-thru, allowing for quick, safe, and convenient order and pick-up of menu items.
And the drive-thru has gained even more importance for QSRs since the onset of the COVID-19 pandemic.
As stated in QSR Magazine, “many have theorized that drive-thru, curbside, and ghost-kitchen-powered delivery will become the beating heart of foodservice’s future.”
With social distancing now a part of daily life, many Americans have a new outlook on the traditionally crowded dining room, and are responding by continuing to order food to eat off premises.
With analysts stating that the presence of a drive-thru can add as much as 30% in sales to a company’s bottom line, QSR franchise businesses are evaluating their service options—and making adjustments accordingly.
For instance, Schlotzsky’s expects 99% of its new restaurants will have a drive-thru going forward. Also, don’t be surprised to see more double drive-thrus—ala Chick-fil-A—become more common as well.
“Ghost Kitchens” Making Waves in Food Franchising
Even before a pandemic forced dramatic changes in the food world, virtual restaurants or “ghost kitchens” were already making waves.
A ghost kitchen is a kitchen space used to prepare food, oftentimes for multiple restaurant concepts, for delivery. Franchise concepts that specialize in this type of operation offer the franchisee a chance to serve customers menu items from several types of food from one hub (upwards of 50, in some cases). According to the franchisors, franchisees and their staff are trained on how to prepare the menu items from each of the restaurants they select for their kitchen.
Ghost kitchens accelerated in growth during the pandemic due to the necessity of delivery during dining room shutdowns. Well-established QSR brands started getting in on the concept to maximize their reach. Some of these franchises include: Wendy’s, Taco Bell, Applebee’s, Wingstop, Dickey's Barbecue Pit, and more.
Now, over a year-and-a-half since the beginning of the pandemic, the steady increase in established brands offering virtual concepts to incoming franchisees is evidence that virtual operation is quickly becoming a permanent brand extension for many food franchises.
Further evidence for the shift: Despite more restaurants being open at full capacity than even a few months ago, demand for takeout and delivery remains high, a habit introduced—and subsequently reinforced—by the pandemic. In fact, a late summer 2021 survey found that 85% of consumers will continue to order takeout or delivery at least once per week despite easing indoor dining restrictions.
QSR franchisees are finding themselves drawn to these concepts because of the reduction in financial overhead by using delivery or to-go-only operation. No dining rooms or servers. By foregoing any on-site dining, these virtual outposts offer a way to increase their revenue through the higher margins of a location that has a smaller up-front investment of time and resources compared to more traditional concepts.
Providing Healthier Options in QSR Franchises
Over the years, quick service restaurants have been rebuked for having less-than-ideal healthy eating options.
As a result, QSR franchises as a whole are constantly developing menu items that will satisfy the customer’s desire for healthier fare. In fact, sales of plant-based menu items have seen a significant boost at virtually all food franchises, as much as 20% in recent years, according to the Plant-Based Foods Association.
One of the largest contributors to the popularity of these plant-based items has been the rise of the so-called “flexitarian.” A flexitarian is a person who primarily eats vegetarian but occasionally eats meat or fish.
“Nearly one-third of the consumer identifies as either flexitarian or say they limit or avoid animal proteins,” says Patty Trevino, senior vice president of brand marketing for CKE Restaurants Holdings, Inc., which includes Carl’s Jr., Hardees, Green Burrito and Red Burrito.
Although research still indicates that as a whole fast food customers are trying to eat healthier most of the time, they are still indulging every now and again.
The Variability in QSR Franchise Opening Costs
The amount necessary to open a franchise can vary widely depending on the unique business system and execution requirements. The opening costs for a fast food franchise can depend on many factors, including but not limited to: the franchise fee, land and building costs, training expenses (such as travel and living expenses, not the actual training courses), grand opening advertising and marketing costs, and more.
One of the most important variables in how much it costs to open a QSR franchise is the type of franchise being opened and how big it is. Commonly, the two types of food franchise offered are traditional and non-traditional. Traditional franchises are usually the biggest option. They are typically standalone buildings where the service of the franchise is the only business offering. Sometimes food court locations are also considered traditional locations. Non-traditional franchises are smaller, and typically located within another building like an airport or gas station. Other franchise types include kiosks, food trucks, and—as discussed above—ghost kitchens.
Franchisors offer estimates in their FDD based upon their experience establishing, and in some cases operating, units. However, prospective franchisees should keep in mind these estimates are just that – an estimate. Prospective franchisees should review the figures presented with a business advisor, taking into consideration their unique circumstances, before making the decision to enter into a franchise agreement.