Exploring Restaurants Across the U.S.
The U.S. restaurant industry is undergoing significant changes. Various trends are shaping these restaurant segments, from the rise of digital-only quick service restaurants (QSRs) to the demand for personalization and cost-saving technologies. Additionally, the catering renaissance in casual dining and the growth of fast casual restaurants further contribute to the evolving nature of the industry.
Distinguishing QSR, Fast Casual, and Casual Dining
The degree of service, atmosphere, and menu selections distinguish QSRs, fast casual, and casual dining. QSRs, also known as fast-food restaurants, emphasize speed and convenience by offering a restricted menu and self-service alternatives. Fast casual restaurants offer higher quality food, a more relaxed ambiance, and occasionally limited table service, bridging the gap between QSRs and casual dining. Casual dining restaurants provide a sit-down dining experience with a more extensive menu selection, higher pricing points, complete table service, and a more traditional dining environment.
No matter the type of restaurant, the industry as a whole is always innovating, from introducing new dishes to establishing financing deals. Consumers have always shown tremendous loyalty to their favorite restaurants, and with the expansion of trends and ever-evolving technologies, the restaurant industry will continue to grow and adapt.
QSR Trends and Financing Deals
The QSR industry is experiencing considerable shifts, driven by factors such as high inflation and restaurant digitization. A notable trend emerging in the QSR space is the rise of digital-only restaurants. These establishments prioritize advanced technology in their back-of-house operations, incorporating self-service kiosks and food-preparation robots. This trend can potentially transform restaurant operations and decrease labor costs while fueling the demand for restaurant IT solutions.
McDonald’s opened its first digital-only concept restaurant in Fort Worth, Texas, featuring a conveyer belt for online orders and multiple kiosks. Source: Kinettix
In recent quarters, more consumers have sought personalized experiences from the businesses they consistently buy from, especially restaurants. QSRs are responding to this demand by leveraging technologies to enhance the customer experience and drive growth. These technologies enable QSR franchisees and restaurateurs to provide tailored experiences and seamless ordering, aligning with the expectations set by the e-commerce industry.
As the cost of doing business continues to rise, franchises and restauranteurs have no other choice but to seek cost-saving measures, including hardware modernization projects, to streamline operations, reduce the number of devices and platforms used, and optimize efficiency.
Casual Dining and Recent Innovations
Casual dining brands have witnessed a surge in off-site sales since the onset of the pandemic. Leveraging their off-premises capabilities, casual dining operators have tapped into catering opportunities. They have introduced drive-thru pickup windows to facilitate catering and online orders and incorporated virtual brands designed for delivery sales.
Casual dining restaurants are increasingly utilizing apps and rewards programs to improve their operations and create better client experiences. Another update in the sector is the creation of to go-only storefronts. An example of this trend is Buffalo Wild Wings, BWW GO – Wings On The Go, where the store gives consumers three options – order online, in the app, or at the counter.
In addition, the sector is now offering more self-serve options in several restaurants while still utilizing the help of a waiter. Restaurants are using tablets at the table, allowing consumers to order their food and pay their bills without needing staff assistance.
The Rise of Fast Casual Restaurants
Fast casual restaurants have been on the rise nationwide, attracting consumers with their efficient dining experiences. The market for fast casual restaurants is projected to grow significantly in the coming years, driven by factors such as increasing demand for healthy and organic food options, the rise of digital ordering and delivery platforms, and the popularity of plant-based diets and ethnic cuisines.
Technavio’s latest report projects a substantial growth of $55.4 billion in the fast casual restaurants market from 2022 to 2027, with a compound annual growth rate (CAGR) of 11.56 percent.
The demand for fast casual restaurants that provide health conscious options experienced a significant surge during the pandemic, and this trend continues to thrive in the post-pandemic retail landscape. People have increasingly sought out quick-service establishments that prioritize nutritious menus. One company, Steele Brands, recognized this opportunity and has rapidly expanded its Crisp & Green restaurant chain. With plans to open up to 250 new locations within the next two years, including 130 outlets across 20 states by 2024, Steele Brands is capitalizing on the growing market, according to GlobeSt. This expansion highlights the enduring popularity of healthy fast casual dining in today’s retail environment.
The Restaurant Industry as a Whole
The pandemic has significantly changed the restaurant business. However, just as restaurant owners began feeling optimistic about a post-COVID-19 world, rising inflation came into the picture. Rising material costs and supply chain disruptions have had far reaching consequences. Same-store sales fell, as did customer traffic, and restaurants were obliged to raise menu pricing to compensate for rising food prices. Furthermore, restaurants are fighting to attract and keep staff amid rising labor costs and skill shortages.
Despite these obstacles, resilient businesses that weathered the storm of 2022 can look forward to a bright future, with the possibility of customers returning to dining out as the cost of groceries grows compared to restaurant meals. In fact, there has been a prominent rise in demand for sit-down dining and QSRs, according to GlobeSt. This can be attributed to the shift in consumer preferences towards not just satisfying their hunger but also seeking a pleasant dining experience. This has created profitable opportunities for entrepreneurs and restaurateurs in the food service industry.
Real Estate Fundamentals: QSR vs. Fast Casual vs. Casual Dining
Real estate fundamentals vary for QSRs, fast casual establishments, and casual dining restaurants. QSRs prioritize high-traffic, easily accessible locations near commercial areas or transportation hubs, often with drive-thru options. Fast casual restaurants seek affordable spots near business districts, campuses, or residential areas to attract a diverse customer base. Casual dining restaurants prioritize spacious seating, parking availability, and a relaxed ambiance, often located in suburban areas near residential communities or shopping districts. The casual dining industry has been weathering the storm ever since the onset of the pandemic. Though the sector is experiencing a significant decline in performance, now is still a great time to capitalize on current market conditions as consumers continue to spend and increase sales in restaurants across the board, increasing property value. While the casual dining market is declining, this post-pandemic drive would put these properties in an excellent position to sell and capitalize before the informal dining industry fades away. It is an excellent opportunity for investors to diversify their portfolio with the proceeds, preferably through a 1031 exchange, into one or more other properties in the limited-service industry or QSR market, so increasing their chances of success and wealth creation.
Common factors to include are demographics, competition, lease negotiation, accessibility, parking, and zoning regulations. Understanding these real estate fundamentals helps make informed decisions about location and maximize profitability. By analyzing target demographics and competition and negotiating favorable lease terms, restaurant owners can secure the right location that aligns with their concept and attracts their desired customer base.
Takeaways
The financing landscape for QSRs, casual dining, and fast casual restaurants in the United States is evolving to adapt to the changing dynamics of the industry. Trends such as digital transformation, personalization, cost-saving technologies, catering innovations, and the rise of fast casual restaurants are reshaping the way these establishments operate and seek financial support. Restaurant owners and operators that embrace these trends and invest in technology will be better positioned to navigate the developing market and fulfill today’s consumer expectations.
