Delivery, minimum wage increases, technological advancements and socially conscious initiatives are key focus areas for restaurant franchisees in 2020, according to a survey conducted by TD Bank.
Almost two-thirds of survey respondents believe that increased automation (34 percent) and mobile loyalty apps (31 percent) will strongly impact the industry in 2020. Many national franchises already have invested in automated services such as self-serve kiosks and created mobile loyalty apps that reward customers for their spending habits. Industry leaders expect these technologies to grow in popularity, driving a "trickle-down" effect, where smaller local and regional chains consider adopting these offerings to meet diners' preferences.
"It's important for brands to invest in technology since the expectations of today's consumer have changed significantly," says Mark Wasilefsky, Head of the Restaurant Franchise Finance Group at TD Bank. "If consumers have a brand's app on their phone, it's much more likely they will visit the store. It's clear that technology from a delivery and mobile ordering standpoint is tremendously important, while investing in technologies, such as self-serve kiosks and loyalty apps, is necessary to compete."
Delivery Demands Attention
As on-demand food delivery remains a staple of modern convenience, franchise restaurants are utilizing delivery strategies to satisfy consumer demand. In TD's 2018 survey, 78 percent of respondents said their restaurant had a delivery strategy, and in 2019, this number increased to 85 percent. Of the respondents whose restaurants had established strategies, there was a wide range of how much these contributed to overall sales:
- 52 percent reported that delivery makes up to 10 percent of sales.
- 13 percent said that delivery contributes to 10-20 percent of sales.
- 20 percent stated that delivery accounts for more than 20 percent of sales.
"As the cost of delivery is decreasing as third-party providers become more efficient and larger operators are able to negotiate more favorable deals, there is tremendous potential for operators to use delivery to account for a larger percentage of their businesses," Wasilefsky says. "Delivery will be a big part of this business going forward."
Franchises Confront Labor Concerns
The restaurant industry employs the greatest share of minimum wage workers at 10.7 million (May 2018), according to the Bureau of Labor Statistics' Occupational Employment Statistics program. Thus, nationwide minimum wage increases are strongly impacting restaurant franchises and respondents have developed varied approaches for offsetting increased labor costs. Of those surveyed, 43 percent plan to implement menu price increases. Thirty-seven percent plan to use labor-saving technology, such as the self-serve kiosk along with the automated "ghost" kitchen. Unfortunately, 7 percent plan to implement staffing cuts.
Socially Conscious Initiatives Attract Socially Conscious Customers
Many of today's consumers are socially conscious citizens, demonstrated through choices in the food they eat, and restaurants are taking this seriously. Although in 2018, only 9 percent of franchisees surveyed planned to invest in environmentally conscious initiatives, in 2019, 68 percent reported having implemented or having plans to implement environmentally-friendly initiatives, including compostable or biodegradable packaging or utensils and paper straws. Seventeen percent reported adding food alternatives with less environmental impact to their menu, like Beyond Meat, Impossible Foods and grass-fed products, and 15 percent stated their restaurant will implement or has implemented biking or on-foot delivery services within a certain radius to reduce carbon emissions.
"To keep up with today's socially conscious consumers, restaurants need to invest in areas that are morally important to them," Wasilefsky says. "By doing so, operators show they have a holistic view of the consumer, which leads to stronger brand loyalty."