Six Key Innovations Reshaping the Future of QSRs
And how quick-service restaurants can evolve with them
It’s no secret that the pandemic has been devastating to the restaurant industry. More than 100,000 restaurants and bars have permanently closed due to the pandemic, according to estimates from the National Restaurant Association. Fortunately, one particular sector has been rebounding faster than others. Thanks to an inherent emphasis on convenience and affordable takeout, restaurants in the fast food and quick-service category were able to quickly adapt to the new normal and serve their customers safely and efficiently. Technomic projected that the fast food sector’s market share will grow by 8% this year.
Despite some states reopening and resuming indoor dining at reduced capacity, most consumers remain cautious with heightened hygiene standards. After all, 77% of consumers recently surveyed by DataEssential say they feel the safest when getting their food from drive-thrus, quick service restaurants (QSRs) have a valuable advantage over other restaurants, and 74% of U.S. consumers have visited drive-thrus the same amount or more often than usual this year.
That being said, this is certainly not a time for QSR brands to rest on that advantage. The adoption of new technologies and changes in consumer behavior, both greatly accelerated by the pandemic, will have a long-term impact on the future of the restaurant business. In particular, here are the six key innovations that are reshaping the future of the QSR industry, and how QSR brands can strategically leverage them to futureproof their businesses.
Grab-and-Go Tech Enables the Ultimate Contactless Experience
Contactless payments today; the “grab-and-go” model tomorrow
One of the key technologies that saw a significant bump in adoption during this year was contactless payment, thanks to heightened concerns around public hygiene. In response, some QSR stores have issued a no-cash policy during the pandemic while others, such as Burger King and Shake Shack, are trying out new touchless restaurant concepts with curbside delivery, pick-up lockers, and outdoor dining spaces.
In addition, QR codes have quickly become the norm at restaurants for accessing the digital menu and, in some cases such as Bluestone Lane, directly take customers to the payment app for mobile ordering and payment. Square recently launched its QR-code driven Square For Restaurants platform, which allows customers to browse menus, place orders and pay for meals with simple scans from their phones.
As contactless payment becomes table stakes for QSRs, it hints at a future where the grab-and-go model pioneered by Amazon Go stores could serve as the ultimate contactless experience of tomorrow, optimized for convenience and operational efficiency. Popular food items will be prepared and kept warm for walk-in customers, whereas online orders will be prepared in advance for contactless pick-up.
Even the grab-and-go model as we know it today could further evolve in the direction of an intelligent store that recognizes the customers the minute they walk in. For example, Amazon recently started testing a palm-reading contactless payment system called Amazon One, which further decouples digital payment from mobile devices and ties it to individual identities to reduce friction. In the long run, the ability to “log into” physical locations, powered by a mix of ambient computing and biometric authentication, will allow customers to receive more personalized services at their favorite restaurants without having to ask.
For QSR brands, this developing trend towards contactless payments today and the grab-and-go model tomorrow necessitates a rethinking of on-premise design. In addition, it also reflects a growing trend in the competitive landscape where grocers and convenience stores (Whole Foods and Amazon Go, especially) are able to offer a similar experience with perhaps more variety of products. While convenience and on-premise dining serve as key differentiating factors for QSRs today, they likely won’t matter as much as the grab-and-go model becomes more widely adopted over the next few years. Instead, QSR brands will need to differentiate themselves through quality products with features designed for off-premise enjoyment.
Dynamic Displays Activate Hyper-Personalized Menus & Offers
Contextually customized menus today; hyper-personalized menus and offers tomorrow
Outdoor-ready digital displays were already becoming standard in many drive-thru lanes, but recent safety-based restrictions on restaurant access and occupancy levels have amplified the value of such displays. Today, these screens can let diners know if they should stay in their car or come inside to pick up their orders. In the future, they could go beyond simple digital menus and become the interface for delivering hyper-personalized brand experiences.
While the aforementioned technologies that will enable customers to log into restaurants are still at least a few years away from mass market implementation, many QSR restaurants have already started leveraging dynamic displays powered by machine learning and contextual data to streamline their drive-thru operations and provide customized offers.
For example, McDonald is leveraging predictive technologies, which it gained from its acquisition of AI startup Dynamic Yield last year, to power new digital menu boards. Pulling in contextual data such as time of day, weather, nearby events, historical sales, and local traffic, these dynamic menu boards can intelligently surface items that are best suited for the occasion. For instance, items that take a long time to prepare might be de-emphasized during a rush to ensure that customers can receive their orders without getting impatient. Likewise, the display could highlight more complex and pricier sandwiches during a slow period.
While use cases for dynamic displays tend to concentrate in drive-thrus today, in the future, they could also work in tandem with ambient computing to help restaurants identify high-value customers and deliver personalized offers beyond ordering. For example, the recent comeback of celebrity-endorsed meal combos could be integrated into a personalized dining experience for fans who ordered them. While some have already turned to virtual dinner parties to fight isolation during the lockdowns, the rise of virtual co-viewing today may also open possibilities in virtual co-dining that enables fans to dine together while watching their favorite games, be it traditional sports or esports.
For QSR brands, the key to implementing dynamic displays is not about the screens themselves; rather, it is all about the contextual and customer data that is needed to power dynamic, hyper-personalized experiences. In order to secure the brand trust required to gather the first-party data required for personalization, QSR brands will need to honor data privacy as a business imperative, and clearly communicate the value of personalized services enabled by data collection across consumer touchpoints.
Omnichannel Ordering Sets the Stage for Embedded Ordering
Omnichannel ordering today; omnipresent touchpoint tomorrow
The emergence of food delivery platforms such as Grubhub and Postmates has been a disruptive phenomenon for years, and this pandemic has encouraged more people to try out food delivery services as many restaurants pivoted to delivery and takeouts. Online food delivery is up 20.2% YoY in 2020 to $26 billion in sales, according to Statista data.
As food delivery apps become increasingly dominant in how people discover local restaurants and place orders, they take on an aggregator role that inevitably tends to commodify the restaurants as undifferentiated suppliers. Luckily for established QSR players, a distinguished brand can help them stand out from the competition on aggregator platforms.
With more customers moving to digital channels for deliveries and pre-orders, omnichannel ordering is becoming the norm, with mobile being the new queue for drive-thrus. 70% of U.S. customers today use mobile to interact with restaurants, according to a recent survey conducted by PYMNTS. In August, Panera introduced ordering options through Google Search, Google Maps and Google Assistant, through which customers can place orders and use Google Pay to seamlessly complete payments.
In addition, connected cars are emerging as a key ordering channel for customers on the go. Ordering food while driving is one of the most common connected activities, with 35.3% of commuters having ordered food and picked it up at a drive-thru in December. Utilizing mobile apps that support voice assistants open another touchpoint for QSR brands. Another PYMNTS research indicates that 35% of all consumers are interested in harnessing voice assistants to order lunch, and many more would like to utilize them for other takeout choices.
Looking ahead, these ordering opportunities will be embedded directly into all forms of digital touchpoints for consumers. Their expectation will be that every platform will be shoppable: from inside the video games they are playing, to the car that they are driving, to their smart home devices. The point of sale will be wherever your customers are and distributed through owned and earned media. Even out-of-home media, with its emerging innovations in interactive displays and AR, could be leveraged to drive direct orders and engagement.
For QSR brands, preparing for this future of omnipresent consumer touchpoints embedded in all forms of media and offline channels means taking a more integrated approach towards both branded content and direct-response marketing. Breaking down the silos and merging them into a channel-agnostic, consumer-centric service will be the key for QSR brands to be accessible everywhere.
The Rise of Ghost Kitchens Reshapes QSR Brand Marketing
The rise of ghost kitchens today; a new age for QSR branding tomorrow
In response to the rising demand for on-demand delivery, some QSRs and fast food restaurants are starting to create virtual concepts out of their existing brick-and-mortar shops, powering them through delivery platforms.
This is close to the emerging concept of ghost kitchens, also known as virtual kitchens or cloud kitchens, where a restaurant doesn’t have a consumer-facing physical location, and relies on delivery platforms to acquire customers and send out products.
Just as the grab-and-go model enables grocers and convenience stores to compete with QSRs, a similar dynamic will play out with ghost kitchens. Already, grocery chain Kroger is entering the space with the launch of two on-site ghost kitchens in partnership with ClusterTruck, a startup specialized in running ghost kitchen operations. Similarly with a “dark kitchen” model, Chicago-based fast casual restaurants Wow Bao is licensing its product to other brands for the sole purpose of distributing via third-party platforms. The market is quickly becoming crowded — even Rapper Wiz Khalifa has launched HotBox by Wiz, a delivery-only restaurant chain, in partnership with ghost kitchen startup Nextbite.
For QSR brands, these shifts in the competitive landscape ultimately point to a new era of restaurant branding and marketing. The rise of omnichannel ordering and ghost kitchens are disintermediating customers from the physical restaurants and the on-premise brand experiences, which will soon become less relevant to a large segment of QSR customers. In this context, QSR marketing is morphing into a pure branding exercise, decoupled from the conventional factors that customers used to define a QSR brand. Instead, how to communicate your brand on food delivery platforms without the help of a physical location to deliver a tangible brand experience will be a new challenge for QSR marketers to address.
As a result, tactics such as enhanced SEO on food delivery platforms, designing packages for delivery, and reimagining off-premise dining experiences online will take on a higher priority in brand building. Of course, this doesn’t mean product quality is unimportant — on the contrary, it will become the only tangible element of the entire brand experience for restaurants. Still, embracing an omnichannel strategy and establishing touchpoints to deliver frictionless online experiences will be the key for QSRs to stand out in the future of ghost kitchens.
QSR Automation Opens Disruptive Possibilities
High labor costs and minimum wage jobs today; robot subscriptions and “ghost kitchens on wheels” tomorrow
There is no doubt that the development of automation technologies will have a profound impact on our society and economy, for it will fundamentally alter the way we think about labor across all industries. For the QSR space, automation will likely play out in three sectors: kitchen automation, customer-facing service robots, and on-demand delivery powered by autonomous cars and drones. For the first two categories, most in-market examples today are described as “co-bots”, with a human touch still required for supervision or to collaborate with for certain tasks.
Inside the kitchen, operations are being simplified and standardized via robotic arms made for prepping and cooking. Robot kitchens and appliances are getting increased funding and attention during COVID as consumers want more contactless options and restaurants look to cut back on labor costs. For example, Miso Robotics is offering their robot arm Flippy to fast-food restaurant owners for an estimated $2,000 per month on a subscription basis, (approx $3 per hour). For comparison, a human worker doing the same job would cost $4,000 to $10,000 or more a month. Currently deployed in Dodger Stadium and at over 50 locations of CaliBurger, Flippy, along with its robotic competitors made by DaVinci Kitchen and Spyce, is poised to become a regular part of fast-food kitchens.
In contrast to the market readiness of robot cooks, serving robots still have a long way to go before mass implementation. A Ball State’s study found that customers in the QSR space weren’t adamantly opposed, but very few were adamantly in favor of being served by a robot. Although there have been reports on how robotic waitstaff is beginning to pop up across South Korea and Japan, as consumers look to feel secure while eating out in a post-pandemic world, generally speaking, robots work better in the backend than in customer-facing roles, as our cultural acceptance of being served by robots has yet to emerge. Plus, if quick service restaurants were to go the way of ghost kitchens, there won’t be much need for robot servers and busboys in future QSRs.
More excitingly disruptive is the impact of autonomous vehicles and drones on how on-demand delivery will be handled in the future. Right now, all restaurants have fixed locations, with the exception of food trucks. In the not-so-distant future, however, “ghost kitchens on wheels” that prepare the food as they deliver to the customers could become a viable concept for QSR brands to explore. Pizza Hut has been testing an autonomous delivery truck since 2018, but no one has combined the idea with a ghost kitchen concept yet. When autonomous food trucks can roam the street and drive to where the customers are, the restaurant business will take on an automated, demand-based model to meet ever-rising consumer expectations on delivery time and freshness.
Alternative Protein Kicks Off an Eco-Conscious Transformation
Meat alternatives today; sustainable dining tomorrow
Responding to consumers’ increasing appetite for fresh, local ingredients, plant-based diets, and eco-conscious consumption, many QSRs and fast food restaurants are finding new interest in sustainable dining solutions, led by plant-based proteins.
Meat alternatives are becoming common in the QSR landscape as they begin to cater to more eco-conscious, younger audiences. Plant-based brand, Impossible Foods, is working with the likes of Burger King and Carl’s Jr, while its main competitor Beyond Meat has shown up in menus at McDonald’s, KFC, and Dunkin’. Burger King has also veered in a different direction and released a Reduced Methane Emissions Whopper that is only made from cows who have been fed a methane-curbing diet.
Beyond meat alternatives, QSR brands are also starting to look into other sustainable practices to update their offers and operations to be more eco-conscious. As the food service industry prioritizes waste reduction and robust supply chains, many are tapping into local suppliers to cut down logistics costs and emissions. Sustainable store designs are also in vogue, as McDonald’s in Disneyland is becoming carbon-neutral and water efficient and Burger King US aims to reduce the carbon footprint of its addresses by 60%. As of September, about 250 Dunkin’ restaurants in select U.S. markets have begun testing a new biodegradable straw.
At the end of the day, QSR brands are starting to pay attention to sustainable dining because of growing consumer demand. Consumers value sustainable foods and products, and that has possibly grown over the pandemic. An ongoing Accenture research series tracking how people’s behavior has changed in the pandemic found that 82% of consumers surveyed in August are making more sustainable choices. The incorporation of plant-based meat products and sustainable dining practices serves as a stepping stone to greater conversations around sustainability in the QSR space, as corporate social responsibility continues to grow prominent across industries.
Want To Learn More?
We here at the Lab are keen to witness the transformation that the QSR and fast food restaurants are undergoing and eager to help brands navigate the disruptive shifts. If you wish to learn more about the developing trends reshaping the restaurant business and the brand opportunities that lie within, please reach out to our Group Director Josh Mallalieu at josh@ipglab.com.
