Where are the Sit-Down Diners Going? QSR
When a family wants to go out, they’re less and less likely to go to a traditional casual diner—that much is clear from the last several years of same-store sales decline in the segment. But where they are going has been a bit of a gut check until recently.
The common refrain was that fast casual was eating up the market share that once went to casual diners. But according to research firm The NPD Group, that’s not exactly the case.
“Where there’s growth, it’s coming right out of full service operators,” said NPD restaurant analyst Bonnie Riggs. “They all thought it was fast casual that they were losing to. So they considered fast casual in their competitive set, but not quick service. I don’t know why full-service operators don’t think they compete with QSR, but they do.”
In a data dive into year-end 2017 numbers, it’s clear that people looking for a casual, sit-down experience have been heading to QSR in recent years. According to NPD, QSR saw a 2% growth in on-premise dining and off-premise dining remained flat at 0% growth. So people are hitting the drive thru at the same rate, but coming in more and more. Mass market casual dining saw a 4% decline in on-premise dining and a 1% decline in off-premise, despite a growing push for delivery and carryout.
How QSR brands are drawing that traffic differs between the brands, but there are a few big trends that seem to be working.
Premium offerings are a key driver into the dinner day part across the segment. QSR consumers don’t want the same “fast food” they’re squeezing into their lunch break. Higher quality food that innovates on the core experience is driving the dinner hour menu mix. Del Taco took aim directly at the dinner day part with its Platos program, a plated menu with sides that mimicked offerings from Mexican casual diners. McDonald’s has similarly expanded sandwich offerings with a whole range of premium burgers and chicken sandwiches. Something for the adults as the kids order a Happy Meal or traditional sandwiches.
Of course value is another key component of on-premise sales. The aggressive QSR marketing around value offerings keeps QSR top of mind when doing the dinner math equation. Sure, mass-market pizza is still the most cost-effective way to feed a family of four. But for parents who can’t stomach another $5.99 cheese pizza with the kids, QSR is a lot closer to pizza than casual dining.
Service is a big component and one that full-service diners have especially been struggling with as turnover creeps up and up. Consumers generally expect a greater level of service when they’re at a full-service restaurant. So all the tablets and efficiency tweaks are doing the segment a disservice. One just needs to walk into a local independent to find the missing servers, and one just has to pop into a Chick-fil-A during the dinner day part to see some lapsed casual diners. Even without the deep discounts of peers, the brand continues to grow traffic.
“Consumers haven’t cut back at Chick-fil-A, that tells me it’s not all about price,” said Riggs. “If you provide the quality you provide the service, they’ll pay the price.”
But the biggest reason more people are eating inside QSR restaurants: remodels. The millions in cheap capital that has been poured into updates in the past few years has produced some really gorgeous restaurants. And big consolidators are speeding the process up. Franchise operators like Gregg Flynn at Flynn Restaurant Group or Tom Garrett of GPS Hospitality are buying up restaurants and updating them well ahead of schedule either as a part of an agreement with the franchisor or just to appreciate the sales bump that averages between 6% and 8% but can reach 10% to 15% depending on the restaurant and the market. Not many people choose at in a shabby retro QSR just because of value or smiling employees.
All this has mass-market casual dining stuck with a few very difficult options just to compete with just QSR. It either has to elevate the experience with better food, better service or something else (see Top Golf or Punch Bowl Social), or it has to cut prices deeper—but that hasn’t worked so far.