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QSR's: Key trends and developments following COVID-19
Floris van der Pijl published on September 14, 2022
The food service industry was hit very hard by the outbreak of COVID-19. With governments imposing lockdowns and other restrictions, restaurants had to adapt and make changes overnight to still be able to serve customers. Let's see how the industry performed during the pandemic.
In this blog we share some insights from our trendreport on the Foodservice industry. The report looked at how the biggest chains (top 250 chains worldwide with a turnover of more than €100 million) fared through the pandemic and whether they recovered in 2021. Additionally we will provide context on key topics to look out for in a possible recession.
Total net sales not yet recovered
Overall, total net sales of foodservice players have not yet recovered entirely from the pandemic (net sales 2020: -15.4%). Longer and stricter lockdowns in Europe and Asia are at the root of these lagging sales. Large foodservice players (more than €1 billion in net sales) did make up for lost sales in 2021, while smaller players saw a stronger setback in COVID. QSR players with continuous access to customers (e.g. via drive-thru) are the majority of the large player segment, it explains their more limited sales drop and swift recovery.
Figure 1: Net Sales Index top 250 global foodservice companies
Quick service restaurant industry least hit by covid
The quick service industry proves its resilience, as sales of QSR chains suffered the least from the lockdowns, returning above pre-COVID levels in 2021. Catering and full-service restaurants on the other hand, struggled to fully recover in 2021 due to their reliance on on-premise dining (e.g. at work/university or restaurant dining).
Restaurants, however, showed a better recovery through the second wave of lockdowns, as their way of working allowed them to adapt (e.g. through the digitalization or extension of outside dining options). For the quick service restaurant industry the drive-thru culture (mainly in the U.S.) allowed the segment to continue to operate in 2020 and 2021.
Another important factor that helped sustain the profitability of QSRs during the pandemic was the level of franchising. Most QSRs operate a franchising-oriented model, where higher margins can be achieved for the head office. The revenue stream is relatively stable (rent and royalties) and the operational costs of adding an additional restaurant for a franchisee are relatively small.
Figure 2: Net Sales Index global food companies per restaurant type
Not only franchising makes QSRs more resilient. QSRs also benefit from efficiency in the kitchen, through a standardized menu and customized cooking equipment, and by reducing the use of staff in other parts of the restaurant.
The future of the quick service restaurant industry
Currently, the foodservice industry is entering an uncertain period. The crisis in Ukraine has led to the departure of international chains in the Russian market, which will affect the 2022 figures. For example, McDonald's already reported a 3% decline in Q2 (quarter-on-quarter), 2% of which is due to the company's departure from Russia. Supply shortages are also expected. This could lead not only to price increases, but also to limited availability of items. Last month, it was reported that several QSRs could not buy French fries after a shortage of containers.
Moreover, the QSR industry will become more digitized in the coming years. Digital sales are expected to account for more than half of QSR business by 2025, and QSR chains are already experimenting with new digital strategies to drive sales growth (e.g., loyalty apps, drive-thru restaurants that fulfill online orders only).
Fast food chains (QSRs) have historically been more resilient to recessions. During the last major recession (2008-2009), QSRs demonstrated strong resilience as a relatively low-cost option compared to other food service segments. Casual and full-service dining establishments are more sensitive to economic downturns. This is expected to be the same if a recession were to occur. The question is: Will it be different in an inflation-driven recession?
More on the Foodservice Industry
Want to find out more about the foodservice industry? In our foodservice trendreport we share the latest insights, trends, and developments on the performance of the industry and its top performers. Download the trendreport for free via the button below.