Interview Synopsis

Fast food industry coronavirus headwinds

  • Public Equity
  • Consumer
  • North America

COVID-19 is affecting all kinds of industries, and fast food operators are no exception. In the US, where the outbreak has spread rapidly, “millions upon millions” of people rely on quick service restaurants (QSRs) for their daily meals, but not all QSRs can serve in these kinds of conditions. Third Bridge Forum interviewed a director from American Dairy Queen Corp to understand more about this situation.

COVID-19 creating a difficult environment for American QSRs

When asked about how the pandemic was affecting major QSRs, the specialist noted that “so far it is significant”, with initial industry indications showing declines of about a third for same-store sales over the few weeks before the Interview. Although some “softness” is expected, this should only have a short-lived effect, as “Americans in general prefer variety” and “there is not a significant erosion of trust at this time in QSR”. 

However, there is one vital capability that could support QSRs: drive thrus. “If you have a drive-thru and you already have the stronger systems and you have the technology inside those restaurants, which the major players do, they’re actually set up pretty well as it relates to some of the smaller chains or chains that haven’t invested in drive-thru technology. It’s critical at this point.”

The cost drivers for QSRs were also discussed. Food and labour are the two largest expenses, and although the former isn’t seeing major disruption yet, there is “concern” about the latter. Building costs are another leading factor, but how this affects different companies, and therefore negotiating power, depends on whether they lease or own.

The specialist also delved into the ramifications of the pandemic on franchisors and franchisees, as well as how franchisors could offer support. Some brands are deferring royalty fees. Changing up marketing strategies is another option, with Burger King noted for emphasising customer safety and how to order from them: “they’re one of the first ones that have gotten to cut TV spots and switch out their advertising quickly.” 

To access all the human insights from Third Bridge Forum’s Fast Food Industry Coronavirus Headwinds Interview, click here to view the full transcript.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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