How Restaurant Franchises are Pivoting and Succeeding in the New Economy

By Brett M. Buterick

Much has been written about COVID-19’s devastating economic impact on the U.S. economy. We have all read the bleak jobless reports and headlines documenting the stock market’s historic turbulence. There is nothing good about the novel coronavirus and restrictive measures enacted to curb the virus.

But often overlooked is the silver lining (if we can even call it that) in the opportunities the pandemic and accompanying restrictions present businesses. This is especially true in franchising. COVID-19 is fundamentally changing the way many franchises operate—especially restaurant franchises. It has significantly increased reliance on technology, mobile ordering capabilities, and online experiences. Given threats associated with a second pandemic wave and vaccine/treatment development timing, many of these changes are here to stay for at least a number of months, if not years.

We are seeing, and will continue to see, two fundamental shifts in the restaurant franchise industry. These shifts are fundamental, dynamic, and are occurring quickly – but will have a lasting effect. They will present opportunities for brands that can best leverage technology and their customer interests, and operate with flexible staffing.

The first major shift is an increased reliance on technology.

This is by far the most important change the industry is seeing. Pre-pandemic, many brands did already embrace and evolve with emerging technology – but future success (and present-day survival) will belong to those who continue to adapt. Successful brands are leveraging online orders and app-based delivery options to counter empty restaurants. For example, Popeyes saw same-store sales increased by 26.2% in Q1 despite pandemic restrictions beginning in March. Restaurant Brands International, Popeyes’ parent company, issued comment through its CEO, Jose Cil, in the earnings statement release. Cil credited the jump, in part, to “mobile order and payment, [and] curbside and delivery options”.

More specifically, Cil said “[t]he groundwork our technology teams have put in place over the last two years allowed us to rapidly accelerate valuable improvements to our loyalty, CRM and mobile app platforms that ultimately improve guest engagement and differentiate our iconic brands…”

Leveraging GrubHub, DoorDash, Uber Eats, Caviar, and every other mobile-order platform will help restaurants drive revenue in slow times. As restrictions ease and these infrastructures remain in place, restaurants can take advantage of, in essence, a new customer base by leveraging the modern “tapping culture” that some brands have embraced more than others. Moreover, the same mobile-based infrastructure will likely prove even more important to address customers changing needs as consumers retain stay-at-home habits. In a recently published survey by Datassential, the company said nearly three-quarters of consumers across all generations will retain many habits developed during the quarantine.

The second major shift will relate to physical space and creatively adapting the in-person experience.

Without question, stay-at-home and shelter-in-place orders have quickly and markedly changed restaurant dining experiences. While many of these orders are now, or soon, lifting – new CDC guidelines on reopening are recommending restaurants both operate with reduced staff and ensure patrons dine at least six feet apart. These measures undoubtedly will keep dining rooms light for a significant period of time. Drive-thru’s and takeout (including the mobile-ordering options above) will be significant in countering this trend. Jose Cil, Popeye’s CEO also highlighted Restaurant International’s drive-thru capabilities for its brands across the board in its strong Q1 earnings.

CDC guidelines aside, convincing customers to gather at a physical location may prove difficult in the near term. Larry Lynch, a senior vice president at the trade group National Restaurant Association, told ABC News that the biggest concern for restaurant owners isn’t federal guidelines, but convincing people that it will be safe to return to restaurants.

According to PwC, about 65% of companies recently surveyed are planning to reconfigure worksites to allow physical distancing. Some 52% are planning staggered shifts or alternating crews, according to the April 18-22 survey of chief financial officers at 305 U.S. companies. Aside from reconfigurations of restaurants to accommodate social distancing, successful brands will have to demonstrate to the general public that they are committed to maintaining the highest level of on-site sanitization and reducing exposure to the spread of the virus. Moreover, restaurants that relied heavily on lunch-break foot traffic will have to turn to other means (tech, takeout, drive-thru) to keep numbers on par with pre-corona metrics.

Despite the present difficulties of the pandemic, the American consumer will continue to embrace and patronize restaurant franchises in the near term. Although economic headlines remain bleak, well-developed brands that tackle these challenges head-on will gain market share and increase customer loyalty over the long haul. By leveraging technology and successfully modifying the in-person experience, the restaurant franchise industry will pivot over the short term and thrive long term.