- Technology has made all the difference for the most profitable fast food chains to separate themselves from those struggling through the restaurant industry’s ever-evolving challenges
- Technology solutions that boost sales, staff productivity, average ticket and guest experience, while requiring minimal changes to day-to-day operations, are integral for successful owners and operators
- Voice AI has become one of the fastest-growing technology categories for quick service restaurants, and is being adopted by many of the most profitable fast food chains
Last year in 2021, 110,000 restaurants closed permanently due to the pandemic. Even the biggest fast food chains felt the effects as the quick-service restaurant (QSR) industry’s revenue dropped from $273 billion in 2019 to $239 billion in 2020. The impact continues to affect profitability for restaurants of all types, whether franchises, corporate-owned chains or independently owned mom-and-pops.
While the restaurant industry as a whole took a hit, quick-service restaurants (QSR) fared far better than full-service restaurants and have likewise enjoyed a faster recovery. Brands that adopted technology solutions to improve efficiency despite being short-staffed went a step further, establishing dominance over those who didn’t embrace the opportunity for digital transformation.
In this guide, we’ll discuss the factors that impact quick-service restaurant profitability and strategies implemented by the most profitable fast food chains to emerge as industry leaders.
What impacts QSR profitability?
Whether you run the largest fast food chain or a small, independently owned coffee shop, QSR brands of all sizes share the same concerns when it comes to profitability. To be profitable, restaurants have to do more than serve the tastiest food or deliver the best service.
For the most profitable fast food chains, remaining resilient in uncertain times means focusing both on driving revenue and controlling variable costs. While fixed costs like rent and utilities are predictable and go relatively unchanged, the costs of food and labor fluctuate based on the economy and business volume, and play a major role in profitability.
Food and labor costs have always been the biggest expense restaurants face, making up 60 – 70% of total operational costs. As dining rooms around the world closed in early 2020, restaurants saw a steep decline in revenue and started to limit menu items and cut back on staff to retain already razor-thin margins.
Now more than ever, restaurants have to be vigilant of food and labor costs to be profitable. Unpredictable business volume, supply shortages, increasing hourly rates and inflation rates at a 40-year high have even the most profitable restaurants in America looking for survival solutions.
Food and labor will always be a challenge in the industry. Here are common strategies chain restaurants use to manage operational costs.
First steps before diving into restaurant technology
While embracing technology is necessary for restaurants to compete in an increasingly digital world, many universal best practices around restaurant operations still apply. Keep these in mind when assessing your brand.
1. Develop standardized recipes
By creating standardized recipes and training staff on proper portioning, restaurants ensure quality and consistency are the same for menu items. Even the best worker who can rely on eyeballing ingredients can’t produce the same guaranteed outcome as a dialed-in recipe.
Let’s say a restaurant serves burritos. When workers prepare menu items without proper measuring guidelines, the finished product will vary depending who makes it. One team member may overportion chicken and overstuff the wrap with rice, while another may not have enough ingredients and put too much sauce, making it fall apart. The result is an inconsistent experience for the guest and an unknown food cost on the dish.
Provide staff with proper portioning tools and equipment and train each team member according to the recipe to ensure quality, cost and consistency is met at all times.
Operators can compare a standardized recipe with real-time costs so they always know the exact margin on each menu item. They can then make adjustments based on accurate information. If every employee isn’t following the recipes, there is no way to know how much a dish really costs.
2. Maintain accurate inventory counts
Unnecessary waste, spoilage, theft or giving away free food all lead to problems with profitability. It may seem harmless to add an extra ounce or for an employee to have an extra meal, but over time the compound effect of all the extras eat away at a restaurant’s profits.
Even small amounts of unaccounted food add up over time. To avoid issues with waste or theft:
- Train staff on proper portioning, as explained above.
- Keep a daily inventory with high-value menu items like proteins, dairy and beverages. Know on-hand counts at the start of a shift and at the end of the day. Check the sales in the POS product mix and compare with a count of what is left on hand. If these numbers don’t align, find out where the discrepancy is coming from.
- Implement an employee meal policy that clearly states what is available and how it needs to be accounted for.
- Check your POS system to see if it integrates with ordering and inventory control vendors.
3. Incorporate cross utilization across menu items
Cross utilization is the best way to deliver on the guest’s preferences and protect food cost. By using one ingredient across multiple dishes, the guest perception is a variety of unique dishes, flavors and add-ons without extra prep work or cost for you.
Though limited menus may appear to help restaurants cut back on costs, it limits options available to guests and the opportunity to increase average check value. Just as the small extras add to waste and a loss of profits, limiting items takes away from upselling the guest and increasing their order value.
Domino’s is an excellent example of this. At first glance, the popular pizza chain’s menu (including a build-your-own option) makes it look like there are seemingly unlimited choices a guest could make—but when you break down their menu, it’s not as complicated as it appears. Sauces used to create specialty pizzas are cross utilized on other menu items, like their sub sandwiches, to create an entirely new dish. Every ingredient is used on multiple dishes, meaning the store isn’t purchasing extra items and staff isn’t doing unnecessary work for one dish that may not sell.
Cross utilization brings value to guests, making more choices and options available. It allows operators to upsell and raise average check values without adding the additional cost of food items or prep work.
4. Invest in ongoing training and development
Even before the current worker shortage and historically high fast food wages, labor was the biggest challenge and expense that restaurant operators faced. Restaurants looking to cut back on labor costs pre-pandemic typically hired employees who would work for lower wages.
In 2021, fast food restaurants saw turnover rates reach 144% and continue to be impacted by the high cost of attrition. On average, it costs a QSR restaurant $5,864 to replace one worker. Restaurants lose time, knowledge and morale when turnover rates are high.
To fight high turnover rates, create ongoing training and development programs. Most restaurant workers only receive an initial onboarding training without continued development programs. Workers stagnate in roles they’ve outgrown and become bored, burned out and eventually leave.
Employee turnover is also attributed to unclear expectations, a disconnect with management, poor communication and lack of recognition and growth. You can manage all of these issues with proper training and cross-training programs. Consistent training empowers workers and creates a culture of development. In return, employees become more engaged, more efficient and more productive.
5. Why embrace technology?
Despite rising food prices and wage hikes, restaurants that embrace technology and digital transformation have maintained and even increased profitability while providing the same quality guest experience they strive for. But this isn’t the first time the restaurant industry has seen such radical change.
The 1940s saw a surge in car ownership. With many Americans now able to take longer, leisure-filled trips, many restaurants popped up along major highways, such as the famous Route 66.
To serve guests quicker, restaurants would have to innovate how orders were taken and how guests were served. From this, we saw the carhop, a team member who would walk to a guest’s parked car and take an order. To speed things up, some restaurants even gave their carhops roller-skates to get around faster.
This was surpassed by the drive-thru, where guests didn’t have to wait for a carhop, but could drive directly to the person taking orders. Further innovation led to a microphone being placed at the start of the drive-thru, allowing guests to place orders before arriving at the window.
Today, we can see profitable QSR and fast casual restaurants using innovative technology to provide better customer service at a faster speed without sacrificing order correctness. Domino’s has doubled productivity during their busiest rush times of day.
Why the most profitable fast food chains use voice AI
Whether they’re a large New York chain or an independently run cafe in Kansas, restaurants of all sizes will continue to see expectations for increased speed of service, convenience and personalized experiences. With the rising cost of raw food ingredients and the ongoing labor shortage, popular fast food chains are integrating AI solutions to help them better meet guest demands.
Voice AI increases speed of service
As dining shifted off-premises during the pandemic, popular fast food chains experienced the year of the drive-thru. Dine-in orders typically don’t account for the majority of QSR sales, so transitioning to 100% takeout and delivery was an easier pivot for fast food chains, than for full-service restaurants.
Before the pandemic, drive-thrus operated the same way for decades. Once built for ease of use for commuters, drive-thrus experienced backlash from local governments and resistance within the QSR industry, as recently as 2019. Operators questioned whether it was worth the cost and headache to keep lanes open.
Despite being hit with major staffing shortages during the pandemic, quick-service restaurants saw a resurgence of drive-thru lanes. Guests, however, were met with slower service time and longer waits.
Now, quick-service restaurants, including fast casual brands once opposed to the business model, are introducing, innovating and expanding their drive-thrus with technology like voice AI to maximize volume and sales while minimizing wait times.
Not only are QSRs giving prime real estate to drive-thru lanes, but they are embracing technology to enhance guest experience.
Operators are using AI technology in drive-thrus for everything from digital interactive menu boards to virtual ordering assistants. Tools like voice AI help expedite the ordering process by removing friction and personalizing the experience to the individual guest by:
- Simplifying complicated menus: With natural language processing, voice AI can listen, receive and place a guest’s order. Even with large menus like Domino’s Pizza, voice AI is context-aware with a deep knowledge on a restaurant’s specific menu. It can respond accurately to a guest’s request like a well-trained server or cashier.
- Relieving overwhelmed workers: Voice AI takes on the time-consuming role of inputting complicated orders with a high accuracy rate, freeing up workers to engage in more rewarding duties like preparing orders and providing guest service. When employees are engaged in their work, they’re more likely to enjoy their job and stick with it.
- Increasing service quality: Voice AI helps operations provide faster and more accurate service to guests. With a virtual ordering assistant, restaurants see an increased speed of service and generate up to a 20% increase in revenue, potentially doubling their productivity during rush times.
Voice AI reduces costs
Over the last two years, the fast food industry experienced the battle of the best fried chicken sandwich. While guests debated over who deserved the title, operators watched the cost of chicken skyrocket.
While demand determines the price of a product, voice AI helps limit waste and manage food costs despite fluctuations in the market. As supply shortages and increased costs of food items continue to rise, a virtual ordering assistant increases order accuracy, helping operators maintain food cost goals.
With the resources to take multiple orders at once without becoming overwhelmed, an automated voice ordering assistant handles high-volume business with minimum order errors. By taking on monotonous tasks, workers are reallocated to higher priority tasks and can help operators save up to 12 extra labor hours per week.
As restaurants expand their business models, voice AI aids in serving more guests in less time.
Voice AI customizes the guest experience
With more guests moving away from dine-in and embracing drive-thrus and delivery, the most profitable fast food chains are focused on enhancing their digital hospitality experience.
Technology plays an essential role in building a strong, integrated brand presence that makes it possible to keep up with the ever-changing behavior of guests. Though dine-in has started to return, guests have become accustomed to the convenience of omni-channel ordering and contactless pickup solutions.
Popular fast food chains are responding by providing multiple touchpoints and access points for diners. With the help of AI, restaurants are giving guests more flexibility and control of their dining experience, whether they choose dine-in or to-go. Restaurant chains are introducing everything from Amazon-style locker or cubby systems to conveyor belt suspended kitchens to cater to the demand for contactless convenience.
Voice AI also provides insights into guest behavior once limited to direct interactions with an individual or through a guest feedback survey. Operators get more insights into the guest’s experience and preferences through advanced analytics, even when the interaction happens off-premise. Voice AI uses machine learning to instantly store insights on each transaction and process massive amounts of data. AI can analyze patterns and trends in the moment and provide personalized recommendations to guests.
Being well-trained on a restaurant’s menu allows voice AI to successfully upsell the guest with customized recommendations, resulting in up to 25% average ticket growth.
More efficient and profitable systems with voice AI
The restaurant industry is on the edge of a major turning point. The pandemic highlighted the cracks in the industry and took a toll on operations. While profitability and managing costs are a main concern for operators, innovation in technology is the future for restaurants to help with the bottom line and to keep guests happy.
Owners and operators are already using automation in kitchens and guest-facing channels. Guest expectations and preferences are rapidly changing and solutions like voice AI help restaurants recover and adapt to a new normal.
Schedule a demo and find out how ConverseNow supports recovering restaurants with virtual ordering assistants powered by cutting-edge voice AI technology.