Ongoing Challenges for Full-Service Restaurants

Jan 30, 2024 | Insights, Restaurant Research

FSR restaurants continue to struggle according to a recent discussion we had with a large multi-unit operator. In-store traffic has not rebounded since covid & the rise of off-premise ordering. Third-party delivery orders are not just thin margin, but they present a significant quality problem for operators who cannot control whether their customers’ orders will arrive hot & on time.

Off-Premise Challenges

  • While covid prompted FSR chains to focus on off-premise channels that included third party delivery & in-store/curb-side pick-up, recent delivery traffic has been trending lower.

Short Comings of DSP Delivery from FSR Operator Perspective

  • The goal is to drive a return to dine-in where the brands have far more control over quality & experience.
  • Also, pick-up is the preferable off-premise channel (compared to delivery) from an operational standpoint so long as there is no associated discounting to drive this business. While this may be the case, pick-up typically does not offer the convenience of delivery to time-strapped consumers.

Development Challenges

  • New build construction costs have increased +40% to +50% compared to 2019. This has significantly deterred even the most ambitious franchisees from growing their footprints.
  • Growth-minded operators seek cost-effective opportunities to repurpose existing restaurants that have closed.
  • While smaller footprint stores (usually designed for off-premise) may be less expensive to construct, they lack the capacity to meet the demand of a weekend rush.

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