Fast-food restaurants are responding to changing consumer tastes during the coronavirus pandemic. Some restaurants are focusing on expanding their takeout and drive-through businesses, while others are betting on delivery services amid a recent surge in new infections and changing regulations. And many expect these efforts to pay off longer-term as the pandemic shows no signs of fading and some consumer habits could change permanently.
Before the pandemic, the fast-food industry enjoyed the benefits of globalisation and had a CAGR rate of approximately 5 percent from 2014 to 2019. However, due to the global pandemic, the sector has lost the benefits of globalisation due to the regulations limiting the cross-border flow of people and commodities. However, large players were quick to remedy the impact on business by scaling their existing delivery capabilities.
Edelweiss estimates that while the entire food services market plunged 82 percent year-on-year in the first half of FY21, the contraction that organized chains such as Domino’s, Burger King, McDonald’s (West & South) reported was restricted to 45 percent; by September recovery was already at 85 percent of pre-covid levels.
With the Covid-19 shuttering in-person dining experiences and limiting restaurants from offering sit-down services to encourage social distancing, many businesses are struggling to keep afloat especially the ones who do not have a larger share in the pie.
What is happening in the fast-food industry?
Fast food culture definitely took a turn over the past year. Kartik Juneja, Founder of Chickeera explained that now due to obvious restrictions and behavioural changes, fewer people step out of their houses to enjoy fast food meals. “Nevertheless, consumers indulge in their favourite meals from the comfort of their homes. Change being the only constant, it is essential for businesses to adapt and evolve with the current scenarios to ensure a productive outcome,” he commented.
The pandemic has brought immense shifts in supply chains and imposed new hazard controls. Since the industry betted on eating out culture, most of the fast-food chains now are relying on its digital sales channels.
Commenting on the same, Kasinn Khaowprasert, Director of CP Avant mentioned, “We have seen technology as a transformative force in the industry, with the rise of digital ordering and online aggregators helping connect restaurants with customers.” Even restaurants that mainly offered dine-in before the pandemic are adjusting their business.
Getting fast food delivered at home
Fast food is best enjoyed hot and fresh. During the lockdown, people have no option but to order online via Swiggy or Zomato. Jumboking saw an increase in orders during the IPL where food was ordered online.
“Once the lockdown is lifted, customers will go right back to visit their favourite stores. Home delivery of a Jumboking meal takes at least 30 minutes and not all fast food tracks well. Fries for instance never taste the same when delivered,” Gupta pointed.
The pandemic isn’t over yet, but people have grown accustomed to the new normal wherein food chains have adopted more safety measures and are delivering while maintaining all the necessary precautions.
“Last year when the pandemic struck, everything in the food industry hit a standstill. People were avoiding eating out of ordering in. During the lockdown, all the restaurants were closed. However, now things are very different. There has been a shift of traffic from dine out to order in which has covered a lot for the sector,” Farman Beig, Co-founder & CEO of Wat-a-Burger informed.
Will fast-food companies sustain through the pandemic?
Although some fast food outlets have tried to integrate technology and drive-through windows in their operations, many have not adapted to the new normal and experience a huge financial struggle. The pandemic has impeded global investment, consumption, and trade, shrinking the international aggregate demand. The fast-food industry is no exception, as quarantine has affected household consumption.
Those people who enjoyed dining in restaurants before the outbreak have to ensure their safety by staying home. Meanwhile, the Covid-19 impacts have made people pessimistic about their finances and job opportunities in the future. Consequently, consumer confidence is gradually declining, resulting in a reduced number of customers.
Gupta strongly feels that over-leveraged and over-expended brands will take a blow. Focused players will come out of the pandemic with minor bruises and bounce back fastest and strongest post the reopening. “They will keep serving their customers with greater vigour. To put it colloquially, this lockdown will separate the boys from the men in the world of business,” he added.
At Wat-a-Burger, the transactional volumes of outlets from last year April 2020 to April 2021 has increased indicating that the scenario is slightly better than the first wave.
“While some fast-food restaurants may unfortunately not survive through the pandemic, we believe that those restaurants/chains with are able to adapt with the redefined rules of ordering in as well eating out will survive and sustain the pandemic,” Khaowprasert anticipated.
Innovations in the fast-food sector have taken over a century since the founding of the first quick-service restaurant (QSR) serving fast food, White Castle, in 1921. With the ongoing pandemic, fast food businesses lead the restaurant segment into a digitally improved and automated tomorrow.
Amid the global pandemic, fast-food outlets have to change their strategies to cope with zero-contact food demand. Many food giants have expanded their drive-through, increased the number of workers, digitized transformation, and streamlined menus. But will these changes continue? What does the future hold?
“We are certain that if the delivery experience remains intact, our customers are here to stay,” Juneja strongly believed.