Food and Restaurant Franchises

It's important to understand that restaurants are only the starting point when considering this industry. The segments and brands have differing fortunes depending on macroeconomic conditions and other factors, so identifying a segment should be an analysis unto itself, and only then should you begin considering specific brands. Quick Vs Full Service Restaurants Restaurants are broadly divided into quick service (QSR) and full service (FSR). You may also see the categories of QSR, fast casual, casual dining, and fine dining used: Quick Service Restaurants (QSR) are 'fast food' Fast casual comprises concepts where food is mostly prepared to order but the majority of customers do not stay to dine Casual dining includes lower-priced full-service concepts Fine dining is, well, fine dining The higher you go up the chain, the fewer the franchised concepts. QSR franchises abound, and casual dining brands are also fairly common. But most full-service restaurants are corporate-owned. Darden, for example, the owner of well-known brands like Olive Garden and Longhorn Steakhouse, does not offer franchises within the U.S. These categories are further segmented by menu type: for QSR, for example, burgers, chicken, and pizza are the primary food franchise opportunities. Commodity Costs The other significant variable is commodity costs. Food is obviously the key input for restaurants beyond labor. Individual food commodities do not move in lockstep. Trends tend to be segment-specific. At a time when many restaurant operators have seen flat or declining traffic counts, one positive factor has been the downward market pressure on commodity food costs. This has enabled many successful Limited Time Offers in the business and helped bolster margins in a competitive environment. The good news is that commodity pricing generally should remain low in 2019. Still, there are signs that prices in some categories are bottoming out and likely to become more volatile in the next 12 months. Here’s a look at what food supply chain experts see ahead. However, QSR brands have been focused on value as opposed to product innovation to drive traffic, which tightens margins. It is also important to remember that franchisors can pressure franchisees by nationally advertising low-priced and attractive but low-margin promotions even if they cannot mandate participation.