Quick Service Restaurants - US - May 2019

OVERVIEW
What you need to know
Definition
EXECUTIVE SUMMARY 
The issues
Fast casuals beat QSRs on quality, catch up on value
Figure 1: QSR competitive associations, February 2019
C-store threat exists for QSRs’ most loyal customer
Figure 2: QSR competitive associations, by Generation Z, February 2019
QSRs face growing labor challenges
The opportunities
Natural fast food has wide and growing appeal
Figure 3: QSR concept interest – natural food/beverages, by select demographics, February 2019
Consumers will pay more for premium meats
Figure 4: QSR price sensitivity, February 2019
Appeal to young consumers with low-cost special diet options
Figure 5: QSR concept interest, February 2019
What it means
THE MARKET – WHAT YOU NEED TO KNOW
LSR segment continues to grow, led by fast casual
Labor challenges keep QSR execs up at night
Convenience stores are a growing threat to QSRs
MARKET SIZE AND FORECAST
The LSR market will see stable growth over the next few years
Figure 6: Total US revenues and fan chart forecast of limited service restaurants^, at current prices, 2013-23
Figure 7: Total US sales and forecast of limited service restaurants^, at current prices, 2013-23
MARKET PERSPECTIVE
Fast casual growth outpaces QSR
Figure 8: Top 200 Limited Service Restaurants sales, by segment, 2016-2017
Convenience stores level up their foodservice programs
Figure 9: Slurpee display at 7-Eleven’s new test kitchen in Dallas, Texas, 2019
MARKET FACTORS 
Labor wars rage on as unemployment rates sit at record lows
Unemployment rates, increased competition, and a looming recession
Figure 10: Unemployment and underemployment, January 2007-February 2019
Minimum wage laws
What does it all mean?
KEY PLAYERS – WHAT YOU NEED TO KNOW 
Blurring segments mean quality improvements at QSRs
QSRs are pioneers in tech
Organic is the future of fast food
QSR SALES AND TRAFFIC
Chick-fil-A is moving on up
Figure 11: Leading 10 QSRs among Top 200 chains, 2016-2017
Chick-fil-A becomes fourth-most visited QSR
Figure 12: Fast food restaurant visitation, any visit in past 30 days NET, fall 2013-18
WHAT’S WORKING?
LSR segments are blurring
Plant-based menu innovations
Ordering and delivery technology
Figure 13: Jimmy John’s ad campaign takes aim at third-party delivery, 2019
WHAT’S STRUGGLING?
The LTO as we know it
Coffee wars rage on
WHAT’S NEXT?
Organic and natural fast food
Figure 14: Nic’s Organic Fast Food in Chicago, 2019
Special diet fare
THE CONSUMER – WHAT YOU NEED TO KNOW 
Generation Z is a key fast food demographic
The importance of technology will grow at QSRs
Natural ingredients are the future of fast food
QSR VISITATION & VISITATION DRIVERS 
Nearly all consumers visit QSRs
Figure 15: QSR visitation, February 2019
Healthy options motivate more fast food visits than indulgent options
Figure 16: QSR visitation drivers, February 2019
Convenient location and healthy options would motivate four in five people to visit a QSR
Figure 17: QSR visitation drivers, by TURF analysis, February 2019
Women are especially motivated by healthy fast food options
Figure 18: QSR visitation drivers, by gender, February 2019
QSR tech amenities and social media posts resonate most with Gen Z
Figure 19: QSR visitation drivers, by generation, February 2019
QSR LOYALTY 
Most consumers are loyal to a particular fast food restaurant
Figure 20: QSR loyalty, February 2019
Gen Z is the most loyal fast food consumer
Figure 21: QSR loyalty, by generation, February 2019
Lower income consumers are more loyal to QSRs
Figure 22: QSR loyalty, by income, February 2019
Convenience and value are the top reasons for loyalty to QSRs
Figure 23: Reasons for QSR loyalty, February 2019
But four in five are loyal because of convenience and high-quality food
Figure 24: Reasons for QSR loyalty, by TURF analysis, February 2019
Loyalty programs are most effective with Millennials
Figure 25: Reasons for QSR loyalty, by generation, February 2019
QSR TECHNOLOGY 
Twice as many consumers use a restaurant over a third party for delivery
Figure 26: QSR technology experience, February 2019
Younger consumers are driving the growth of technology at QSRs
Figure 27: QSR technology experience, by age, February 2019
Hispanic consumers overindex for most types of fast food tech
Figure 28: QSR technology experience, by race and Hispanic origin, February 2019
QSR MENU PRICE SENSITIVITY
Premium meat items are more of an expectation than snack items at QSRs
Figure 29: QSR menu item interest, February 2019
Lower income consumers are most interested in fast food snacks
Figure 30: QSR menu item interest, by household income, February 2019
Some consumers would pay more for one premium meat item than a full value meal
Figure 31: QSR price sensitivity, February 2019
Younger consumers have a higher price threshold at QSRs overall
Figure 32: QSR price sensitivity – NET all items, by age, February 2019
Men are willing to spend more on fast food snacks
Figure 33: QSR snack item price sensitivity, by gender, February 2019
QSR COMPETITIVE ASSOCIATIONS 
Consumers associate quality with fast casuals
Figure 34: QSR competitive associations, by correspondence analysis, February 2019
Figure 35: QSR competitive associations, February 2019
Gen Zers have better perceptions of QSR quality and service
Figure 36: QSR competitive associations, by Generation Z, February 2019
Parents are more likely to consider LSRs kid friendly than the general population
Figure 37: QSR competitive associations for kid friendly, by parental status, February 2019
QSR CONCEPT INTEREST 
Natural food and beverages are becoming an expectation at QSRs
Figure 38: QSR concept interest, February 2019
Natural ingredients and sustainable packaging would appeal to the majority of fast food customers
Figure 39: QSR concept interest, by TURF analysis, February 2019
Women are driving the demand for natural fast food
Figure 40: QSR concept interest, by gender, February 2019
Gen Z shows emerging interest in functional ingredients, CBD at QSRs
Figure 41: QSR concept interest, by generation, February 2019
Nearly half of Hispanic consumers want natural fast food ingredients
Figure 42: QSR concept interest, by race and Hispanic origin, February 2019
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Sales data
Fan chart forecast
Consumer survey data
Abbreviations and terms
Abbreviations
APPENDIX – THE MARKET 
Figure 43: Total US revenues and forecast of limited service restaurants^, at inflation-adjusted prices, 2013-23
APPENDIX – THE CONSUMER 
Correspondence Analysis
Methodology
TURF Analysis
Methodology
Figure 44: Table – TURF Analysis – QSR concept interest, February 2019
Figure 45: Table – TURF Analysis – Visitation drivers, February 2019
Figure 46: Table – TURF Analysis – Reasons for loyalty, February 2019