The topic of Quick Service Restaurant (QSR) pricing has received a significant degree of discussion in the financial industry.
Many fast-food dining establishments have been adversely impacted by the rising cost of food. There are those in this sector who believe that cost is a major factor. However, some in the industry believe that placing emphasis on topics other than prices often proves beneficial in the long run.
The Chief Executive Officers (CEOs) of three fast-casual franchises recently weighed in regarding this subject.
Portillo’s
Not long ago, Michael Osanloo, the principal executive for the midwestern-based chain Portillo’s spoke before the Baird Global Consumer, Technology, and Services Conference. He cautioned that placing a continued emphasis on the price of food may prove counterproductive with consumers.
He believes price does not necessarily determine a fast-casual establishment’s value. Issues like the product’s quality, the expediency with which food gets delivered, and the overall customer service experience also carry significant weight with consumers.
When discussing his company’s own circumstances, he chooses to focus on topics like the quantity and quality of food offered and branding the establishment as a suitable alternative to the more expensive and struggling casual dining.
Osanloo said rising costs are sometimes inevitable. However, he feels fortunate that the average price of his chain’s most popular meal is anywhere from $2-$4 less than competitors.
He also suggests that restaurants might be able to counteract rising costs through efforts such as extending operating hours, introducing new menu items, and introducing new advertising techniques.
Sweetgreen
Jonathan Neman serves as CEO of Sweetgreen, which offers customers fast but healthy meals like salads and grain bowls. He addressed the cost issue by stating his company’s intentions to turn its attention to emerging technology.
Before speaking at the William Blair Growth Stock Conference, Neman touched on how his franchise will continue to introduce Infinite Kitchen technology. The Infinite Kitchen is equipped with machines capable of preparing menu offerings.
Such technology might help combat costs by preparing food faster, reducing labor expenditures, and heightening the customer experience. The Infinite Kitchen can prepare 500 bowls per hour or one every 90 seconds.
Neman said rising food costs have not stricken his company’s bottom line yet. However, he also believes that customers might be willing to pay a little more at his restaurants because of the superior food quality, as well as the fast and high-quality customer service.
Cava
Brett Schulman, the head of Cava, a fast-casual chain offering Mediterranean-style food, also spoke at the William Blair event.
He said that fast-food costs have increased significantly over the last several years, while traditional dining options continue to experience difficulties giving consumers the right bang for their buck.
Schulman said understanding this phenomenon has served his company well. He stressed that Cava is a step up from traditional fast food offering diners a solid alternative to standard casual dining choices.
“So that’s our enhanced value proposition,” he said. “Where it’s become very transactional, very drive-thru, kiosk-driven, consumers are saying ‘Well for a dollar or two more or even the same price, I can have a really healthy meal at Cava.’”
There is no doubt the cost of food has increased and impacted the prices at popular fast-casual food service chains. However, leaders in this industry seem to believe that a menu item’s price does not have to define an establishment’s value. Focusing on other important consumer-related factors could prove just as important.
