Quick service restaurants (QSR) are one of the fastest growing and most prosperous industries in the country. With revenue of $203.2 billion, QSR restaurants remain a dynamic industry, according to Statista. But there’s one issue that could hinder their growth—the QSR market is becoming increasingly saturated. According to IHS Economics, there were 157,429 quick service restaurant franchise establishments in the U.S. in 2015. These popular restaurants are found all over the country—they can thrive in emerging markets, suburban markets, urban markets and more. But because of their flexibility, markets can quickly become saturated, meaning real estate options can be harder to come by as demand outpaces supply. This means that franchise brands need to think of new ways on how they can grow. For QSR brands, free standing sites used to be the norm. But oftentimes, large real estate spots that can contain a drive-thru and parking lot are tough to come by. Jesse Tron, spokesman for International Council of Shopping Centers, said brands are now thinking outside the box.
“Retailers are healthy and looking for space, but demand is far outpacing supply,” Tron told QSR Magazine
. “As rental rates continue to increase, we could see more new developments on the horizon, but right now we’re largely in a phase of redevelopment, not new development.”
With this in mind, some brands are using technology to find places to build, while others are seeking out non-traditional real estate sites.
One QSR brand that is looking to avoid market saturation is Checkers & Rally’s. The iconic and innovative drive-thru restaurant has more than 800 locations nationwide, and they’re looking at new measures to find successful real-estate spots. The brand is leveraging technology as it continues to grow through its partnership with the web-based analytics platform Buxton to pinpoint growth opportunities. Buxton helps Checkers & Rally’s analyze potential sites, run traffic reports and create expansion scenarios. This avenue allows the brand to determine new real estate spots, avoid saturation and gives them an analytical edge to mitigate risk. Another way to avoid saturation is by opening up locations inside other large retailers. Businesses such as Wal-Mart operate QSRs in their stores to provide additional options for their customers. This is a route that’s proven to be successful, as big-box stores have steady traffic streams. Another advantage to this real estate option is that many QSRs can be designed for smaller locations. Several brands have used this model, such as Checkers & Rally’s, Philly Pretzel Factory, McDonald’s and Subway. While somewhat more traditional these days, strip malls continue to be a hot destination for QSRs as it provides them with convenient real estate space that provides an excellent store front, signage, visibility and a good flow of traffic from other stores. Dairy Queen Grill and Chill franchises have used this model with great success and Which Wich encourages their franchisees to consider end-cap spaces during their real estate search.
The QSR industry is a popular one, with new locations opening up all the time. The market may become crowded, but if brands are creative in their site selection and use new means to discover untapped markets, they will thrive.