A Growing QSR Competitor

Bonnie Riggs, Restaurant industry analyst

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“The quick-service restaurant (QSR) segment of the commercial foodservice industry has recovered the recession-driven traffic losses experienced in 2009 and 2010, while full-service restaurants have not.”

That has been the broad view of demand for prepared meals and snacks that we’ve become accustomed to hearing over the past several years. The QSR segment, however, includes not just fastfood and fast-casual concepts, but also retail outlets; and in fact, traditional QSRs have not recovered lost traffic. Instead, the relative strength of the segment stems from foods and beverages purchased at convenience stores.

C-stores traditionally have met consumer needs for morning meals and afternoon and evening snacks. Yet they have achieved strong traffic growth not only in these core day-parts, but also at other times. QSRs also have posted traffic gains at morning meal, but traffic declines continue at the lunch and p.m. snack occasions. Foods purchased from convenience stores as p.m. snacks tend to be quick, on-the-go indulgences and energy boosters. Among these snack-oriented choices, those that have shown the most growth over the past five years are sandwiches (excluding burgers and hot dogs) doughnuts, hot dogs and nuts/peanuts. Many popular c-store snack foods are not offered at more traditional QSRs.

It’s a different story with beverages. The beverages most frequently ordered at c-stores for p.m. snack occasions are readily available at QSRs. Other than coffee, all types of beverages are ordered from c-stores for a snack considerably more often than what is noted for QSR snack-related occasions. The three beverages with the strongest increase in servings at c-stores over the past fi ve years are iced tea, noncarbonated soft drinks and energy/sports drinks.

 A beverage is ordered during 76% of c-store p.m. snack occasions and 64% of QSR (excluding retail) p.m. snack occasions. This is likely the result of c-stores’ expanded fountain variety and sizes of beverages compared to that of traditional QSRs. Advantageous pricing for beverages in c-stores relative to other QSRs is also a contributing factor.

Convenience Factors

Of course, convenience factors also support food and beverage purchases at c-stores and contribute to traffi c growth. Half of all visits to c-stores (51%) are driven by the convenience of the location or being in a hurry/did not have time. That’s twice the level supporting visits to QSRs (26%). Convenience-store operators have made it easy for customers to grab popular foods and beverages at the same time they pay for fuel. Also, a location’s convenience accounts for more of the traffi c increase at c-stores than any of the other primary reasons given for visiting.

Offering incentives to encourage consumers to visit has been a traditional part of QSR marketing efforts. One in four visits includes some type of a consumerrecognized offer, and dealing use is back at levels prior to the recession. It appears c-store operators are beginning to compete on this front as well, because there has been considerable growth in deal-related visits to c-stores over the same time period.

The challenge for c-store operators continues to be prepared-food competition from QSRs. Today, QSRs are the biggest competition for c-store preparedfoods offerings. Not only do c-store operators have to compete with this huge segment of the industry, but they also lag behind QSRs in customer satisfaction when it comes to food-related attributes, especially in the area of food, fl avor and quality.

C-store operators have gained some ground as a foodservice destination and played a key role in total QSR segment gains in recent years. But to compete more directly with traditional fast-food and fastcasual outlets, retailers must place even more emphasis on fresh ingredients, food quality and new products.

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