In the near future, customers will likely be ordering their fast food through their smart home devices, such as Amazon’s Alexa or Google Home. Gary Vaynerchuk, chairman of VaynerX, a modern-day media and communications holding company, gave this prediction at the International Franchising Association Convention in February 2019. Lawyers need to be prepared for this because you want the consumer’s system to offer your client’s brand.
We can envision this future when one of these companies will have contracts for delivery with Grubhub or Uber Eats. But what company will supply the burger? It could be any of the numerous quick service restaurants, or an as yet-to-be-branded burger. The determinative factor is likely to be the strength of the brand. When customers order vocally, their minds are lazy, and only the brand and its signature sandwiches will come to mind. Thus, those with the strongest connection with the consumer will win the battle of the brands for internet ordering.
What type of burger or sandwich will this be? The branding will probably dictated a truncated list of selections and we cannot expect too much variety at first because the delivery systems have to be perfected. However, brands that have more plant-based offerings are likely to be high on the list.
Healthy lifestyles are now the rage as the baby boomers age. According to research, approximately a fourth of consumers in the United States state they eat plant-based protein as well as animal-based protein, and many of these people do not identify as vegetarian or vegan.
The consumers driving the demand for plant-based protein are exactly those who are the heaviest users of the internet. The brands which now feature menu items that are “beyond meat burgers” include White Castle, Carl’s Jr., TGI Friday’s, In-N-Out Burger, and Chili’s. In order to stay on top, brands will need increased marketing initiatives, up-to-date websites and menus, and, for continued brick-and-mortar sales, the display of additional point of sale information. Staff will need to be trained to accurately and quickly answer customer inquiries. As has already begun in India, the menu board and take-out boxes should contain plant-based indicators to raise awareness and assure quality control.
In the past, plant-based options were unpopular. They were expensive, did not taste good, seemed unnecessary, and were not seen as a treat like the juicy, fattier options were. But demand is rising, and so is the realization that these options must not only be on the menu and attractively priced, but also that they must be advertised to ensure the brand is reinforced. Consumers need to know where to go for healthy options.
So, how will restaurants pay for this? Labor costs keep escalating, and the minimum wage will keep rising. Technology may reduce some labor costs, but all of the technological intermediaries that enable ordering and delivery will soon be eliminating the thin margins currently in place. Franchise restaurants may need the franchisor to reduce its fees. Reducing royalties is anathema to franchisors and their financiers. These royalty streams are etched in stone and may not be flexible. Franchisors, however, do have more flexibility with the costs they charge for opening new outlets and the initial franchise fees for each unit that a multiunit operator pays. Restaurant industry analyst Roger Lipton goes further, suggesting that the franchisors should absorb more of the technology upgrades that the franchise system needs to improve.
As consumers become more dependent on technology, branding will be the key to gaining customers. Branding for the new consumer needs to start now. In the future, we can expect labor costs to continue to rise, and we can expect internet fulfillment to extract a greater proportion of the available margin.