Question

Assess the impact of COVID on the Quick Service Restaurant (QSR) industry.

Answer 1

The quick service restaurant industry has been impacted drastically due to Covid as social distancing norms have come into place. This has led them to service customers via take aways and online orders. There has been an increase in demand for delivery persons in order to service takeout and delivery options. However even then there will be a drastic impact on sales as the overall spending has reduced in the economy, in light of greater unemployment levels and higher propensity to save. The industry will see a decline in sales year on year.

Some of the restaurants have already declared bankruptcy's as they have faced several working capital constraints in light of reduced demand for their products. Consumers are preferring to eat at home in order to avoid crowded places, thus the industry will have to seriously cut down on operating costs of maintaining large scale restaurants and instead will have to downsize in order to reduce its cost overheads. They have increased their presence via online channels and are offering meal kits so that consumers prepare fresh dishes sourced from such restaurants at home.

The supply chain in this industry has also been severely disrupted led by regional and global lockdowns. This has led to limiting the menu size and giving fresh instead of frozen products. Some have decreased their capital expenditures and instead are keeping free cash flows in place in order to be agile and adjust to the current environment as situations change.