QSR: How different are they from traditional restuarant?
In the modern fast paced life, everbody needs everything quicker. Food is no exception to this theory. QSRs - Quick Service Restaurants or commonly referred to as Fast Food restaurants, are a big hit and an answer to an increasing demand of food-served-fast. How often we have seen a long bee of cars waiting in a McDonald drive thru during breakfast or lunch or dinner time?
This article is not to talk about the good and bad of eating out in a fast food restaurant. But instead, I want to talk about how the operations of QSR are different from a classical restuarant. I want to look at the challenges of QSR both from its internal operations standpoint as well as from a distributors standpoint.
Large Inventory Turnover
The first fundamental difference is that the menu of a QSR is thin. They dont carry too many items on the menu, but they thrive on the volume. Due to that, the inventory turnover is very high and the storage facility available in a store is very limited. Imagine you walking into the kitchen of a medium-sized classical restaurant and you will find that they will have enough storage capacity to last them for at least a week. Of course, fresh produce is a different animal altogether and you cannot stock it for more than couple of days.
But if you walk into a Taco Bell or Burger King's kitchen, you will be amazed that the size of their "warehouse" will be no larger than your master bath cabinets. Since space is scarce, the need for a better inventory management is extremely critical. But unfortunately, most of the QSRs struggle with this. The inventory visibility, leave alone the corporate, even for the store manage is very poor. It is extremely difficult to account for inventory by comparing the sales
Shrinkage
Another related challenge is the amount of shrinkage a QSR store has. I was talking about the difficulty in tying the inventory to sales. That is mainly due to large amount of shrinkage. Just visualize this situation: you order a ham burger and the guy will flip couple of buns, stack it with the patty and stuff various vegetables like onions, lettuce, tomatoes, etc. The chef (so to say) will pick a bunch of lettuce leaves, tear some of them to stuff in your burger and throw the rest. Based on analysts report, the amount of shrinkage is sometimes is as high as 40%
Too many drops
Due to the limited storage capacity, the number of drops from a QSRs distributor is very high - sometimes more than once a day. QSRs are not adequately staffed and equipped to handle receiving these frequent inventory drops which results in wrong entering of inventory data in the system.
The margin in this type of business is very low, primarily due to issues like these. If you have to look at it positively, there are multiple opportunities for any QSR to improve their bottom line.
We will talk about the challenges a distributor to QSR face in my next post
