QSRs Leverage Coffee to Perk up Traffic

This week in restaurants, QSRs bet on coffee, Subway breaks records and tech providers consolidate.

Quick-service restaurants (QSRs) are noting the growth potential in coffee, as the beverage, an everyday purchase for many consumers, poses an opportunity to keep customers coming back. McDonald’s, for instance, noted on a call with analysts Tuesday (Jan. 31) discussing its fourth-quarter 2022 financial results that the caffeinated beverage is a high priority going forward.

“Chicken and coffee in particular offer us a good growth opportunity,” CEO Chris Kempczinski said on the call. “We’re going to be focused on that with some very specific products, [whereas] in the past that was a little bit more left to individual markets to chart their course.”

Similarly, Starbucks, the world’s largest restaurant company by revenue, shared in its first-quarter 2023 financial results Thursday (Feb. 2) that demand for its coffee is higher than ever.

“The record demand for Starbucks Coffee in North America we’ve reported on our Q4 call accelerated in Q1 and through holiday,” Starbucks interim CEO Howard Schultz told analysts.

Focusing on this everyday need can help brands drive up frequency, turning casual customers into frequent diners. Research from PYMNTS’ study last year “Digital Divide Technology: Customer Service and Innovation in the Restaurant Industry,” which drew from a survey of nearly 2,400 U.S. consumers, found that 32% of diners visit restaurants once or twice a month, while 16% visit once a month or less and 15% visit three times a week or more.

Smaller brands are looking to get the coffee boost as well. For instance, Maryland-based bakery-café chain Fresh Baguette, launched a coffee subscription this week, as QSR reported, offering caffeinated beverages for $9.95 a month.

“Our new Coffee Subscription is a game changer for us and our fans,” said Florent de Felcourt, founder and CEO of Fresh Baguette, per the report. “… [W]e understand it’s often hard to stop at just one cup, so with our coffee subscription, our guests can indulge multiple times a day at a really great price. Plus, our coffees are the perfect pairing to our deliciously crafted and freshly prepared bakery selections.”

Subway Breaks Sales Records as It Explores Possibility of Sale

Subway announced in Thursday earnings release “record sales results” for 2022, noting that the company achieved its highest weekly average unit volume (AUV) sales, breaking a record that had existed for a decade.

“After two years of record sales results, we can confidently say that Subway is getting its swagger back,” Subway CEO John Chidsey said in the release. “Across every region, the team’s efforts have set the stage for another year of strategic and profitable growth and exciting enhancements to our guest experience.”

The news comes as the chain’s owners explore the possibility of selling off the company, valuing it at more than $10 billion.

“As a privately held company, we don’t comment on ownership structure and business plans,” a Subway spokesperson said in a statement emailed to PYMNTS. “We continue to be focused on moving the brand forward with our transformational journey to help our franchisees be successful and profitable.”

Chowly Acquires Koala as ResTech Consolidates

After a proliferation of restaurant technology providers in the early stages of the pandemic, a period of consolidation in late 2021 and much of 2022 has slowed somewhat in recent months, as inflation has prompted a focus on near-term profitability over long-term growth.

Now, it seems that some mergers and acquisitions (M&A) activity is resuming in the space. Point-of-sale (POS) integrations solution provider Chowly announced in a Wednesday (Feb. 1) press release the acquisition of consumer-facing restaurant technology company Koala.

“Merging these two businesses together represents a major leap forward in the mission of both organizations as we help restaurants navigate today’s complicated digital world,” Chowly Co-founder and CEO Sterling Douglass said in the release. “Koala’s open platform meshes perfectly with Chowly’s, while also giving restaurants a simpler experience for their off-premise strategies.”