Why QSRs Are Optimistic Despite Difficult Macro Outlook
Food chains reveal how they plan to keep afloat over the coming year.
The Australian economy has definitely seen healthier days, but even with the recent string of company closures and downsizing, QSRs say they are not fazed. That’s because many of them either believe they can ride out the retail slump, or that the macro outlook will rebound earlier-than-expected.
Stick to core strengths
When we asked QSRs what they were most concerned about looking forward to the next 12 months, the majority pointed to the general economy that has seen small firms folding up and multinational manufacturers packing up their local operations. These business closures and resulting unemployment will corrode retail confidence, says QSR leaders, but companies that can identify and stick to your core strengths should continue to do fine.
“Alcoa, Ford, GM, Forge, Qantas, Toyota collapsing and withdrawing from Australia spells the imminent collapse of possibly hundreds of small support businesses supplying those industries. Only a fool would consider that the Australian economy is in good shape. Australia needs to find new sources of employment and enterprise and with the banking sectors current behaviour, this is highly unlikely. We are in for a grim two to three years with unemployment and tough retail times ahead,” says Warren Reynolds, executive chairman at Muzz Buzz.
“Muzz Buzz will continue to grow and focus on the core aspects of our business through supporting local supply networks to create growth in employment and sustainability. Muzz Buzz is a proudly Australian company and works hard to support Australian owned industry.”
“All of the negative talk about the manufacturing sector and other at-risk industries can’t be having a great effect on retail confidence,” concurs Steve Plarre, chief executive officer at Plarre Foods Pty Ltd, the operator of the popular Plarre bakery chain.
“I don’t think it is cause for huge concern but it’s certainly a very good reason to question your value proposition in the market and make sure you stick to the knitting. Everyone loves a great meat pie, chocolate éclair and a coffee so I think we’re looking pretty sweet (pardon the pun).”
QSRs also seem better prepared to deal with a retail slump this time around, especially for brands like Burger Urge that have managed to prevail over the recent Global Financial Crisis (GFC).
“We grew from one store to five stores throughout the GFC, so the current economic climate does not faze us. The future is looking extremely bright for Burger Urge,” says Pete Kilroy, Marketing Manager, Burger Urge.
Maximize returns
Aside from focusing on strengths to minimize risks, QSR chains should also look to maximize returns amid volatile macroeconomic conditions that has spiked up costs.
“The economy is still fragile with increasing unemployment and increasing costs in key area like utilities, compliance and labour. With the falling Australian dollar the cost of packaging and other key imported items will also increase,” says Serge Infanti, managing director at Foodco Group, which operates Jamaica Blue and Muffin Break.
“We must ensure that our brands continue to deliver an acceptable return on investment.”
Workplace reform needed
Infanti laments though that even if QSRs are helping themselves cope with the wobbling economy, the government should also chip in by rolling out workplace law reforms.
“The retail and hospitality industry is heavily affected by antiquated labour laws that penalise businesses for trading outside 'normal trading hours.’ Retail has changed significantly over time as has customer expectation. We now expect to be able to shop and dine at all hours and on most days.”
“Furthermore, many people want to work part time to accommodate their personal or study requirements but penalty rate make it less likely that retailers can afford to open for trade. Online retailing is more reason why bricks and mortar retailers need to be competitive and meet customer expectation. The current labour penalty rates stifle growth.”
Possible turnaround
The headlines might be all gloom and doom when it comes to the economic outlook for the next 12 months, but there are QSR operators that see a possible turnaround as early as the coming months.
“The continued volatility in consumer confidence and unemployment remains a concern but we recognise that unemployment particularly is a lag indicator,” says Mark Buckland, managing director at Healthy Habits.
“Underlying business confidence remains sound and, subject to macro factors on the global stage, we do expect a strengthening in sentiment and consumer spending in the latter half of this year.”
Until then, Buckland says the most important strategy is to keep wavering customers loyal and satisfied: “The only thing we remain concerned about is whether we are keeping our customers happy and excited with what we are doing.”
