Do quick service restaurants in MY need to pick up pace in embracing change?

Thai billionaire Charoen Sirivadhanabhakdi is considering taking a "substantial stake" in the Pizza Hut and Kentucky Fried Chicken restaurant chains in Malaysia. According to The Star, Sirivadhanabhakdi is in the act of assuming control over Thailand's entire KFC chain of operations and is interested in growing his footprint into Malaysia.

QSR Brands Holdings currently owns and operates KFC and Pizza Hut in Malaysia. Johor Corp, the major shareholder of QSR Brands Holdings, owns a 51% stake in the company while the Employees Provident Fund (EPF) and private equity firm CVC Capital Partners own 25% and 24% respectively.

The article added that Sirivadhanabhakdi is keen on acquiring the stakes held by EPF and CVC. Sirivadhanabhakdi  has over the years been growing his own empire with a take over of Fraser and Neave (F&N) in Singapore in 2013.  He also owns a majority stake in Thai Beverage (ThaiBev), which produces and markets Chang beer. In August, he bought 240 KFC restaurants across Thailand for RM1.43 billion.

The restaurant business is now an extremely competitive space. For one, QSR Brands has plans to expand its KFC business with an additional 30 new outlets by the end of this year. McDonald’s Malaysia also said it will fork out RM1.4 billion on its latest expansion plan to increase to 450 outlets nationwide by 2025. The local fast-food chain currently has 262 restaurants nationwide. Global US-based Wingstop Restaurants, also said it plans to open 30 franchise locations in Malaysia over the next six years as part of an international expansion agreement with The Great Fundamentals.

The entire ecosystem is also undergoing massive disruption with entrants such as UberEATS making its move into the Malaysia F&B scene.Beginning 21 September 2017, Malaysians who downloaded the UberEATS smartphone app were able to purchase and order food listed on the app to be delivered right to their doorsteps.

According to Abhinav Sharma, head of strategic planning, Geometry Global Malaysia while food delivery services such as foodpanda and UberEATS are expensive. As such, quick service restaurants need to develop an efficient delivery service. This is because such services are gaining momentum and already percolating down to the middle and lower-middle classes.

Nonetheless, there will always be a place for in-store dining, especially for milestone moments, Sharma said, and to ensure survival quick service restaurants will need to carefully pick those moments.

"A child’s birthday for example will continue to be an occasion where quick service restaurants can exploit through premiums and create an experience that only they can deliver," Sharma said.

Adding on to the discussion is Prashant Kumar, senior partner, Entropia, who said the delivery as a segment is exploding, offering huge scalability at a lower cost of sale. Consumers want regular fast food restaurants to know them and be able to customise to their preferences. While that requires smart logistical planning, it also offers new margin opportunities.

Changing Malaysian consumer habits

Meanwhile, there are a number of social, technological and economic variables that are impacting the Malaysian consumer today. All of these have an impact on how quick service restaurants need to market themselves in an environment that’s become fluid and possibly even a little uncertain.

Increased economic activity as one factor that impacts how quick service restaurants need to market themselves. Sharma explained that Malaysians are demanding for shorter lines and more restaurants, as they are looking to do more in a shorter period of time, including dining out. A high smartphone penetration means consumers will base their decisions on GPS and consumer reviews. Also, the pressure of inflation and price will continue to be a huge factor to consider, Sharma said.

"These factors also point to some of the threats faced by quick service restaurants today. Chains such as 7-Eleven have started to offer sit down eating options that are even quicker. With over 2000 stores, if the line at a KFC seems unduly long, you can easily hop over to the nearest 7-Eleven, which are often open 24/7, and grab a quick meal," Sharma said.

Also weighing in on the issue is Gareth Ellen, regional planning director and COO of China, Geometry Global, who said consumers are increasingly making choices based on lifestyle rather than convenience. With this, quick service restaurant brands need to find ways to adapt their value proposition beyond their core offering of speed and consistency.

While speed and consistency might be tough to achieve given the scale of operations, and difficulty will remain in making quick changes that affect all locations, Ellen said restaurants can start by shifting menu options towards more healthy choices. They can also leverage local ingredients or cuisine trends. Another way would be to look beyond the standard breakfast-lunch-dinner flow and consider the specific eating needs of consumer segments during certain occasions.

He added that franchise owners should be hard wired into the social media universe of their consumers; making sure they stay on-trend and also providing a direct channel for feedback and ideas.

Meanwhile, Kumar said "Food is more than food today, and fast food is more than efficiency. Tastes need to stimulate and the dining experience needs to energise.”

Driving footfall

Sharma said footfall will continue to be important in the near future. Delivery services like foodpanda are still only targeting the high end consumer, and with Malaysia being a foodie nation, the experience is still very much entrenched in the food. That experience, however, needs to keep up with the times, Sharma said. Free Wi-Fi, more lounge like environments and a menu that continues to innovate will drive footfalls and keep Malaysians loyal to the brand.

Ellen added that the main challenge that quick service restaurants are facing is the fight for foot traffic. The proliferation of mobile ordering and delivery brings about the question as to whether real estate should be transformed beyond just a quick bite to a more engaged consumer experience. As such, the integration of technology will be a must for the younger target audience, ensuring connectivity but also building mobile transaction capability into the ordering process to provide the "impatient generation" with a seamless experience.

Kumar said that in-store dining will continue to be important as it is a happy outing and socialising experience. Nonetheless, the experience needs to be recreated as how people would like to have the experience has changed over the last five years.