Dive Brief:
- A majority of franchise operators (66%) feel optimistic about their businesses despite the macroeconomic outlook, according to a TD Bank survey of 300 franchise operators and restaurant financiers. The survey was conducted by the bank at the 2022 Restaurant Finance and Development Conference in Las Vegas.
- Most franchisees are still planning to invest in new technology or channels this year, the survey found. Only 11% of operators have no investments planned for 2023, while 41% plan to invest in store-level remodels or new digital ordering and delivery systems.
- TD Banks’ findings align with similar reports from the National Restaurant Association, which predict moderate growth in the restaurant sector barring a severe recession. These reports predate the collapse of Silicon Valley Bank, however, and the subsequent outflows of deposits from regional lenders.
Dive Insight:
Restaurant operators cited inflation, labor costs, supply chain disruptions and rising interest rates as the primary challenges facing the industry, according to TD Bank. Despite growing restaurant employment, 69% of those surveyed said the quality and quantity of labor available has decreased, compared to just 24% who said labor quality and supply have increased.
Despite these headwinds, only 13% of survey respondents were pessimistic about the future of the industry. Mark Wasilefsky, head of restaurant franchise finance group at TD Bank, attributed this sentiment to the overall resilience of the industry. Wasilefsky predicted restaurants would still see large shifts in consumer behavior as dine-in traffic nears pre-pandemic levels. These changing behaviors and preferences could put pressure on restaurants to increase investment in in-store technology and off-premise channels despite macroeconomic challenges.
“Consumers are demanding a better digital and in-store experience, which requires an investment in their physical and digital presence,” Wasilefsky said. “Brands with solid digital and delivery programs and up-to-date facilities will have a distinct advantage. In addition, operators with stronger balance sheets and overall better liquidity positions will be able to take advantage of this opportunity.”
While some operators may be optimistic, recent weeks have signaled potential signs of trouble for restaurant franchisees, especially at Restaurant Brands International. Three RBI franchisees — two Burger King operators and one Popeyes operator — have gone bankrupt so far this year. Small chains like Bertuccis and Corner Bakery have also recently filed for Chapter 11 protections.
