In the last two years, amid rising cases of Covid-19 and continued worker shortages, some fast-food restaurants closed down their dining rooms and anticipated to never reopen again. While sit-in areas where closed, the locations offered other ways of getting food whether via pickup, delivery, and drive-thru. But as the pandemic continues to change the restaurant industry, whether that’s cutting back on staff, turning to delivery, or investing in new business models like ghost kitchens, it raises the question of whether fast-food chains still need dining rooms at all.
In some cases, the loss of indoor dining will be permanent because they are investing quite a bit in changing the architecture of their restaurants. Like few McDonalds opted for drive thrus and they remained a constant even after post pandemic mess. Meanwhile, few fast food chains have been turning to ghost kitchens, which are essentially restaurants without a storefront as they would rather deliver meals themselves than outsource it to third-party delivery companies and lose the commission. And, for some restaurants, the reopening of dining rooms may come with more hassle and expenses than it’s worth.
Customers are looking for spaces to step outside
But restaurants that are in malls or have playgrounds are likely to continue to have sit-in dining, as they cater to children which is a big market. Children would like to go and get some happy meal or enjoy and get some balloons. That is part of the fast food operations. At the same time, a delivery-only restaurant limits what type of food can be delivered.
But whatever the situation may be, the projrection of having no dine-in space for any fast food outlet is not a valuable proposition yet. As Reetesh Shukla, business head of Charcoal Concepts, K Hospitality Corp commented, “Customers are looking for spaces to step outside their homes and offices, and fast-food restaurants with seating, where you can get food served quickly, conveniently and at value for money prices, provide a space for consumers to bring their families or colleagues, and let customers experience the brand. “As we scale up Joshh in the coming years, we would provide spaces where our customers can come experience the brand and our quality promise, in person,” he informed.
Are ghost kitchens replacing dine-in need?
Fast food restaurant owners know operating successful ghost kitchens require savvy planning, but it's a risk many chains seem willing to take. Following the coronavirus pandemic and the rise of third-party delivery apps, some fast food establishments are converting to these kitchens to satisfy off-site dining demands.
There's no storefront, dining room or front-of-house staff in a ghost kitchen. Instead, a team works solely to fulfill online orders requiring delivery, space gets rented to prepare food orders made through third-party apps. The adoption of ghost kitchens isn't new, but it has surely new takers post pandemic. But not all feel the same.
“In today's changing world, there are numerous options like dine-on, cloud-kitchen , etc. But the craze for and of dining spaces for restaurants is something which no one can replace. Today, fast food goes beyond greasy burgers and fries. Millennials are looking for greasy burgers, a flawless espresso shot is whipped up in record time by a medley of music, delicious food, pleasant surroundings, and live performances,” Rohit Tandon, co-founder of Zoca Café commented.
India has a sizable market for dining establishments, and fast food cafes are turning heads with innovative ideas and expanded menus. Fast food cafes like ZOCA, YOLO (You Only Live Once) operated by Fraterniti Foods Private Limited, have already adapted themselves as competitors in India. Fast food outlets are transforming into dining establishments with a variety of their own brands and providing a distinctive food court experience from a stand-alone restaurant.
May get eliminated abroad but not in India
The coffee business in which Tim Hortons competes has been roiled in recent years with the spread of drive-thru coffee huts abroad. Dutch Bros, which went public last year, rocketed to become the third-largest coffee chain with a model that features no seating. But when Tim Hortons decided to enter India, they were sure of the seating model and not the drive-thru model. Indian audience and consumers when compared to international consumers vary differently in terms of preferences.
Large fast food brands that rushed to open cloud kitchens and double down on virtual first brands in the pandemic said they are focusing more on their dine-in business and prioritizing deliveries via existing stores. Sagar Daryani, co founder and CEO at Wow! Momo, which had opened 19 stand alone cloud kitchens post the pandemic, said they will follow a more hybrid model, building stores that service both dine-in and delivery. The company operates three fast-food brands. For several chains that have for years invested in pure-play dine-in formats, cloud kitchens were an alternative revenue stream during the pandemic and not a primary one.
Many people who did cloud kitchens as a means of survival are now witnessing fewer orders or are not looking at expanding those kitchens and are back to expanding physical outlets.
And for the only legible substitute of dine-in for fast food chains can be drive thru which cannot be a great idea considering Indian demographics. A country like India can never manage a drive-thru restaurant in its overpopulated cities like Delhi, Kolkata, Mumbai etc. Due to urbanization, competitors in the fast-food industry are increasing and it's almost impossible for a fast-food brand to acquire a large enough space and operate a drive-in in an already overcrowded place.
Looking at the current scenario, in the future, franchises will have more choice, from choosing between smaller size restaurants with kiosks to a full on brick-and-mortar restaurant, and now dine in or takeout-only services. However, going hybrid will be the way forward for fast-food brands.