TransUnion Live: Bridging the Quick Service Restaurant Affordability and Profitability Gap

Andrew Goss/Host:

Welcome, everybody, to another episode of TransUnion Live on LinkedIn. I'm TransUnion's Andrew Goss, and I'm excited to be joined by my esteemed colleagues, Mark Rose and Todd Proper. We're here today to discuss a recent study about the state of quick service restaurants. Welcome, you two. Now, before we get started, I have a quick housekeeping note for the audience. We welcome your questions related to today's conversation in the comments area below. If they're applicable and we don't get to them during today's episode, we'll respond to you afterwards. Now, let's get started.

To begin the conversation, I always start off getting the lay of the land. Can you two provide an overview of the how, when, and why the study was conducted? Mark, I think you're muted.

Mark Rose/Sr. Director, TransUnion:

God, that's never happened before. For the record, I did say hello to you earlier as well. Yeah. So we originally did the survey back in June of 2024 to about 100 QSR executives, and with a qualifier that the company had to have done or was doing 250 million or more in revenue. Back in those days, which wasn't that long ago, inflation was much more of a factor. Consumers were dealing with higher prices, operators were feeling that pressure accordingly. So while inflation has receded, the dining industry continues to feel the after effect of high prices and the continued pressure on consumer discretionary spending. Actually, if you add in today's current headlines around the threat of tariffs, some days are on, some days are off, and the impact it's having on consumer sentiment, and then you factor in bird flu and the implications that has had on food supply, dining, hospitality still remains a challenging business. And some of the insights from our report I think can still be helpful to restaurant marketers today. And I think that's what we'll get into in the discussion here.

Andrew Goss/Host:

Great. Todd, anything else to add before I move on to my next question?

Todd Proper/Vice President, TransUnion:

No, I think I would echo what Mark said. We definitely see challenges in the business.

Andrew Goss/Host:

Great. And speaking of challenges and headlines, I think doom and gloom in the media about the restaurant industry persists today, and part of it could be a continued hangover from COVID. But let's talk about some of the good news in our study around traffic and restaurants.

Mark Rose/Sr. Director, TransUnion:

So again, with the caveat that we did the study last summer, the news on store traffic was very positive. For the 100 respondents, roughly two-thirds of them said store traffic had increased across all day parts. So breakfast, lunch, dinner, for instance. And only 17% said that it has slowed across all day parts. So at least back then there was very positive news around store traffic across the industry.

Andrew Goss/Host:

Great. Now let's get into less of just the facts and more of the color here, not just in the study, but beyond what we're seeing in the marketplace. There really appears to be a tie between the overall health of QSRs and their abilities to leverage loyalty programs and value offerings effectively. So can you talk a little bit about that?

Mark Rose/Sr. Director, TransUnion:

Yeah. So in the survey, nearly all or 93% of all the respondents said they had raised prices across the board in 2024. But for the majority that did, it's very interesting to note what differentiated those that saw increased store traffic versus those that didn't. And it's really about value driven messaging. If you look at who raised prices, amongst those who raised prices, two thirds of them, of the operators who significantly increased emphasis on value driven messaging saw an extremely positive effect on traffic as well. Compare that to 53% that only somewhat increased emphasis on value driven messaging saw the same result. So how do you sum that up? If you're going to increase prices, make sure you're telling a story of value along with it to keep consumers engaged to drive that frequency.

It's actually worth noting, just so we make sure we're not using too much industry speak, what is value driven messaging? So it's really communicating promotions, value deals, limited time offers or LTOs, as it's known in the trade, in their marketing campaigns.

Todd Proper/Vice President, TransUnion:

And we've really seen this come to life in some of the big players in the industry in their Q-four earnings releases. Burger King grew about one and a half percent in Q-four for US in-store sales compared to a year ago. Whereas McDonald's saw a decrease of about one and a half percent in their sales. And there's many factors that go into this, but really, one of the key factors I think behind Burger King's success was they emphasized menu items and value propositions tied to the Addams Family promotion that they did, and that seems to have resounded well with consumers. Similarly, BK's corporate cousin, Popeye's also was able reverse some trends that they saw in Q3 in terms of declines by focusing on their core business and offering relevant promotions on chicken items which resounded well with consumers.

There's another reference point from a bit more of a premium angle with Chipotle. We saw in Q4, the same store sales grew about 5.4%. And again, a lot of this was driven by some of the LTOs they had. A lot of people would've seen the advertising behind chicken al Pastor and smoked brisket, which were two of their key promotions, which did very well with customers. So again, as Mark said earlier, it's not really just about low pricing, it's about value to the consumer for what you're offering.

Mark Rose/Sr. Director, TransUnion:

Ironically, since I tend to spend a lot of money at Chipotle, I actually got my early access invitation for the hot honey chicken today. So, that's big news. But I think one aspect of the research focused on what resources were restaurant operators using to make their promotions or LTOs more effective. So interesting point, we found that those operators that were leveraging demographic data in their loyalty programs were three times more likely to continue running those promotions this year, 2025, versus discontinuing them. And why is that? Well, I think those operators that have a better understanding of their customers, they can be more effective in creating those compelling promotions. They would know, for instance, that the Adams Family promotion that Burger King did is likely to be a hit, likely to resonate with their customers. So customer intelligence, it matters, right? It has implications for pricing and implications for what the promotion should be and how it should be a message and targeted to customers.

Todd Proper/Vice President, TransUnion:

Yeah. And we also saw some recent data from the NRA, the National Restaurant Association, showing that people that are going out to eat are really looking for value, with 75% of adults saying that they'd consider some sort of daily special or discount or a value promotion when they go to a quick service restaurant, snack shop, deli, wherever it is that they're going out to eat. So it's really, three out of four people are looking and would certainly consider some sort of deal. So it's really top of mind for consumers.

Andrew Goss/Host:

Yeah. I specifically feel very seen, because no matter where I'm shopping, across the spectrum, it's always value offerings, and loyalty programs, for that matter. And I don't think I'm that abnormal, so that shows me that I'm normal. So, thank you. Quick reminder for the audience as we continue this fascinating conversation. If you have any applicable questions, put them in the comment area below and we'll respond to them afterwards. And before I get going here, sorry if I interrupted anything, anything else we want to say on that subject before we pivot the conversation?

Mark Rose/Sr. Director, TransUnion:

We're good.

Todd Proper/Vice President, TransUnion:

I think we're good.

Andrew Goss/Host:

Great. So expanding on that loyalty program topic we just discussed, obviously tons of benefits we talked about, but it can also be tied to fraud. So let's get into that topic about loyalty programs being closely tied to fraud.

Mark Rose/Sr. Director, TransUnion:

Well, look, more and more restaurants and really any business for that matter are offering loyalty programs. Ask yourself, why are they doing that? Well, they want to understand their customers, because with that understanding, you can create better programs, better promotions, you could even use it for merchandising, or in the case of restaurants, [inaudible 00:10:01] development, all intended to drive repeat business and loyalty. So while not part of this study, we have other data from TU that clearly shows that consumers enrolled in loyalty programs tend to be the biggest spenders. And so for anyone out there, we can help you do that. We can do a segmentation of your loyalty program by level of spend, help you understand who those customers are and how you can reach a message to them as well. I think we can do a commercial message. Right, Andrew? I think so.

Andrew Goss/Host:

Yeah, sure.

Mark Rose/Sr. Director, TransUnion:

All right.

Andrew Goss/Host:

Totally. And anything on the fraud side that we want to talk about, about these loyalty programs?

Mark Rose/Sr. Director, TransUnion:

Yeah. Look, as loyalty programs become more popular, accounts are more ripe for theft of their points or their store credit card information. And we all view these points as currency, and so having them stolen from us really jeopardizes the trust that we have with the brand if our accounts are hacked or points are stolen. And in our survey actually, we found that four out of five QSR execs respond and said they believe that the current economic effect had at least a very moderate current economic environment [inaudible 00:11:34] had a pretty moderate effect on fraudulent purchases or misuse of loyalty programs, and nearly half rating the effect as significant.

Andrew Goss/Host:

Yeah. I mean, I've never thought about loyalty programs and... Really, it is a second currency if you think about it, if that gets hijacked. So, for sure. Todd, anything else on that topic, loyalty programs in general or fraud, before we move on?

Todd Proper/Vice President, TransUnion:

I mean, it's definitely a huge source of information for marketers. Having someone in your loyalty program... As Mark mentioned, loyalty members spend significantly more than regular customers that aren't enrolled. So it's definitely going to continue to be a push for marketers in this space.

Andrew Goss/Host:

Okay. So let's pivot now to technology. Talking about AI and headlines we talked about earlier in the AI space, it's all about drive-through automation, kitchen robotics in this area. But with survey respondents, they were more focused on leveraging AI for let's say customer adoption and retention. So I'd call them less sexy areas, but definitely things that are vital for businesses, right?

Todd Proper/Vice President, TransUnion:

Yeah. Actually, we did see that three quarters of the respondents to the survey said they planned to increase their use of AI for identifying and targeting high value customers. So really leveraging that understanding of their customer base. And why is that? Well, they find that the current uses are pretty effective. Beyond customer targeting, a lot of QSR executives also found success in using voice assistants or chatbots for customer service or ordering, a lot more efficient than having an actual person servicing those requests. And over half said that AI had a positive effect on their demand forecasting. So they'd definitely be able to incorporate that into their business practices to make their businesses more efficient as well.

Andrew Goss/Host:

Okay. And Mark, anything else on that AI space before we move on?

Mark Rose/Sr. Director, TransUnion:

No, Todd covered it.

Andrew Goss/Host:

Yeah. Okay, cool. So I have a quick commercial break. Again, I will ask folks and offer it up. If you have any questions about today's conversation about the QSR industry, please put those questions in the comments area below and we'll get to them. So I always end my questions with a bottom line here. But two big recommendations, if you were to sit in front of any QSR company, what would they be in 2025? And feel free to repeat earlier points and expand on it if needed.

Mark Rose/Sr. Director, TransUnion:

I'll start, Todd. I would think of value in ways beyond price. When we asked operators what factors were most important in what was then a very high inflationary environment, more than half of them responded that food quality and speed of service were the most important factors. Surprisingly, fewer than half cited factors such as pricing, loyalty program incentives, sustainable environmental practices, even a variety of order accuracy. So really, the basics matter. When you compare metrics across restaurants, across the respondents, we discovered that nearly three-quarters of them emphasized order accuracy as a key metric, saw traffic drive across all day parts, in contrast to the one quarter that saw traffic slow across all day parts.

When we were talking about this and prepping for it and doing some other research, it actually aligns with a report we found from the National Restaurant Association. They call it the State of Restaurant Industry 2025. And they talk about expanding on the meaning of value. It's not just about price, it's about experience, it's about environment. In that report... You can Google it... 70% express interest in tasting events, 52% express interest in private dining events, about half even cooking classes with a chef. So operators can think about their businesses in a way where they leverage what they do really well, but leverage that into new experiences. Similar to my point before, the ability for a restaurant or a QSR to really understand who their customers are as well as the surrounding market that they're in can help them develop those types of experiences and make them effective.

So value can also be convenience. It's not just about how much it costs. Personally, some restaurants that I use that I love use Toast because that enables me to order from my table, it enables me to pay my bill with an app, which I love. I've always thought it's been tough for staff to be shuttling back and forth. You all right, Todd? All good?

Todd Proper/Vice President, TransUnion:

Yeah, yeah. Sorry.

Mark Rose/Sr. Director, TransUnion:

Okay. I've always thought it's just a tough use of time for staff to be shuttling back and forth trying to help me pay my bill while they could be serving other customers. Meanwhile, having young kids, I'm looking to get out fast. Those that know, know. So I think that's just one way to think about it is, how can you as an operator give value in new ways you haven't thought of before?

Todd Proper/Vice President, TransUnion:

Yeah, apologies, Mark. I didn't mean to interrupt. My point was just going to be about getting the message right, knowing your customers. I think really understanding your customer base is so important. Helping companies in the industry understand their customers is certainly bread and butter to our identity solutions business. Our identity graph covers about 98% of the US. Just as important as the coverage is the accuracy that we have with nearly 100% persistency in terms of offline identity. We work with clients through a variety of methods, file transfer, batch APIs, work with CDPs, native apps such as Snowflake, GCP, or AWS. And it's really important to be able to tie back the data you have and enrich that with other identity data that we have in our cloud database. So it's really important to be able to tie that back.

Mark Rose/Sr. Director, TransUnion:

I call it the bread and butter comment, Todd, maybe it was a pun, but it was well done.

Todd Proper/Vice President, TransUnion:

Thanks.

Mark Rose/Sr. Director, TransUnion:

You're welcome. I think if I would expand on that, we can help a partner, a QSR, whomever, really understand your customers with our segmentation schema. For example, we can tell you where in our segmentation schema your high lifetime value customers sit, what their demographic attributes are, what types of media they consume, and then make it easy to target them as well. You can cut that a bunch of different ways. Maybe you would do it around, "Hey, which segments are most responsive to my LTOs? Which segments drive the highest incremental spend beyond LTOs?" Et cetera. So to your point, a lot of different ways that we could help you better understand and strengthen your understanding of your customers.

Todd Proper/Vice President, TransUnion:

Yeah. I think one other important area that a lot of industries people have been focusing on really is the personalization in the marketing messaging. So really drilling down to your customers, if you have a consistent customer base and you have all their CRM contact information, you're probably sending them emails, you're sending them SMS notifications, texts. So, this is an easy win. If you can leverage their purchase history, tie that together with the information you have about browsing the site and really target them relevant offers and relevant messages that are what they're looking for anyway, it's a really easy win, especially in this space.

Andrew Goss/Host:

Yeah, it's fascinating. I mean, when you all are talking, and also in these other conversations I have across the business, my head is constantly running because I'm experiencing all these things as a consumer. But I will say, tasting events, cooking classes at QSRs, something I have never experienced, so I must not be on their list, because that sounds fascinating. I think my daughter would love to take part in a cooking class at Chipotle or something like that. So, interesting.

Mark Rose/Sr. Director, TransUnion:

Yeah. And then as I think about it, are you likely to see a tasting event at a QSR or are you're likely to see it at a little bit of a higher end restaurant? Probably more the latter than the former. But I think the point is still to say, whether you're operating in a QSR format or whether you're operating something that's more sit down, think about value beyond just what's on the menu. Think about it in terms of the overall guest experience, I guess is how I would say it.

Andrew Goss/Host:

Yeah. Fascinating. Anything else? Any last things you want to address as the gotcha question for me as a reporter here?

Mark Rose/Sr. Director, TransUnion:

A gotcha question for you? What's a promotion that you would love to see at a restaurant that you haven't seen yet?

Andrew Goss/Host:

Oh, you're asking me a question now? Okay.

Mark Rose/Sr. Director, TransUnion:

Oh, I thought that's what you wanted. Okay.

Andrew Goss/Host:

No, a gotcha questions kind of like trying to catch the person you're interviewing off guard, but now you caught me off guard. I mean, you just got my juices flowing there. Even if it isn't a high-end restaurant, even a QSR, I could see my twelve-year-old wanting to do a cooking class at a Chipotle, or a special new item only being like a VIP event at one of these places. Even though it's not a high-end restaurant, I still think you're going to get an audience for that, and potential, some loyalty for it. So that's what's going on in my head. You caught my attention.

Mark Rose/Sr. Director, TransUnion:

That's good. I think, look, for your kids, they would love that. I don't think they really care what format the restaurant is. They would just dig the experience. So, yeah.

Andrew Goss/Host:

Yeah, exactly. Exactly. Anything else before we call this good on this conversation today?

Mark Rose/Sr. Director, TransUnion:

No, this was fun. Thank you.

Todd Proper/Vice President, TransUnion:

Yeah. Thanks a lot, Andrew. This has been great.

Andrew Goss/Host:

Yeah, fascinating stuff. So, thank you so much for joining us, and audience, thank you for joining us. If we didn't get to your question today, or if you think of something afterwards and it's applicable to the conversation, put it in the comments area. This event page stays in perpetuity, so we will be there and we will be monitoring it. And to download the study we referenced today, I'll be putting in the web address TransUnion.com/report/QSR, and a QR code up on the screen. You can also find that URL by going to LinkedIn live event page description tab. See you next time on TransUnion Live.