The evolving business model of restaurants and QSR revealed
The first is input cost inflation in an environment where pricing adjustments are not as straightforward as in fast-moving consumer goods (FMCG) retail.
The second is the continued growth of takeout, drive-thru, and platform-driven delivery channels as meaningful contributors to revenue.
Taken together, these trends are adding complexity for both franchisors and franchisees, particularly when it comes to balancing profitability, pricing, and customer expectations.
Rising costs can't simply be passed on
In most consumer goods categories, rising input costs can be passed on to the end customer with relative ease. Restaurants and QSR operators don't have that luxury – menu pricing is highly visible, emotionally charged, and instantly comparable across competitors.
Even small increases can shift perceived value, especially in price-sensitive segments where consumers are quick to compare and switch.
At the same time, the environment is characterised by ongoing cost pressure as well as shorter-term shocks. Food inflation, energy volatility, wage growth, and logistics costs are all interacting in ways that make margin management more complex than simple pricing decisions.
Fuel-related volatility is a good example. Geopolitical disruptions affecting global oil supply routes are driving sudden cost spikes. While there is often an expectation that prices will normalise once those pressures ease, the reality is that consumer prices rarely adjust back down in the same way.
As a result, franchised restaurant systems are experimenting with a range of responses rather than relying on straightforward price increases. Broadly, three approaches are emerging.
One approach is to increase prices quickly and communicate openly with customers about why the adjustment is necessary, with the intention of reviewing pricing again once conditions improve. The challenge is that even clearly communicated increases are rarely perceived as temporary by consumers, which can slowly affect perceptions of value over time.
The second approach sees franchisors absorbing cost increases for a defined period – typically two-three months – before partially passing them onto the franchisee. In some cases, this is supported by temporary relief measures such as reduced franchise fees to help protect franchisee viability.
The third is a shared-impact approach, where franchisors and franchisees absorb cost pressure together. While this can strengthen alignment across the system, it can also place strain on franchisee cash flow in already tight trading conditions.
Convenience has moved to core business
The second key trend is the rise of takeout, drive-thru, and delivery as primary revenue drivers.
In South Africa, leading QSR operators report that around 35-40% of turnover now comes from off-premise consumption, including drive-thru and delivery. That shift is influencing decisions around store design, site selection, and capital allocation.
New store formats are increasingly being designed with fulfilment efficiency in mind. Drive-thru capability, for example, is no longer seen as a differentiator – it is becoming a standard requirement for many new sites. In some cases, such as Chicken Licken's expansion strategy, outlets outside of shopping malls are not considered viable without a 'fly-thru' model.
At the same time, third-party delivery platforms such as Uber Eats and Mr D have become essential distribution channels, but they come at a cost. Commission structures can reduce margins by up to 10%, which creates a trade-off between reach and visibility on the one hand and profitability on the other.
Operators are responding in different ways. Some fully integrate with platforms to maximise exposure and volume. Others are moving towards hybrid models that balance platform participation with direct ordering and in-house delivery.
A growing number are also investing in their own digital platforms, loyalty ecosystems, and delivery capabilities to reduce longer-term dependency.
The role of financial partners is shifting
Together, these two trends are increasing pressure on franchise systems. Success is increasingly defined not just by growth, but by how effectively operators manage consistency, cash flow, and margin pressure across the system.
This is where financial partners are playing a more integrated role. Institutions like Nedbank are increasingly engaging with the sector – not only as lenders, but as ecosystem partners.
With exposure and deep sector knowledge across agriculture, manufacturing, and franchising, Nedbank has visibility across the full 'farm-to-fork' value chain. And that matters, because pricing pressure and delivery economics are connected to broader supply and demand dynamics rather than isolated parts of the business.
In practical terms, this enables more tailored support: working capital solutions that help franchisors and franchisees manage temporary cost pressure; rental guarantees that support expansion into drive-thru and high-efficiency sites; and financing structures that enable digital investment, from e-commerce platforms to integrated delivery systems.
Increasingly, the value lies in reverse-engineered financing, where funding structures are designed around how the broader system operates rather than how individual components perform in isolation.
A new operating reality
The restaurant and QSR sectors are not under fundamental disruption, but they are operating in a more complex and demanding environment than before. Solid assumptions, such as input cost stability, predictable dine-in behaviour, and clearly defined sales channels, are being tested by ongoing volatility and changing consumer behaviour.
In this context, operators are being challenged to manage pricing carefully while adapting to the growing importance of convenience-led consumption, all in a way that protects brand value. Increasingly, success will also depend on having partners who understand these dynamics across the full value chain and can help enable the required changes.