- Expansion and investment in mobile apps and artificial intelligence (AI) is growing within the restaurant franchise industry
- These insights come from a survey conducted by TD Bank (TSX:TD) at the 2024 Restaurant Finance and Development Conference, which gathered opinions from 175 restaurant operators and financial professionals
- Over the next 12 months, 84 per cent of respondents believe that M&A activity will increase, signaling a significant shift towards consolidation and growth within the industry
- Toronto-Dominion Bank stock (TSX:TD) opened trading at C$75.76
Following recent industry challenges, the appetite for expansion and investment in mobile apps and artificial intelligence (AI) is growing within the restaurant franchise industry.
The past five years have presented significant hurdles, but the industry is now experiencing renewed optimism. This positive outlook is driven by the adoption of digital and mobile ordering, creative menu innovations, and heightened expectations around AI. These insights come from a survey conducted by TD Bank (TSX:TD) at the 2024 Restaurant Finance and Development Conference in Las Vegas. The poll gathered opinions from 175 restaurant operators and financial professionals to uncover their expectations for 2025.
Technological advancements and value meal strategies drive optimism
Continued technological advancements, better value meal strategies, and an improved interest rate outlook are key factors driving this optimism. Survey respondents believe that lowering interest rates will have the greatest impact on the restaurant industry in the next 12 months (46 per cent), followed closely by artificial intelligence and automation (42 per cent). The industry’s focus on value menus appears to be paying off, with most operators indicating that the increase in foot traffic (60 per cent) offsets the margin compression from these programs (40 per cent). Additionally, more than half (52 per cent) of respondents have observed improved foot traffic trends compared to just three months ago.
“Franchise 2.0”: Prioritizing investments in mobile apps and AI
Looking ahead, restaurant operators and financial professionals are prioritizing investments that drive revenue and simplify operations, particularly mobile apps. When asked about their predictions for the top three revenue drivers for restaurants over the next 12 months, more than three-fourths (77 per cent) of respondents ranked mobile ordering as the number one driver. Similarly, 59 per cent believe that mobile apps offering easy online ordering will have the greatest impact on operations during the same period. Meeting consumer expectations and employee needs is pushing restaurant franchises towards AI and automation. The survey found that 43 per cent of respondents believe using AI to analyze customer data and predict market shifts will have the greatest impact on operations, followed by the automation of administrative tasks to allow restaurant managers to spend more time assisting employees (34 per cent).
“The push for convenience and efficiency to improve customer and employee experiences is driving the industry’s focus on mobile ordering,” Mark Wasilefsky, TD Bank’s head of franchise finance explained in a media release on this survey. “The continued focus on mobile apps and online ordering tools signals a demand to better accommodate changing consumer expectations and employee needs.”
Ultimately, mobile apps and automation are seen as key growth areas over the next 12 months, with 36 per cent of respondents predicting that restaurants and franchises will invest in digital platforms, mobile apps, and online ordering to enhance customer experience, as well as technology to automate and streamline operations.
2025: The year of M&A growth?
As lowering interest rates and technological innovation boost optimism, restaurant franchise leaders are turning their attention to mergers and acquisitions (M&A). Over the next 12 months, 84 per cent of respondents believe that M&A activity will increase, signaling a significant shift towards consolidation and growth within the industry.
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group. TD is the sixth largest bank in North America by assets and serves more than 27.5 million customers. TD had $1.97 trillion in assets on April 30, 2024.
Toronto-Dominion Bank stock (TSX:TD) opened trading 0.41 per cent higher at C$75.76, but has lost 11.26 per cent since the start of the year.
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