Posted May 04

When in Thailand, burgers on the go

Is Thailand’s private consumption expenditure growth and the convenience of quick meals on-the-go what makes it appealing for Drive Thru F&B brands to set their sights on Bangkok?

Few retail formats symbolize the shifting expectations of consumers quite like Drive Thru dining. Since being pioneered in the United States in the 1940s, the Drive Thru restaurant or café has enabled customers to consume light meals, soft drinks and coffees without leaving the comfort of their car. Orders are generally placed using a drive-up microphone, and are collected by driving to another window. It is designed to be a largely effortless process for consumers – making it not so much a shopping preference as a distinctive lifestyle statement.

In essence, Drive Thru dining epitomizes convenience, and this format is starting to gain popularity across South East Asia. Suburban residents in the region’s larger cities are discovering they can purchase and consume food and beverage products “on the go” when they choose – without having to waste time by parking their car and physically entering a café or restaurant.

Bangkok is a good example. The structure of the Thai capital’s residential landscape has changed considerably in recent years as suburban areas become increasingly popular with commuters. Several community malls and shopping centres have opened their doors in decentralized areas of Bangkok as shifting consumer lifestyles place a greater emphasis on localized services and retailing.

The inbound tourism growth, as well as improving household incomes and population growth is placing upward pressure on F&B consumption. Food consumption in 2015 grew by 3.2%, however BMI Research expects food consumption to grow by 4.8% between 2014 and 2019.

Expanding into the suburbs

The embrace of localized convenience is creating new opportunities for F&B Drive Thru operators’ seeking expansion options beyond Bangkok’s crowded shopping streets and malls. In addition to offering neighbourhood locations, an additional attraction of Drive Thru outlets is that this quick-service format typically generates revenues 15-20% higher than a traditional outlet. Part of the reason for this is lower staff costs, and also deconstructed menus – which mean less food wastage. The stripped down menus are designed to reduce the complexity for consumers, and hasten the speed of preparing and delivering each order.

McDonald’s pioneered Drive Thru F&B retailing in Thailand, and today it leads the market with 26 Drive Thru outlets across Bangkok. KFC currently ranks second, and other fast-food and coffee shop brands, such as Starbucks, Burger King and Dunkin Donuts, are seeking to expand their Drive Thru presence across suburban districts of the Thai capital.

The primary locations are Ratchapruk Road, Phaholyothin Road and Rama 2 Road, which count Bangkok‘s highest concentrations of Drive Thru F&B outlets. Bangna-Trad Road is expected to be the next hot spot, as the area counts high car traffic volumes, and an abundance of land exists to accommodate new development.

Key issues to consider

Drive Thru dining is also attracting interest from brands yet to establish their market presence, but developers and operators in Thailand must consider key logistical and operational issues. For F&B operators, getting the food and drink menu right is crucial as customers have high expectations both in terms of menu range and the speed of order processing and delivery.

For developers planning to build drive-thru outlets to let, it is important to ensure the location and venue layout will attract interest from high-profile F&B brands. In a sense, this echoes the ‘developer beware’ caveat that applies to all forms to retail asset development. In a less mature retail market like Thailand, many well capitalised individuals and families want to enter the retail sector without adequate market knowledge and experience. Some of these investors have developed retail properties without studying demand developments for both retailers and consumers. This has resulted in under-performing assets being created that require significant extra funds and time to turn around.

Another factor to consider is that F&B brands have different requirements for a Drive Thru retail venue. Currently, all of Bangkok’s Drive Thru outlets are owned and operated by F&B brands, rather than franchisees, but there is no “one size fits all” format. McDonald and KFC’s outlets, for instance, require a three-window station, whereas Starbucks requires only two windows. Developers must identify a prospective occupier first, and then understand the preferred operating requirements before designing and building the Drive Thru property.

Siwanart Srisomsup, Retail Manager at JLL Bangkok, thinks that “despite growing popularity of drive-thrus, demand for letting space in shopping centres is unlikely to see any significant impact from this trend. Most of the F&B retailers operating Drive Thrus will continue to open traditional outlets in shopping centres. There are fewer fast food brands who are looking at opening outlets in prime shopping centres where occupancy costs are relatively higher and operating hours are less flexible.”