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Trends in the Quick-Service Restaurant Industry
by Ron Gorodesky and Ed McCarron

We recently made a presentation to a large quick-service restaurant franchise operator. We discovered some interesting trends in this industry - some you probably know about, some you may not know about - that we wanted to share with you.

Diet foods don't work in the quick-service, or fast food, industry. Mickey D's McLean burger was a great idea but it just didn't catch on with the fast-food eating public.

We'll single out Michael Jordan's favorite fast food restaurant chain again. The Deluxe series at McDonald's (Arch Deluxe, Fish Filet Deluxe, Crispy Chicken Deluxe and Grilled Chicken Deluxe) serves up sandwiches which are larger, cost more but taste about the same as the regular models in an effort to attract more adults to the Golden Arches.

Value pricing is a direct response to increased competition for all dayparts and to saturated markets. Speaking of markets, have you tried Boston Market's Chicken Carver Combo for $4.00? It includes a chicken breast sandwich, a side dish and a medium soft drink. Pretty good value, don't you think? Value-priced meals at fast food restaurants usually include a sandwich, french fries and a soft drink. These meals help increase sales of french fries and soft drinks, which are high profit margin items.

Even the mid-scale restaurants such as Red Lobster are moving to value-priced meals. Restaurants are trading lower average checks for increased covers.

The burger chains did not grow as fast as the pizza and chicken chains over the last five years, but they are still about double the size of pizza chains, the second largest group, in dollar volume and still make up almost half of dollar volume of the total U.S. fast food market which has revenues of almost $100 million. See the chart in this article. The main deterrent of burger chain growth is a more health-conscious American public.

More fast food restaurants are showing up in the strangest locations. Little Caesars is now in K-Mart and McDonald's is now in Wal-Mart. This trend will continue as increased competition and saturated markets cause fast food companies to become more creative in selecting their locations.

The use of "multiple-branding" - whereby several restaurant chains operate at the same location - is an attempt to draw more customers by offering a large number of items from which to choose. Chains that engage in multiple-branding can better absorb fixed operating costs, such as rent. Pepsico, owner of Taco Bell, KFC and Pizza Hut, has started co-branding where you'll see a Taco Bell kiosk in a KFC store.

Fast food restaurants have become more creative in their pricing strategies, real estate locations and marketing schemes in response to the fiercest competition ever in this industry. As long as the American public continues its fierce competitiveness in the workplace, working longer hours with no time to prepare food at home and continues its insatiable hunger for new restaurant concepts, the most creative and aggressive fast food companies will flourish with these trends and also create new trends.

Restaurant Advisory Services provides full-service consulting services to the restaurant and hospitality industries. The firm offers a full menu of advisory services focusing on every aspect of the life cycle of restaurants and other hospitality organizations, from pre-opening and conceptual planning, to day-to-day operations, to design and brokerage.

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