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QSR 2009: Five hits and a miss
December 21, 2009 - Christa Hoyland
The past year may be one many operators would like to forget, with double-digit unemployment, reduced consumer spending and tightened credit lending. But it wasn't all bad news.
Many brands moved forward with major product rollouts, refranchising programs and redesign efforts. Smart QSRs also understood consumers' desire for value and adapted their pricing strategy to match. From those efforts, QSRweb.com picks five bright spots — and one dark one — for the segment in 2009:
1. Social media gets brands talking
Many brands expanded their social media strategy this year to include Twitter. Even McDonald's (@McDonalds) and Wendy's (@URBaconMeCrazy) joined in the conversation — and discovered the fun of actually talking to consumers. Both brands have so far mostly used the channel to promote consumer contests, but occasionally they'll break into a back and forth with followers.
Some brands' social media strategy includes using the applications to learn from consumers. For example, Krystal Restaurants has used Twitter and Facebook to glean consumer input for product innovations. The chain also has announced new product launches via those sites before sending press releases to the media.
Other QSRs, such as White Castle and Wendy's, yes, Wendy's, are encouraging — and posting — fans' video interpretations of their love for the brand on their YouTube channels.
Such interactions may just help those 18 to 24 year olds currently out of work keep their favorite brand top of mind when they can start spending again.
2. McDonald's gets an espresso boost
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McDonald's could not have timed its McCafé line of espresso-based beverages launch more perfectly. In May, consumers were already minding their wallets and as such eagerly snatched up McDonald's free samples — and kept coming back to buy more of the value-priced specialty drinks. A year earlier and consumers still would have been in love with $4 Starbucks lattes.
And McDonald's isn't stopping there. The opening of its European coffeehouse design in Manhattan followed by the announcement that its Wi-Fi will be free next year shows the brand wants its coffee to be an in-store experience, not just a drive-thru pick-me-up. Soon business deals will be made with the smell of french fries in the air.
3. Premium burgers go mainstream
Who would have thought that premium burgers would resonate with consumers in a down economy? But with the right marketing, brands like McDonald's were able to focus on the higher end of their price tier. The chain's new Angus Third Pounders contributed to a summer sales lift, according to the company's earnings reports.
Sister chains Carl's Jr. and Hardee's refused to take McDonald's premium entry lightly and fired back with their own stepped up value messaging. Those chains have historically marketed their upscale burgers as affordable quality and reminded consumers of that. The brands also launched a bigger, cheaper Big Mac copycat, focusing on its lower price and additional meat patty.
Although consumers like the better burgers, they have opted to make the sandwiches their meal and do without combo meals. For QSRs, the trade off was one of several factors that led to lower same-store sales.
4. Burger King finally kicks off a redesign
Burger King finally acted this year on a trend other brands have already well developed — improving their in-store experience ala fast casual. (Jack in the Box, for example, has reimaged nearly half of its system to date.) Burger King introduced its new 20/20 store de
sign this fall, one that incorporates its messaging in bold, contemporary colors. Digital signage and menu boards are part of the "store of the future" design.
sign this fall, one that incorporates its messaging in bold, contemporary colors. Digital signage and menu boards are part of the "store of the future" design.The chain also has a lineup of premium menu items to match the new setting, one it touts as rivaling casual dining. The product rollouts will start in February 2010, when all U.S. stores will be onboard with their new batch broilers. First up: The Steakhouse XT. Bone-in ribs are in test.
5. KFC gets grilled
KFC pinned its hopes on reviving sales with the launch of its better-for-you grilled chicken line. The new product could have flopped after the chain's Oprah Winfrey promo partnership grew out of control. But the company responded quickly and offered a mail-in coupon to appease consumers.
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One dark spot for the year
The dark side of franchising was fully evident this year with the lawsuits filed against Burger King by many of its franchisees. The operators, stretched to the limit by falling comps and already tight margins, said BK was making matters worse with its decision to boost its marketing funds at the expense of their soft drink rebates and then again by adding the Double Cheeseburger to the dollar menu. Another group of franchisees refiled a suit against the company's decision to require longer operating hours.
The suits illustrate the magnitude of the frustrations operators must deal with on a daily basis, particularly decreasing margins. And worse, it shows a lack of collaboration between the parent company and those on the front lines. Burger King is not the only brand to face such legal wrath and likely won't be the last. To his credit, the company's CEO John Chidsey has expressed a desire to work things out offline.
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