In 2011, the restaurant industry continued its recovery from the depths of the Great Recession and was able to embrace more opportunities for growth and innovation.
And, boy, did the QSR segment innovate this year, with upgraded burgers and fries, healthier kids' meals, specialty beverages, snack items, and everything in-between. Research and development was just part of the story. Here are QSRweb.com's top 10 happenings from 2011:
1. Healthy equals Happy (Meals): After taking the brunt of the blame for rising childhood obesity rates,and becoming the object of local legislations, many QSRs changed up their kids' meals, adding items such as low-calorie drinks and yogurt, or removing toys all together. Chains, including Jack in the Box, Arby's and Popeyes jumped on board, as did McDonald's, which reduced the amount of fries in its Happy Meals and added apples.
The trend accelerated in the summer when the National Restaurant Association partnered with Healthy Dining to launch a healthy menu initiative for kids. Inaugural participants include Burger King, Burgerville and El Pollo Loco. The NRA has predicted children's nutrition to be a top trend carrying over into 2012.
2. Lookin' Good: QSR players big and small have been investing heavily into the modernization of their restaurants, an effort that will continue throughout the next couple of years. In the spring, McDonald's announced a major plan to remodel its restaurants to look more like an upscale coffeehouse. The effort is estimated to cost about $1 billion, and a majority of units should be updated by 2015. Earthy tones, comfortable seating, flatscreen televisions and double drive-thrus hiighlight the design.
Burger King is also undergoing a modern store redesign, and Wendy's recently began testing four prototypes. Smaller chains such as Captain D's, El Pollo Loco and TCBY recenly updated their stores, as well.
3. Sold! The mergers and acquisitions activity picked up slightly this year, with the big news being Wendy's/Arby's Group's sale of Arby's. The chain, famous for its cowboy hat logo and roast beef sandwiches, was put up for sale in the beginning of the year. By June, it had a buyer: Roark Capital Group, no stranger to restaurant investments, spent an estimated $430 million on the transaction.
In September, Yum! Brands also unloaded its Long John Silver's and A&W brands after shopping for a buyer for nearly 10 months. Long John Silver's was acquired by LJS Partners LLC. A&W was acquired by A Great American Brand LLC. Additionally, Bojangles' was acquired by Advent International in July, and Rita's Italian Ice was sold to Falconhead Capital LLC earlier this month.
4. Foreign territory: QSRs continue to ambitiously expand their footprints overseas. Yum! Brands just raised its 2011 EPS growth guidance to a staggering 13 percent because of its strength in the China market. International sales have boosted the bottom line of Burger King; Dunkin' Donuts just opened its 10,000th milestone unit with its opening in Xi'An, China; Wendy's planted a flag in Russia; and India, Brazil, the Middle East and New Zealand have rolled out the welcome mat for American brands.
5. Burger wars escalate: This year, major QSR players took note of the rapidly-growing fast casual segment – and its overnight success stories such as Smashburger and Five Guys – and began stepping their burgers.
The efforts seem to be paying off so far. During Wendy's most recent earnings call, CEO Emil Brolick said its new Dave's Hot 'N Juicy burger line contributed significantly to a positive financial report.
6. Where's the Beef? Yes, Wendy's brought back its signature "Where's the Beef" tagline, but this year's real beef came against Taco Bell. The chain was slapped with an ugly lawsuit at the start of the year, questioning the content of its beef filling. The company responded with an ad barrage and ramped up its defense by offering free tacos to its customers. The suit was eventually dropped in April, but the damage continues to linger. Taco Bell, which generates about 60 percent of Yum! Brands' domestic business, has experienced negative same-store sales since the filing.
7. Coffee percolates. Coffee was hot this year in the QSR space. Dunkin' Donuts went public and continued to grow its footprint aggressively, including west of the Mississippi. Its success comes from coffee (it trumped Starbucks with the anticipated K-Cup launch) and its specialty beverage line. Krispy Kreme, on the brink of bankruptcy a few years ago, rolled out its own coffee line, and has doubled its profits this year. Canadian staple Tim Hortons continues to make a splash in the U.S., also with a new coffee line, as well as smoothies and a robust lunch menu.
The benchmark of QSR coffee success continues to be McDonald's McCafe line, which keeps introducing new variations and pulling in big sales numbers quarter after quarter.
8. Rise and Shine. The breakfast daypart has evolved into a significant opportunity in the QSR space. Technomic reports that the demand for breakfast offerings has grown from 33 percent to 46 percent in the past two years. Wendy's revamped its morning menu and continues to test baked goods in a number of markets. McDonald's, Chick-fil-A and Burger King introduced oatmeal to the masses. Subway, Dunkin' Donuts and Sonic broadened their breakfast options. And this is just the tip of the daypart's potential for innovation and revenue: Mintel reported that 66 percent of customers want restaurants to offer healthier breakfast options.
9. Neck and neck. Not only are Wendy's and Burger King modernizing their restaurants, they've both made menu changes at a dizzying pace. Wendy's has rolled out new burgers (Dave's Hot 'n Juicy, the W, etc.), salads, lemonade, fruity frostys, etc. Burger King's breakfast launch at the end of 2010 was its largest menu overhaul ever. It has also rolled out new burgers, chicken tenders, french fries, a soft serve dessert line and more. Both brands also recently launched new french fries. The enhancements have sparked an intriguing competition between the QSR giants. One analyst predicts Wendy's will soon surpass Burger King for the No. 2 spot, for the first time in the companies' history.
10. Social, mobile customers. Having a social media campaign has quickly become the rule rather than the exception. In 2011, big brands shifted to social media more than ever to launch promotions, crowdsource for ideas, announce new items and have conversations with their customers. Meanwhile, mobile initiatives are just starting to have an impact, as QSRs dabble in mobile couponing, text promotions, QR codes and mobile payments. This likely is just the beginning for a customer base that tends to be tethered to smartphones.
Other stories of note:
- In addition to coffee, other specialty beverages, variations of hot chocolate, smoothies, iced tea and lemonade in particular, made a lasting impression. Carbonated drink sales, meanwhile, fizzled.
- The USDA replaced its 19-year-old Food Pyramid with MyPlace, which promotes an increase in fruit and vegetable intake and encourages a switch to whole grains and fat-free or low-fat milk, as well as a reduction in sodium and sugar.
- McDonald's Europe rolled out self-serve kiosks, raising concerns about technology replacing people in the workforce. Ironically, in the U.S., McDonald's "hiring day" in April yielded about 62,000 new employees.
- In its effort to appeal to a broader – family – demographic, Burger King dropped its King mascot, as well as its longtime agency that created it, Crispin Porter + Bogusky.
- CKE Restaurants, parent of Carl's Jr. and Hardee's, dropped its AOR David & Goliath after less than a year. Some whispered the agency's ads weren't sexy enough for the company, which has used Paris Hilton and Kim Kardashian to sell its burgers in the past.
- Just as burger upgrades thrived this year, so too will chicken in 2012. McDonald's and Wendy's are already planning big chicken rollouts.
- Snacking will continue to take shape as a legitimate daypart inbetween lunch and dinner. QSRs will increase their rollouts of smaller-portioned items to fit this time slot.
- The frozen yogurt category will continue to grow, along with dessert offerings in general, as consumers' economic confidence returns. McDonald's has also hinted at a broad dessert introduction in the coming year.
- Healthy (and healthy sounding) initiatives including sodium reduction, vitamin-fortification and nutritious kids' options, will take a bigger share of the spotlight.
- Mobile initiatives will continue to ramp up, with QR codes, augmented reality, location-based promotions and mobile payments making their way into marketing plans.
- As menu labeling stipulations become law, more restaurants will embrace digital menu boards, both indoor and at the drive-thru.
Read more about statistics and trends.
Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.