Article

Why catering is a good idea for Taco Bell and QSRs

QSRs have ecosystem advantages to add catering, such as fixed assets and real estate, as well as media power.

November 3, 2014 by Alicia Kelso — Editor, QSRWeb.com

Last week, Taco Bell held a virtual press conference to announce the launch of its robust mobile app, which includes order-ahead, past orders, payment and other convenient features. The rollout overshadowed another announcement from the brand that may have similar influential implications in the QSR segment: 

The company is testing catering in “10 to 15 stores in Southern California.”

According to President Brian Niccol, it’s too early to tell how it’s going, but he is very optimistic about the test. 

"It is one of the big requests we’ve had from folks. We’re just getting started, We’re going to basically play it out and see how we’re able to execute," he said. "It’s a very exciting program and I’m optimistic about it."

Catering is a growing channel as the marketplace tightens up and the fight over consumer dollars becomes more intense than ever. But for now, it seems to be finding its footing mostly in the fast casual, casual and pizza segments.

Sure, some QSRs have a successful catering program in place (sandwich concepts, mostly), but the low-price-point, diverse-menued, millennial-focused, drive-thru-heavy Taco Bell?

According to Erle Dardick, founder of catering software company MonkeyMedia, this idea makes perfect sense because of Taco Bell's brand power.

“Due to the maturation of the market for QSR’s, this segment continues to have the largest brand equity and awareness at the consumer level. These brands have been in our communities for decades, and have spent billions and billions of dollars keeping themselves in front of consumers,” he said. “Catering provides an additional opportunity to extend these brands into the communities they serve.”

If QSR operators can develop a catering strategy properly, Dardick said consumers will use the service because of the connection they already have with the brand. This is true, he adds, even for non-sandwich concepts because QSRs have many ecosystem advantages over other restaurants.

For example:

• Fixed assets and real estate:“QSR’s still have the most fixed assets deployed in our industry.  Each of these assets (stores) is a manufacturing facility.  If you consider the strategy of pursuing markets to seek more sales, then scaling the right business strategy and scaling the correct consumer experience across existing assets is simply good business,” Dardick said. “As a group, QSR’s have the greatest opportunity to shift the use of large-scale assets.”
• Media: QSRs control much of the media, including print, TV, billboards and radio, and their ad spend continues to grow. Such saturation provides a platform for consumer influence and, once QSRs join the conversation on catering, the segment lines will continue to blur, Dardick predicts.

“This will be especially true for the QSR segment if they focus on winning back dollars from the grocery segment. In addition, this will lead to more market convergence towards the value proposition for healthier services by QSR/grocery/fast casual. Like any market, when profits grow, competition increases,” he said. “This convergence is already taking place and is a good thing for the entire supply chain of our industry of which the consumer will receive the benefit as our services grow.”

Expanding the off-premise experience

Catering also isn’t too much of a stretch for a quick-service powerhouse like Taco Bell since it already has a well-defined takeout experience. This, Dardick says, provides an important psychological advantage in the catering market.

“When we add the business of catering to QSR operations, and focus on the consumer markets, a point of differentiation is made using language because catering is just another off-premise service experience for the brand,” he said. “Saying that, the entire service conversation and workflow is different, as are the products and packaging.”

Tripping up operations?

But as with any workflow changes, operations, including the ever-important speed of service, could potentially get tripped up. Since few QSRs have worked catering into their overall business plans (outside from window signage and odd jobs here and there), this remains a concern. 

“To incorporate catering properly, they will need thoughtful design, planning and implementation of a strategy that should one day represent 20 percent of overall system sales for the QSR segment,” Dardick said.

He directs any skepticism about this ambitious number to the advent of the drive-thru.

“History repeats itself,” he said. “But building a business this large takes commitment. It’s strategic and it won’t happen by accident.”

The drive-thru and even the QSR breakfast daypart took “generations,” as well as "billions and billions" of dollars of investment in infrastructure, technology and media to mature and the same could eventually be true of QSR catering.

“Take a look at what is happening with consumer demand for more convenience and America’s insatiable appetite for more services from existing restaurants. Catering is here to stay in restaurants, even in the QSR segment,” Dardick said.

Taco Bell’s test will provide a good indication of how quickly it will find its place. It will require a “HUGE” investment in operations, technology and media to significantly drive revenues, Dardick said.

And it will take learnings on how to scale across the existing system and to franchisees.

“Without this type of strategic commitment, the program will not have long term success,” Dardick said. “Regardless of what Taco Bell's test results reveal, you will certainly see other QSR brands exploring catering in the marketplace because there is a substantial sales lift on the table for any one of these brands if they actually take the time to do it right.”

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