Can McDonald’s Keep Its Mojo After the All-Day-Breakfast Hype Fades?

February 8, 2016
by Christine Birkner
Adweek
January 28, 2016, 11:49 AM EST
http://www.adweek.com/news/advertising-branding/can-mcdonalds-keep-its-mojo-after-all-day-breakfast-hype-fades-169241
Consumers are lovin’ McDonald’s all-day breakfast, to the tune of surging sales for the brand, but how long can the party last?

The effort, which included a social media-themed ad campaign by Leo Burnett, launched to much fanfare in October and so far has helped reverse the fast-food chain’s sagging fortunes. This week, McDonald’s announced that its fourth quarter comparable U.S. sales increased 5.7 percent due, in large part, to the launch of all-day breakfast.

According to research firm NPD Group, the percentage of McDonald’s customers who ordered breakfast at the chain grew from 39 percent prior to the launch to 47 percent afterward. And over the past two years, breakfast has been the strongest growth segment for QSR brands overall, with sales rising in the 3 percent to 4 percent range.

“Taco Bell and Subway entered the breakfast market, and there have been a lot of specialty innovations that have driven morning meal growth. Everyone wants to take advantage of that opportunity because it’s such a huge part of market share,” said Bonnie Riggs, restaurant industry analyst at NPD.

McDonald’s president and CEO Steve Easterbrook, who took the helm in March 2015, has executed a turnaround plan for the company that includes a simpler menu and faster service. In May, the chain pared down menu items to speed up order times. The brand’s focus on value, in the form of offerings such as its McPick 2 menu, which allows customers to choose two menu items (McChicken sandwich, double cheeseburger, small fries or mozzarella sticks) for $2, also was credited for increased sales in this week’s earnings call.

The fast-food chain’s vision in the U.S. is “to become a modern and progressive burger and breakfast restaurant focused on our food, the customer experience and value,” a McDonald’s spokeswoman said. “Simplifying our menu and operations procedure has made things easier for our customers and our crew and helped contribute to the rise in earnings.”

Will the momentum continue?

But after consecutive sales declines, McDonald’s latest results actually aren’t much to celebrate, says Darren Tristano, president of restaurant industry research firm Technomic. (The company’s U.S. sales rose for the first time in two years in October.)

“Strong results after a few years of sales declines can still be considered a rebound. They haven’t gotten back to where they were three years ago,” he said. “They’ve done a nice job with all-day breakfast, and aggressively advertised it, but all-day breakfast isn’t new. Jack in the Box, White Castle, other brands are rolling it out. [McDonald’s] out-performed the market in the recent session, but they’ve recently struggled to keep up, so it’ll be good to watch.”

On Jan. 7, McDonald’s U.S. restaurants also launched new packaging, with a sleeker, simpler design than previous iterations. Paul Pendola, foodservice analyst at Mintel, gave the change mixed reviews. “Saying they’re going to be a contemporary, modern burger place is too vague, and it doesn’t communicate to consumers what it is that makes them different, unique or better,” he said. “They could communicate that on the packaging. It’s super simple and lovely, but there’s no messaging on it about what makes them better or unique.”

Tristano was optimistic about McDonald’s fortunes, overall. “They’re focusing on the millennials with breakfast, the lower-income groups with value, and they’re innovating with some of the regional burgers they’re offering,” he said. “As long as they continue to focus on fundamentals and not over-complicate things on the menu level, they’ll have some momentum.”


Brisket Channel proves to be ultimate reality TV

August 27, 2014

Article by: David Phelps, Star Tribune

© 2014 Star Tribune

Remember the Brisket Channel on Duluth TV?

It was on for 13 hours and five minutes over the Memorial Day weekend.

It turned out to be quite a hit, once reruns made it to YouTube. Nearly 400,000 viewers tuned into the Internet version of the smoked brisket marathon developed for Arby’s by the Minneapolis ad agency Fallon.

So popular was the website that each unique visitor spent an average of 38 minutes on the site, watching a brisket slow cook in the same manner that Arby’s prepares brisket for its customers. It also helped that visitors had a chance to win one of $20,000 in prizes that included a 10-gallon hat, lasso and beef-scented candles.

“We were blown away by that,” said Matt Heath, Fallon creative director, of the viewership.

And the client was pleased. “Thirty-eight minutes is longer than a lot of TV shows,” said Jeff Baker, Arby’s senior brand experience director. “It was a great idea based on simplicity.”

Besides setting a Guinness record for the longest TV commercial, the brisket show and limited brisket sandwich offer set the stage for Arby’s new “we have the meats” advertising campaign that Fallon launched earlier this month.

Results for the fledging ad campaign so far are inconclusive. But Rocky Novak, Fallon’s managing director, said: “We’re seeing a lot of social media love.” Arby’s said it does not release sales figures. But when it first made the brisket sandwich limited-time-offer available in October of 2013, “we declared it the most successful [limited-time offer] in the brand’s 50-year history,’’ said a spokesman Wednesday.

Gone as Arby’s pitchman is Bo Dietl, the former New York City police detective who was the face and voice of Arby’s for nearly two years. To quote Dietl from a commercial for Arby’s fish sandwich, “Really?” Yeah, really.

In fact, the new Arby’s commercials are faceless. The only human element seen by viewers is of a person from the shoulders down wearing a chef’s jacket. A roast beef or turkey or corned beef sandwich is the star of the commercial.

“The LSR [limited service restaurant or fast food] industry is not hyper-focused on food. There are a lot of entertainment factors,” said Heath. “We wanted to see how close we could get to the food. We didn’t want to put a face in there. It’s about the finished product.”

Among the tag lines used for the new set of Arby’s commercials are “this is meatcraft,” “fear not the meats,” “meats crafted with a heavy hand” and “it will change you.”

“We feel like we have an incredible heritage of meats and that presenting them in a simple way was the best way,” Baker said in an interview earlier this week.

Brand overhaul

Arby’s new advertising campaign will be accompanied by a new branding campaign that the Atlanta-based company announced in June. The branding effort includes remodeled exteriors, revitalized interiors and staff training.

Based on some consumer testing, Arby’s message and image could use a little retooling.

According to the food industry consulting firm Technomic, sales and market share at Arby’s have declined in each of the last two years, placing the roast beef king a distant second behind Subway in the non-hamburger sandwich sector and ahead of a hard-charging Jimmy John’s.

“Arby’s is considered to be unique because its about roast beef, not hamburgers, not chicken. We’re talking about an older, nostalgic brand,” said Darren Tristano, executive vice president for Chicago-based Technomic. “Clearly there are some advertising opportunities and some innovative opportunities.”

Novak said the new Arby’s advertising campaign is all about what goes between a bun or two pieces of bread in the Arby’s kitchen.

“The main takeaway first and foremost is that this is about the meat that is put in the sandwich,” Novak said.

Tristano said Arby’s scores well with consumers on a number of metrics, including service, decor and “craveability.” But it doesn’t score so well on prices, healthy options and “advertising that makes me hungry.”

“By focusing on what differentiates you, that creates memorable and creative advertising,” Tristano said. “Freshness gives you a stronger feel of healthiness.”

And credit for a new Arby’s feel may come down to a Texas-smoked brisket that took 13 hours to cook and five minutes to carve.


With a Mouthful, A&W Hopes to Draw Baby Boomers’ Offspring

May 5, 2014

pictureA&W plans to submit to Guinness a 304-character hashtag promoting its Hand-Breaded Chicken Tender Texas Toast Sandwich.

By ANDREW ADAM NEWMAN

THE popularity of the A&W Restaurants chain in the United States peaked in the 1960s and 1970s, when the number of locations — many with carhop service — swelled to 2,400, so it is no wonder that the brand stirs nostalgia in the baby boomer generation. But now A&W, which has about 700 restaurants, wants to make an impression on those boomers’ children, and the brand is increasingly turning to social media to do so.

To promote a new menu item with an unwieldy name, the Hand-Breaded Chicken Tender Texas Toast Sandwich, the brand is introducing a hashtag that is itself unwieldy: #supertastylargeandinchargetexastoasttwohandwichmadewithdeliciousonehundredpercentwhitemeathandbreadedchickentendersandyourchoiceofclassicorspicypapasauceeitherwayyoucan’tgowrongwowthatsoundsgoodyouneedtotryoneitsonlyavailableforalimitedtimeImgoingtohavetogogetonemyselfareyoustillreadingthisseeyouatAandW.

Along with deliberately defying the basic hashtag tenet of being simple to remember, at 304 characters it far exceeds the 140-character limit of Twitter, although other social media platforms like Facebook, Instagram and Pinterest allow longer hashtags.

A television commercial introduced on Monday opens with a voice-over asking: “How would you describe the Hand-Breaded Chicken Tender Texas Toast Sandwich?” To the sound of rapid clicking of keyboard keys, the speaker breathlessly rattles off about half of the hashtag, before slowing down and saying, “In other words, it’s a mouthful.” An end card directs viewers to the A&W website to see the full hashtag.

The brand is calling it the world’s longest hashtag, an assertion that may be difficult to prove, but it says it will seek recognition from Guinness World Records. (A search of the Guinness website yields five records related to Twitter and six related to Facebook, but none related to hashtags.)

The social media and advertising campaign is by Cornett Integrated Marketing Solutions, the agency of record for the chain. Both are based in Lexington, Ky. A&W, which declined to reveal expenditures for the campaign, spent only $876,000 on advertising in 2013, according to the Kantar Media unit of WPP. (Advertising expenditures for A&W root beer sold in stores, which is licensed in the United States by the Dr Pepper Snapple Group, is not reflected in the figure.)

A&W ranks 168th among all American restaurant chains, based on estimated yearly revenues of $184.4 million, according to Technomic, a restaurant consulting and market research firm.

“They’re a brand that’s trying to find their way,” said Darren Tristano, an executive vice president at Technomic. “It’s a nostalgia and legacy brand that is familiar to a number of Americans, but the problem with A&W is that it was a drive-in and it isn’t really a drive-in today.”

Among A&W’s 700 units in the United States, 50 are drive-ins, 200 are stand-alone dine-in restaurants, and the remainder are co-branded locations where it shares a roof with other fast-food establishments, primarily KFC and Long John Silver’s.

What A&W needs to do, Mr. Tristano said, is “rebuild their brand perception with millennials.”

Tim Jones, a creative director at Cornett, said that to reach younger consumers, the 95-year-old brand aims to strike a tone of “hip nostalgia” that characterizes older brands like Levi’s and Ray-Ban.

Rooty the Great Root Bear, an orange-sweater-wearing A&W mascot introduced in 1974, was returned to prominence in 2012 after having been, in the words of the brand, hibernating for about a decade. Today, A&W’s Twitter account, which has 7,200 followers, is written from the bear’s perspective.

“On Twitter, if you’re the voice of a seven-and-a-half-foot-tall bear with no pants, you can be a little bit more silly and more playful,” said Liz Bazner, associate manager of digital communications at A&W Restaurants. “The idea is also that Rooty doesn’t quite understand technology or Twitter, so he’d use a hashtag that would be too long for Twitter.”

In 2013, A&W created a profile for the mascot on LinkedIn, and when other users would add Rooty to their professional network, the bear would write far-fetched recommendations on their behalf.

“Using only a large-ish glass of water, he once single-handedly defended a small village in the Amazon Basin from a horde of ferocious army ants,” Rooty wrote on behalf of one LinkedIn user. About another, he offered, “He can hurl tennis rackets at small moving objects with almost zero accuracy.”

LinkedIn removed Rooty’s profile a couple of weeks after it went up, citing a policy of permitting only actual people on the site. In response, the brand posted a video in mock indignation to YouTube.

An A&W smartphone app encourages users to draw a mug of root beer for the bear, who, when tapped on his stomach, emits a hearty belch. The app, Burping Rooty, also allows users to direct the bear to recite the alphabet in belch form.

“If you’d like to grab some attention for your business on social media,” Forbes.com reported in 2013, “A&W Restaurants is currently providing a training manual on a fun-filled way to do it.”


Taco Bell Runs Naughty TV Ad For ‘Happier Hour’

March 27, 2014

taco-bell-campaign-188_2To drive awareness of its “Happier Hour,” which runs from 2 to 5 pm each day, Taco Bell is running new TV creative that’s slightly naughty, in a playful way.

The spot (in 30- and 15-second versions), from Deutsch LA, shows three different scenarios in which male/female pairs — office colleagues, college students and seniors — exchange suggestive looks and then appear to be heading out together for a tryst, as the song “Afternoon Delight” plays in the background.

But it turns out that they’re all actually headed to a Taco Bell, where they can get any “Loaded Griller” for $1, and any medium beverage for the same price, during those three afternoon hours.

The “Afternoon Delight” version is a Little Hurricane cover of the 1976 Starland Vocal Band song.

The keen-eyed viewer may notice a cameo by “America’s Next Top Model” winner Laura Ellen James, playing a college student who clearly makes the day of her much-shorter classmate when she lures him out of an in-progress lecture.

The spot started airing this week on networks and cable, and will continue running through the end of June, with additional media support through the end of August. Happier Hour is being promoted on Taco Bell’s social assets, including Facebook (10 million “likes”) and Twitter (1.1 million followers), as well as featured on YouTube.

Happier Hour is described in consumer promotions as a “limited time offer,” but it’s been running at participating locations since last year (an “always on” promotion), according to Deutsch. The current marketing push is the second campaign for Happier Hour; Taco Bell also ran a campaign last year.

The reasons behind a special afternoon event/offer aren’t hard to grasp. QSRs obviously benefit from driving more traffic during the quieter hours between and following regular meals. And offering snackable items at attractive prices has become a key strategy for driving such business.

According to a new “Snacking Occasion Consumer Trend Report” from foodservice research firm Technomic, 51% of Americans now report that they eat snacks at least twice a day — up from 48% two years ago. Nearly half (49%) report that they eat snacks between meals, and 45% replace one meal a day with a snack.

Among those who buy snacks at restaurants, 45% order from the value or dollar menu.

“There’s plenty of room for restaurants to expand their snack programs and grab share,” even as packaged food makers and retailers also push harder to grab those snacking dollars, noted Technomic EVP Darren Tristano.

And while candy is still the dominant snack (purchased at least occasionally by 71% of surveyed consumers), half of consumers say that “healthfulness” is very important to them when choosing a snack. As a result, many restaurants, like their CPG counterparts, are including healthier options within their snack offerings.


Making Sense of Value and Pricing Expectations

March 25, 2014

The prevalence of value-based promotions spiked in recent years as U.S. restaurant operators aimed to drive incremental traffic and sales among consumers affected by the recession. The use of these deals is becoming ingrained in consumer behaviour, even as the economy slowly improves. During the economic recession, consumers were more likely to cut back spending altogether, deals or no deals. Now that the economy is on the mend, consumers are accustomed to these deals being available and likely expect that they will be in the future.

While price continues to be a major component of the value proposition, it is by no means the only factor. Value is multidimensional, including the quality of food and beverage, and the quality of service and convenience. These different facets of value allow flexibility in formulating value propositions and pricing strategies.

This article explores U.S. consumers’ value equation; the appeal of restaurant deals and promotions; consumer price thresholds and how low prices drive traffic. U.K. operators will find many of these themes suitable for their own customers, whether they are deal-seekers or not.

The Value Equation

The restaurant value equation is comprised of a host of factors. It’s not straightforward—and it’s evolving. Primary drivers of value are price, quality, service and atmosphere. Secondary drivers vary but may include the meal or occasion as well as the diner’s mood and needstates. Consumers asked to describe what constitutes good value in a restaurant mention food quality, appropriate portion sizes, fair prices, service and cleanliness.

Food and beverage trump price in creating good value. Highlighting specific qualities of food and beverages—such as quality, convenience or healthfulness—can help marketers create a message of good value. Even at limited-service restaurants, the quality and taste of the food are most important: 86% of consumers say food and beverage are key to the LSR value equation, vs. 74% who name price. At full-service restaurants, of course, service and ambiance are also central: 87% name food and beverage as a component of value, 60% mention price, 28% ambiance, and 24% the service and amenities.

Customisation can enhance the value proposition. Half of diners—and a larger proportion of those under 35—say customisation is important in creating a good value proposition. They want to know that the meal will match their personal preferences and that they will get (and pay for) only the ingredients they like. Restaurants can incorporate customisation by offering menu items in multiple portion sizes (thus making them appropriate for both meals and snacks); allowing ingredient substitutions; and varying the heat level of foods from mild to super-spicy. Even a simple bottle of hot sauce left on the table allows patrons to customize their dish to their liking.

Deal-seeking in restaurants has become ingrained behaviour for consumers. Dealing was essential during the recession, but since then operators have been hoping to scale back on deals as the economy improves. However, consumers expect to continue employing deals; more than half say they’re using more deals now than two years ago. Interestingly, deal-seeking is not tied to income constraints; eight out of 10 diners at almost all income levels say they order from dollar menus at fast-food restaurants at least once a month, and among those with annual incomes over $150,000, seven out of 10 do the same. In addition, four out of 10 consumers use “daily deal” websites, and two out of 10 use them more than once a month. (These sites encourage restaurant patronage, but not loyalty; 55% of subscribers to daily-deal sites say they turn to these deals so they can try new restaurants more often.)

Traditional buy-one-get-one and half-off specials resonate strongly with consumers. More restaurant traffic is being driven by specials rather than the quality of the food, atmosphere or experience, with consumers asking: “What can I get for the price?” Deals that provide immediate half-off savings represent the most attractive value: eight out of 10 consumers say buy-one-get-one deals and half-off promotions add strong value, compared to seven out of 10 who name set-price specials, coupons or value menus. Buy-one-get-one specials, coupons and half-off deals are effective in driving traffic, with almost two-thirds of consumers saying they’d be likely or extremely likely to visit restaurants that offered these.

Base: Approximately 800 consumers aged 18+; base varies as promotions were randomly rotated Sum of percentages may not equal cumulative percentage due to rounding Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Base: Approximately 800 consumers aged 18+; base varies as promotions were randomly rotated
Sum of percentages may not equal cumulative percentage due to rounding
Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Pricing Expectations

Consumer price thresholds increase as the day progresses.Operators should make sure that their price thresholds are in line with what consumers are willing to pay (keeping in mind that consumers may report lower thresholds than they would actually accept). Research for Technomic’s Value and Pricing Consumer Trend Report found a “sweet spot” between what consumers consider optimal and what they’ll pay without complaint for each meal in each restaurant segment.

3-2014_exhibit_23-2014_exhibit_3

3-2014_exhibit_4

Base: 1,800 consumers aged 18+ Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Snacks provide a unique pricing opportunity because women are willing to pay more for snacks than men are. For example, while the average consumer would pay $5 for a snack, women aged 25‒34 would pay $6.50. A number of chains, from coffee-café Starbucks to quick-service burger chain SONIC, have experimented with “happy hours,” during which they sell snacks at a special price. And while some fast-casual bakery cafés are seen by consumers as offering only unhealthy pastries for snack time, Au Bon Pain has built afternoon traffic with female-pleasing small plates like hummus with cucumber and Thai peanut chicken with snow peas.

“Fresh” and “premium” descriptors can increase consumer price thresholds.Nearly half of consumers say they would be likely to purchase—and to pay more for—food or beverage that is fresh; 37% say the same about premium options. Operators may be able to justify higher price points on food and beverage billed as fresh, homemade, premium, authentic, local, natural, organic, seasonal or sustainable. They should carefully consider both what such terms could mean when applied to their offerings and how to adjust their price threshold.

Value and Low Prices Help Justify Restaurant Visits

The good news for restaurant operators is that good value makes consumers feel better about eating out: 57% say they can eat out more often if meals are low in cost, and 52% say low prices help them justify the money they spend eating out.

Base: 1,500 consumers aged 18+ Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Base: 1,500 consumers aged 18+
Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Key Takeaways

The value equation involves multiple inputs, but price and quality both play strong roles in all segments. Deal-seeking in restaurants has become ingrained behaviour, and consumers don’t expect to change. Operators must find ways to adjust prices, deals and portions so they can still make money. Price and value promotions can effectively drive traffic. But be careful what you’re driving traffic to; you probably don’t need more business on Friday night. Freshness, quality and customisation can help justify higher prices.

There is pent-up demand for restaurant meals. Consumers who are looking for low prices are doing so to eat out more often. Older consumers seek value and “worth,” while younger diners have a more straightforward desire for deals; operators should consider strategies that don’t alienate any part of their customer base.

Darren Tristano is Senior Managing Director of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.


Industry Evolution

October 1, 2013

U.S. restaurant chains of all stripes are taking on fast-casual attributes to evolve their concepts and remain relevant to consumers.

Change is one of the few constants in the restaurant industry. Whether restaurants are adding another daypart, updating the décor or introducing new prototypes, the best foodservice operators understand that, to succeed in the business, they should be aware of the unpredictability of the industry and be open to evolving.

In the past few years, we’ve seen many U.S. concepts make some key changes to keep up with the restaurant industry’s best performer: the fast-casual segment. Thanks to customisable and craveable options, premium ingredients and quick service, growth of the fast-casual segment is outpacing that of the quick-service and full-service sectors. As reported in Technomic’s Top 500 Chain Restaurant Report, turnover for the restaurant industry as a whole from 2011 to 2012 increased 5.2%, including a 5.8% rise in limited-service turnover and a 4.5% increase in full-service turnover. In comparison, turnover for the fast-casual segment increased 13.0% from 2011 to 2012, and that growth is expected to continue.

To compete with fast-casual restaurants, quick-service and casual-dining operators are branching out of their comfort zones to find different ways to reach new consumers as well as retain their customer base. Full-service chains such as Applebee’s and Red Lobster have introduced fast-casual elements to attract on-the-go consumers, and Burger King, which receives most of its business from drive-thru and carryout orders, added delivery service to increase its convenience factor. Other chains like Auntie Anne’s and Chick-fil-A are using food trucks to generate brand awareness by bringing their food to festivals, sporting events and community gatherings.

It’s not just existing chains that understand the need to evolve. The latest crop of limited-service pizza concepts, which includes Pie Five Pizza Co. and MOD Pizza, functions more like a Chipotle than a Pizza Hut. Patrons create their pizzas by making their way through an assembly line-style queue, choosing a crust, sauce, cheese and toppings as they go. They then receive their pizzas in minutes, sometimes by the time they reach the cash register. This style of ordering allows diners to be much more involved in the pizza-making process than at a traditional limited-service pizza concept, where patrons usually don’t watch the preparation of their pizzas. The customisability and quick service are some of the reasons why Technomic predicts made-to-order fast-casual pizza concepts are the next “better burger.”

Below are some examples of operators thinking outside of the box in order to keep their concept relevant in the ever-changing restaurant industry.

Full Service to Limited Service

In the U.S., the limited-service sector is growing at a faster rate than the full-service segment, leading some of the country’s top full-service chains to experiment with limited-service prototypes. In August, midscale chain Bob Evans launched Bob Evans Express, a new counter-service prototype for nontraditional venues such as corporate offices, universities and shopping malls. The new format, which offers a limited menu of hot foods along with packaged items, was designed to expose patrons who otherwise wouldn’t have the time to visit a sit-down Bob Evans restaurant to the chain’s signature homestyle breakfast and lunch offerings.

Earlier this year, U.S. casual-dining seafood chain Red Lobster began testing a new limited-service offering, Seaside Express, at two of its Florida locations. Patrons visiting the restaurants can choose either the standard full-service Red Lobster dining experience or order from the Seaside Express counter, which offers a menu of mains such as burgers, sandwiches and flatbreads, priced between $6.99 and $8.99 (approximately £4.50 and £5.79). After ordering, customers seat themselves and a server brings out their food. Because patrons pay for their meals at the counter, the concept is meant to appeal to diners who are pressed for time and may not like waiting for a cheque to be brought to the table. It also appeals to those looking for a discounted Red Lobster experience—the Seaside Express menu features lower-priced mains compared to Red Lobster’s standard menu.

Also earlier this year, Applebee’s expanded its limited-service model, Applebee’s Express Lunch, to 23 company-owned locations in the U.S. The format, first launched in Kansas City in July 2012, is similar to Seaside Express, in that patrons choose to either sit down and be waited on or order their meal from the Express counter, then seat themselves. The menu features pick-two combos starting at $6.99.

Applebee’s launched a fast-casual offering, Applebee’s Lunch Express. Patrons order at a counter then seat themselves, and a server brings their food to their table.

Applebee’s launched a fast-casual offering, Applebee’s Lunch Express. Patrons order at a counter then seat themselves, and a server brings their food to their table.

The Un-Delivered Pizza

Today’s trendiest limited-service pizza concepts don’t focus on delivery—in fact, most don’t even offer it. Fast-casual pizza concepts such as Uncle Maddio’s Pizza Joint and Blaze Fast Fire’d Pizza are revolutionizing the limited-service pizza industry by specializing in create-your-own personal pizzas. Thanks to high-tech pizza ovens that cook pies at incredibly high temperatures, patrons no longer have to call ahead to place a takeaway order or sit at their house waiting for a pizza to be delivered. Now, customers can simply line up at a counter, choose their crust, sauce and premium toppings, and either have their pizzas ready for them by the time they reach the cash register or brought to their table by a server in minutes.

One of the largest points of differentiation is that these fast-casual pizza concepts focus on dine-in service. Instead of operating out of small, minimally decorated counter units, these restaurants feature a hip, chic décor and plenty of seating to attract dine-in consumers. Most also menu adult beverages, a characteristic that attracts value-seeking consumers on a dinner date or group outing who may not have the funds to visit a full-service restaurant and provide a tip.

Décor at Uncle Maddio’s Pizza Joint units (top) includes abstract wall dividers and a word wall, dominated by the phrase “Served with love.” Pie Five Pizza Co. units feature science-themed murals, such as a periodic table that replaces the elements with Pie Five pizza ingredients.

Décor at Uncle Maddio’s Pizza Joint units (top) includes abstract wall dividers and a word wall, dominated by the phrase “Served with love.” Pie Five Pizza Co. units feature science-themed murals, such as a periodic table that replaces the elements with Pie Five pizza ingredients.

These new concepts haven’t gone unnoticed by the quick-service pizza sector. Pizza Inn, a U.S. pizza chain that consists mostly of buffet and counter-service restaurants, launched its own fast-casual made-to-order pizza concept, Pie Five Pizza Co., in 2011, which has since grown to 14 locations. Sbarro, another U.S. quick-service pizza chain, is set to debut a fast-casual pizza concept, Pizza Cucinova, later this year.

Not all pizza chains are launching fast-casual concepts; some are instead choosing to incorporate fast-casual elements into their existing concept. Within the past few years, Domino’s Pizza has converted dozens of restaurants into its Pizza Theater prototype. The model still functions like a typical Domino’s Pizza unit but features a comfortable dining room and an open kitchen for patrons to watch the preparation of their pizzas. Other new elements to the Pizza Theater prototype include ordering kiosks, electronic order tracking, and chalkboards where customers can doodle and leave feedback while waiting for their order.

Quick-Service Delivery

In contrast, some quick-service concepts are updating their concepts by adding delivery services. In 2012, Burger King launched delivery in the U.S. at select locations in Washington, DC, and has since expanded the service to select markets in 14 states, from California to Illinois to New York. The chain boasts that hot food is delivered hot and cold food is delivered cold, thanks to new innovative packaging. The service is designed for large orders (a minimum order amount of $10 is required), so in addition to Burger King’s standard offerings, the delivery menu also features several large combo meals, like a four-sandwich bundle with fries and an option with 10 cheeseburgers and 20 chicken nuggets.

A loyalty program specifically for customers using the delivery service has been implemented to bring in more users. Those who use the service and are enrolled in the loyalty program receive a free sandwich with every fourth order.

Burger King launched delivery service in select markets in the U.S. The delivery menu features Burger King’s traditional offerings along with large combo meals.

Burger King launched delivery service in select markets in the U.S. The delivery menu features Burger King’s traditional offerings along with large combo meals.

It will be interesting to see if the service succeeds and if other concepts will be inspired to launch delivery. Burger King says customers in the U.S. have embraced the new option, and it continues to expand delivery to other U.S. markets, most recently to Washington State and Minnesota. But so far, it appears only one other major U.S. quick-service chain, White Castle, has followed suit. The popular burger chain has been testing delivery at a restaurant in Columbus, OH, since earlier this year and recently added delivery to a second site in Columbus, but it hasn’t discussed any plans to expand the service nationwide.

Key Takeaways

While the fast-casual segment is booming in the U.S., it is relatively new in the U.K.—only seven of Technomic’s Leading 100 U.K. Chain Restaurants are classified as fast casual. However, all of those chains posted turnover increases in 2012, and three of them–Patisserie Valerie, PAUL and Le Pain Quotidien–reported double-digit turnover growth. As a group, they increased sales by 8.5% and grew their unit count by 6.6%.

With these numbers, along with the recent entry of U.S. fast-casual concepts like Shake Shack and Five Guys Burgers and Fries in the U.K., we can expect the U.K. fast-casual sector to continue growing. Thus, it’s likely we’ll see top quick-service and casual-dining chains in the U.K. evolve their concepts to compete with the growing fast-casual segment.


Loyalty Programmes Drive U.S. Restaurant Visits

May 16, 2013

Smart restaurant operators have always endeavored to take care of their most frequent visitors. That may have taken the form of a server simply knowing her customers’ names and whether they took cream in their coffee. Some restaurant managers kept a Rolodex or card catalog of customers, with notes about favourite tables, anniversaries, kids’ names and other key data points. These are still valid tactics, but they require staff and managers with a keen sense of hospitality and a long memory.

Punch cards put the loyalty programme into customers’ hands. Customers carry a card that gets signed, hole-punched or stickered each time they make a purchase. The customers need to keep coming to get that 10th sandwich for free.

Restaurant loyalty programmes evolved with the digital age, and swipe cards or keychain fobs replaced many punch cards. Today these programmes collect valuable data on consumers’ purchases and behaviours, what they like and when they visit. Online and smartphone-based programmes are even more convenient for consumers and enable more data collection on the part of operators.

Consumer Insights on Loyalty Programmes
Current restaurant loyalty programme participation rates in the United States suggest that opportunities are going untapped, and there are lessons to be gleaned for U.K. operators as well.

Technomic’s recent “Market Intelligence Report: Loyalty Marketing” found that while only about one-third of consumers (36%) say they participate in a restaurant-based loyalty programme, 72% say that if the restaurant they visit most often offered a programme, they would sign up. This indicates that there is opportunity for more restaurants to offer loyalty programmes. It is possible that some of these favourite restaurants do have loyalty programmes already; here, the opportunity exists in building awareness about the programme and its benefits.

The prevalence of restaurant loyalty programmes and consumers’ willingness to participate begs the question of why someone would be reluctant to join. Consumers say they are concerned about privacy, and they demand to know how their personal contact information will be used.

  • Fully 70% of consumers say they would be more inclined to sign up for a rewards programme if they could be guaranteed that the restaurant would not pass along their information.
  • Two-thirds of consumers want to know how restaurants intend to use the personal information provided.
  • Forty-six percent say they are concerned about receiving spam or junk mail after signing up with loyalty programmes.
  • And 39% are concerned that restaurants might share their personal information with others.

Technomic asked consumers specifically which personal information they would be willing to provide to join a loyalty programme. While 60% would share an email address, only 43% would provide a home address and only 30% would provide their phone number.

At the same time they explain what their loyalty programme’s rewards are, restaurants should let customers know what they will do with their information. Such transparency can help build trust, which is a good step toward building an emotional connection.

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Base: 1,000 consumers age 18+
Consumers indicated their opinion on a scale of 1-6, where 6=agree completely and 1=disagree completely
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Operators will also want to consider who their customers are—or who they are trying to attract as customers. Our research has found that the more income consumers make, the more likely they are to participate in restaurant loyalty programmes. This may be because higher-income groups want to be recognised for the money they are spending.

However, don’t neglect “aspirational” diners, those who go out to eat at restaurants that are just out of their reach for most occasions but are used for special occasions. These consumers may not be your key demographic, but they add up, and you would miss them if they didn’t come at all. Programme tiers could offer different rewards to different customer groups. Aspirational members may be attracted to a reward that simply makes them feel included, such as an offer to try a new menu item and give their opinion. It would tell them that even though you don’t see them every week, you value them and their input.

Developing Programmes That Lead to Loyalty
Technomic recommends three steps to moving toward emotional connections.

  • Set up a loyalty programme, offering enough of an incentive for customers to provide personal information.
  • Use the data gleaned from those users to provide compelling and relevant rewards.
  • Speak to what is important to them to build real loyalty.

Initial communications should focus on free or discounted food or beverages or other giveaways. As the following exhibit shows, the relationship will probably begin as a materialistic one, dependent on regular coupons and discounts and immediate benefits for signing up. Being invited to sign up by the restaurant’s staff or being welcomed by one’s favourite restaurant are incentives that begin to build the relationship between the consumer and a favourite brand.

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Base: 358 consumers age 18+ who participate in restaurant loyalty programmes
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Customers don’t want to have to work hard—or at all, really—for their perks. Even when they are willing to sign up for a loyalty programme, they want restaurants to make it as painless as possible. Seven in 10 consumers (71%) would be more likely to sign up for a programme if perks were “effortless,” 59% don’t want to have to print coupons, and 39% don’t want to have to carry a physical card in order to receive loyalty-club benefits.

loyalty_chart_3_450

Base: 1,000 consumers age 18+
Consumers indicated their opinion on a scale of 1-6, where 6=agree completely and 1=disagree completely
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Compared to other consumers, loyalty club members are more likely to be active social media users. While 53% of all consumers “like” restaurant brands on Facebook at least occasionally, 62% of those who participate in restaurant loyalty programmes do the same. Similarly, 19% of all respondents read and/or write restaurant reviews on sites like Yelp, but 29% of loyalty-club members do so. This speaks to the importance of two-way communication with frequent diners.

To successfully communicate with frequent diners, operators must also speak the correct language and use the correct medium. Fully 78% of consumers who have smartphones and participate in restaurant loyalty programmes use their phones to access information or discounts from the programme. It’s no surprise that younger people use their smartphones more often than older consumers. It’s interesting, though, that a majority of consumers 45 and older also use their smartphones to access their loyalty programme. Savvy loyalty-programme operators will use this information and input from their own members to determine the best means of communication.

loyalty_chart_4_450

Base: 230 consumers age 18+ who have smartphones and belong to restaurant loyalty programmes
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Loyalty Membership Drives Restaurant Visits
The good news for restaurants with rewards programmes is that a majority of consumers who participate in loyalty programmes are likely to decide which restaurant to visit based on whether they are a member of that restaurant’s programme. And, just as higher-income consumers are more likely to join such a programme, they are also more likely to base their decision on where to eat on their membership.

Being in a loyalty programme does appear to put the restaurant in consumers’ consideration set, which helps get them in the door. It’s a good first step toward building those emotional connections.

loyalty_chart_5_450

Base: 358 consumers age 18+ who participate in restaurant loyalty programmes
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Darren Tristano is Senior Managing Director of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.

Examples of Successful U.S. Restaurant Loyalty Programmes

Incorporating Social Media
Dunkin’ Donuts held a competition to award the title of President of Dunkin’ Nation. Members earned points for checking in via FourSquare and Facebook, and then selected the winner from among the top visitors.

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Offering ‘Important’ Rewards
Understanding customers creates the ability to offer rewards that customers find important. For example, la Madeleine’s Card for the Cure speaks to the core values of the chain’s regular clientele, who are mostly women. The loyalty card costs $35 up front, and gives the customer 10% off all purchases for a year. Additionally, 1% of sales goes to Susan G. Komen for the Cure. The card can be renewed annually for $25.

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Making Consumers Part of the ‘In Crowd’
Some successful programmes appeal to consumers’ psychological need to be part of the “inner circle.” The Greene Turtle Mug Club enables the chain’s customers to purchase their own mug at their local Greene Turtle restaurant. The mug is assigned a number and stays on display in the unit until the member comes in and orders a beverage. The company boasts that there is an average of 1,000 members per unit.

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