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.

Wendy’s Tests Updated Look at Detroit Location

January 22, 2013

Fast food chain cooks up something new

The redesigned Wendy’s that reopened Monday on Detroit’s near west side is not only a gleaming place with more workers. It’s also a key experiment as Wendy’s tests several interior and exterior looks in an effort to stay ahead of Burger King as the nation’s No. 2 fast-hamburger chain.

After a 50-day closure, the Wendy’s at Grand River and Livernois Avenue opened again sporting a more contemporary look, one of four designs that Dublin, Ohio-based Wendy’s is testing nationwide. It eventually will select one or two looks for its nearly 6,600 U.S. franchised and company-owned restaurants. Wendy’s has 162 restaurants in Metro Detroit and 286 in Michigan.

Forty-four staffers work at the Detroit outlet that used to employ 27. The new design removes the iconic exterior copper facia and replaces it in part with a straight roof line and an awning, as well as large, floor-to-ceiling greenhouse windows.

Wendy’s also has elevated one of its old tag lines, “Quality Is Our Recipe,” and given it prominence outside. Inside, the location features metallic paneling, walnut-hued floors, WiFi access, lounge seating in front of a fireplace and the first flat-panel TV for customers of any Wendy’s in Michigan.

“Everyone in the quick-serve-restaurant space is modernizing buildings and upgrading their people and trying to carve out a niche to meet the increasingly competitive landscape out there,” said John Zielinski, vice president of Wendy’s Great Lakes division, who was at Monday’s opening. “So we studied every aspect of the customer’s restaurant experience, and based on that feedback, Wendy’s totally overhauled the interior and exterior of our restaurants.”

The chain is testing the three other new looks — which it calls “traditional,” “ultramodern” and “urban” — at other Wendy’s around Michigan and the nation, Zielinski said. Wendy’s eventually will rollout nationwide the two designs that “best resonate” with customers.

“We have a vision that we want to provide our guests a restaurant experience that is truly a cut above other quick-serve restaurants, and we believe that what we call ‘image activation’ through redesign goes a long way toward making this happen.”

While prices remain important, fast-food companies are looking for another edge over competitors, a leading quick-serve expert said.

“Pricing among all the fast-food leaders seems to be somewhat competitive, and they’re all trying to boost the quality of their ingredients and make them fresher,” said Darren Tristano, executive vice president of Technomic, a restaurant market-research and consulting firm based in Chicago.

“Experience is what consumers are looking for, especially younger consumers. They don’t want to go to old, beat-up restaurants. McDonald’s, Burger King and now Wendy’s are all doing more to attract new customers into the four walls of their restaurants. For a long time it was about drive-through efficiency, but now more consumers are looking for a place to go.”

Wendy’s is contesting with the sit-a-spell designs of Starbucks, Panera and other “fast-casual” outlets, as burger chains such as Five Guys and Smashburger — which have Metro Detroit outlets — catch on with consumers.

The quick-serve choices for Metro Detroiters are mushrooming — ranging from an expanding Penn Station submarine sandwich chain, to startups the Big Salad and Zoup!

The intensified competition explains why Wendy’s makeover includes far more elements than just store redesign, including new premium menu items such as Dave’s Hot ‘N Juicy Burger and a quartet of new entrée salads featuring ingredients such as strawberries and blueberries; a Mobile Nutrition smartphone app; a TV-advertising campaign featuring Wendy Thomas, daughter of founder Dave Thomas; and the first updated logo in nearly 30 years.

In the new logo, the cartoon rendering of “Wendy” has been updated to simplify her pig-tailed hairdo.

But new isn’t necessarily better on the logo, said Kyle Lin of 99 Designs in San Francisco. He likes the new girl figure because “she’s sort of modern and friendlier,” he said. But the “new handwritten direction” for Wendy’s name, Lin said, “looks sort of cheap to me.”

Popeyes Bachelder Lifts Franchisee Profits

July 13, 2012

ATLANTA — Cheryl Bachelder, chief executive officer of AFC Enterprises Inc (NYSE: AFCE), holding company for Popeyes Louisiana Kitchen, speaks to Blue MauMau about the art of leading.

 A big believer in measuring, Bachelder actually monitors the bottom line of Popeyes franchises — 2,044 restaurants altogether, 40 of which are company-owned. That’s because she believes the key to a franchisor’s success is focusing on individually lifting the profits of franchised establishments.

Under her leadership, Popeyes says customer ratings have improved by over 20 percentage points in just the past year. In last month’s earnings report, Bachelder declared, “According to independent data, our 2011 domestic same-store sales outpaced the chicken QSR category by 430 basis points.” Actually, the chain has outpaced the QSR sector in same-store sales growth for three of the last five quarters. In a time of squeezed profits because of creeping commodity costs, Popeyes restaurant margins have become better by over 200 basis points in three years.

 “2011 was the third year in a row that we have delivered increased, absolute profit dollars to our franchisees,” declares Bachelder. How many franchisors can say that?

 Darren Tristano, executive vice president of researcher Technomic Inc. observes that there has been a shuffle in the fried chicken marketplace. Chick-fil-A, Popeyes and Bojangle’s have gained market share while Church’s and KFC have declined. “As KFC keeps its growth aimed at international markets and specifically China, other fried chicken brands have an opportunity to grow and grab share in this mature U.S. QSR chicken segment,” says Tristano. “Popeyes has improved its image through rebranding, broadening its menu and differentiating through flavor profiles and brand positioning. Their success in growing sales and units during our difficult economic climate over the past five years is a testament to their management team’s efforts and their strategy.”

Bachelder knows these companies well. She cut her management and leadership teeth with consumer goods giant Procter & Gamble and later Gillette. She joined Domino’s Pizza in 1995 as vice president of marketing and product development. From 2000 to 2003, she served as president and chief concept officer of KFC, a restaurant division of Yum! Brands, Inc.

Her peers think highly of the CEO of Popeyes. Domino’s Pizza CEO Patrick Doyle says of Bachelder: “Cheryl hired me into Domino’s and taught me a great deal about the business.” Doyle, who was recently honored as CEO of the year for 2011 by CNBC’s Herb Greenberg and Brian Sullivan, adds of his mentor: “What has made her highly successful is her focus on building great consensus with her franchisees whenever possible, and building that through a fact-based approach to the business. It’s not at all surprising to see the level of success she is having with the Popeyes brand.” 


Bertucci’s Reboots Restaurants to Court a Younger Generation ; With Guidance from SapientNitro, Ads go Digital

May 2, 2012

DC Denison

By D.C. Denison Globe Staff, 16 April 2012, The Boston Globe

© 2012 New York Times Company. Provided by ProQuest Information and Learning. All Rights Reserved.

How does a familiar, family-oriented restaurant chain shake off middle age and become cool enough to attract the digital generation?

It puts its executive chef into a cooking show on YouTube. It changes the music played for patrons to contemporary pop instead of big band arrangements of Italian standards. Instead of 95 cookie- cutter outlets, each restaurant is made to feel like a local business. Booths are phased out in favor of larger, more open tables, suitable for hanging out, and so-called small plates are served to encourage sharing.

After 31 years, Bertucci’s is courting a new, youthful clientele in an effort known within the company’s Northborough headquarters as “The Millennial Project.” One of Boston’s most tech-savvy marketing agencies, SapientNitro, has been hired to launch a new campaign with an emphasis on digital media. The chain, which has 95 restaurants in 10 Northeastern states and the District of Columbia, last week aired new television and radio ads, introduced new menus, and posted the first episode of the YouTube series featuring head chef Jeff Tenner.

“We’re contemporizing the brand,” said Skip Weldon, senior vice president of marketing at Bertucci’s. “We’re moving into a new space.”

Why revamp the whole brand? The clientele that grew up with Bertucci’s, the baby boomers who embraced wood-fired pizza in the 1980s and 1990s, are getting older and going out less, company executives said. If it wants to grow, the chain needs to attract “Millennials,” loosely defined as consumers between the ages of 18 and 30, said Michael Maione, head of the Bertucci’s account at SapientNitro.

“Long term, Bertucci’s has no choice in the matter,” said Dennis Lombardi, executive vice president of food service strategies at WD Partners, a design and development firm based in Columbus, Ohio. As the baby boomers move on, “the torch is being passed to the Millennials,” he said.

Founded in 1981 by Joey Crugnale, who opened the original restaurant in Somerville, Bertucci’s grew quickly in its first two decades. In 1998, Crugnale was ousted in a hostile takeover, and Bertucci’s Corp. is now owned by Jacobson Partners, a New York private equity firm.

Growth at the chain, and in the general “casual dining Italian” sector, has been relatively flat over the last five years, said Darren Tristano, executive vice president at Technomic Inc., a Chicago research and consulting firm. Total sales at Bertucci’s during 2011 were $200 million, up just 0.5 percent over the previous year.

Tristano said the new emphasis on Millennials and digital media is a good strategy for a chain that is looking for more dramatic growth.

“Millennials spend less per ticket than baby boomers, but they come in more often,” he said. “More importantly, they are your future.”

Cory Ip, a 28-year-old program manager at SapientNitro, said the agency has identified three primary ways that the restaurant can appeal to younger diners. “Millennials crave unique dining experiences, not chain restaurants,” she said. “We also like companies with a mission. And we like to share. I can’t remember the last time that I ate at a restaurant when I didn’t share the food with my friends.”

Weldon said the company’s aim is to translate those preferences into the revamped Bertucci’s.

Unique? Bertucci’s will be branding each restaurant according to its location: “Bertucci’s Waltham,” for example. A prominent chalkboard will feature local specials and notes from the restaurant staff.

Mission? Bertucci’s marketing will promote the idea that the chain has a passion for its “hand-crafted” brick oven pizzas.

As for sharing, the restaurant is reducing the number of booths in favor of open high-top and farmhouse-style tables, and emphasizing small plates and shareable items on its menu. It’s also updating its interiors – more contemporary, less old-world Italian – and has redesigned its menu.

To get the word out, SapientNitro has built digital media into a new advertising campaign. Bertucci’s previous advertising mix was only 2 percent digital; radio was the largest segment. By contrast, the new campaign, aimed at Millennials, will be 48 percent digital and online. The chain is pushing buttons on all the usual social media networks: Twitter, Facebook, Pinterest, and Instagram. It has created a new mobile device-friendly “landing page” designed to make it easy to order takeout from a smartphone. And Tenner will appear in cooking segments on YouTube. “It puts a face to the Bertucci’s brand,” Tenner said. “It gives us an authentic feel, more like an independent restaurant.”

The obvious risk is that Bertucci’s could alienate its current clientele without drawing enough new customers. Bertucci’s executives said they are treading carefully to avoid driving away their core: the baby boomers who have patronized the chain since the early 1980s, and continue to do so. Those customers have options, including other Italian-themed restaurant chains such as Olive Garden and Uno Chicago Grill.

“Baby boomers are going to become lighter buyers as they get older, but our research has shown that casual dining Italian will still grow,” said Bonnie Riggs, a restaurant industry analyst with the NPD Group, a market research company based in Port Washington, N.Y.

“Boomers still perceive casual dining Italian as a good value.”

Joyce Lee, the chain’s director of marketing, doesn’t think the new campaign will push away older customers.

“Most of our social media is geared towards Millennials,” she said, “because they are primarily the ones who will be using these services. Our core customers won’t even see many of these initiatives. So it’s not replacing one group with another. It’s growing the entire pie.”

Lee paused for a beat, and added, “That would be a pizza pie, of course.”

D.C. Denison can be reached at

Globe Newspaper Company, Inc.

Seattle’s Best Is Overhauling Its Image After Losing Tons Of Stores When Borders Died

April 9, 2012

Seattle’s Best Is Overhauling Its Image After Losing Tons Of Stores When Borders Died

Emily Bryson, Chicago Tribune | Mar. 19, 2012, 10:47 AM

March 19–Seattle’s Best Coffee, which lost about 450 of its cafes when Borders bookstores closed, is overhauling its image in pursuit of a different customer.

The Seattle-based, Starbucks-owned chain expects to open a prototype store Monday in west suburban Northlake that aims to serve young working-class families, particularly Hispanics, who spend their mornings in the car.

Its first store in the new style, a drive-through on North Avenue adjacent to aWal-Mart, features glass outer walls and a gray interior with a large menu board, nearly split between food and drinks. It’s a stark contrast to the well-known Borders design of secluded cafes with wood tables and chairs, and a pictureless menu focused on beverages. (Seattle’s Best still has a stand-alone location in this style in downtown Chicago.)

Pop music filled the store during a friends-and-family tasting event to prepare for Monday’s opening. Steven Kupisch, whose fiancee works at the cafe, said while his favorite beverage was an iced marble mocha, an espresso beverage with white and dark chocolate sauce, he liked the cold-brewed iced coffee too.

“I’ve tried iced coffee everywhere and don’t like it,” he said. “But this I’ll have again.”

After the Borders bankruptcy, Senior Vice President Jim McDermet said the chain “saw a real opportunity to pause, take a look at the broader market,” and see “what was the market opportunity not being met.”

The chain was looking for an idea that could be rolled out to thousands of stores nationwide and catapult the brand past $1 billion in annual sales. Starbucks does not disclose Seattle’s Best revenues, but McDermet said he believes it can be a “multibillion-dollar brand.”

In recent years, the company has overhauled its grocery packaged coffee and established national contracts that lend coffee credibility to fast-food chains making a go at breakfast, like Subway and Burger King, and even convenience chains like Chevron’s ExtraMile.

Seattle’s Best had previously marketed itself as a more approachable alternative for people put off by Starbucks. After eight months of research, the 42-year-old brand has tightened its focus, courting workers and young, on-the-go families who spend mornings in the car, buying coffee beverages at fast-food chains or gas stations. Chris Bruzzo, chief marketing officer for Seattle’s Best, said that about half of the U.S. population over age 18 fits into this category.

But Seattle’s Best is particularly keen on building its Hispanic customer base. Bruzzo said Hispanics are the fastest-growing population within the company’s new consumer target, and Northlake was chosen with Hispanics in mind. The store has three employees who speak Spanish fluently, and two who speak Polish.

To overhaul its menu, the company spent time with Chicago-area Hispanics, Bruzzo said. The result is a number of sweet beverage options including a caramel candy latte, a creme brulee latte, and caramel, hazelnut or vanilla flavored creams.

He said the group also asked for a variety of food options for breakfast, lunch and snacks, with healthy and indulgent options. The result is a line of egg sandwiches on English muffins or biscuits; cookies; sausage-and-egg biscuit bites; pretzel sandwich rolls; mini fruit pies and multigrain fruit bars.

The new menu is being offered only at the Northlake store, but the company said it could be rolled out to existing locations quickly.

Seattle’s Best expects its status as a known, premium brand to vault it past fast-food competitors with penny-pinching coffee lovers. But Darren Tristano, executive vice president of Chicago-based Technomic, believes the retooled Seattle’s Best is more likely to cannibalize sales from Starbucks.

Still, “from a strategic standpoint, I think they’d rather draw away from their own customer base than allow a competitor to draw away from it,” he said. “If they can siphon some Starbucks customers and others from places like Dunkin’, that makes them very competitive.”

Tristano said he believes Dunkin’ customers buy sandwiches as an add-on while stopping in for coffee, rather than a belief that the products are high quality. At Seattle’s Best, however, he said customers will expect a more upscale experience and food quality to match.

Tristano said he expects Seattle’s Best to be competitive with Dunkin’ and McDonald’son price for a la carte orders, but he believes they’ll fall short for those seeking deals on bundled meals.

But at least one customer was considering a change Friday.

Emaad Elhindi, a Dunkin’ regular who strolled into Seattle’s Best on his way to Wal-Mart, described the chain’s coffee as “the best.”

Twitter @emilyyork

Read article here

Burger King Does Their Homework, Gives Customers What They Want?

April 2, 2012

Burger King launches 10 new menu items in an effort to regain share and increase unit sales. The menu items include a new home-style snack wrap, salads, smoothies and frappe coffees. 

BK has done their homework and the conclusion is:

  • Contemporize restaurants – Update and remodel tired, aging stores
  • Improve packaging – use more contemporary cardboard cartons vs. wrappers
  • Change server uniforms to be more modern
  • Provide customers with the same choices they enjoy at McDonalds

Although these changes may not lead to a rapid turnaround for the burger giant, it certainly is a giant step in the right direction. 

After all, it has often been said that “sometimes the best ideas are borrowed” and “imitation is the greatest form of flattery”. 

We’ll have to wait and see if  this “me-too strategy” works…

Burger King New Menu Items

New McDonald’s Look, but Same Prices

March 6, 2012

New Look

New McDonald’s Look, but Same Prices

CHICAGO — With half-moon shaped booths, low stools, wooden blinds and flat-screen TVs, most patrons might expect to pay $8 for a burger, or $4 for a smoothie. But the decor isn’t a harbinger of price. This is the new look of a remodeled McDonald’s, purveyor of Happy Meals and value deals as well as upscale coffee drinks.

The Oak Brook, Ill.-based burger chain is reaching critical mass on a nearly decade-long, multi-billion-dollar global renovation and rebuilding project it’s betting will boost sales, traffic and brand perception. Restaurants undergoing simultaneous interior and exterior remodels are expected to see a 6 percent to 7 percent increase in same-store sales upon reopening, no matter where they are located.

“We are playing a little bit of catch-up,” said Denis Weil, McDonald’s vice president of concept and design, adding that retail remodels now need to happen more frequently. “Styles change faster, and customers have a higher need for novelty, and their tastes change faster as well.” Once an area has reached 40 percent to 60 percent completion in the remodeling process, Weil said, consumers begin to view the brand differently, stop in more often and buy higher-end items. Analysts say at that point they also can see the lift in sales.

McDonald’s plans to open 1,300 restaurants and remodel 2,400 in 2012, spending about $2.9 billion, the company said last week. The chain pays 40 percent to 45 percent of a franchisee’s remodeling costs for each restaurant, which averages about $600,000 in the U.S. By year’s end, the chain will have completed interior renovations on about half of its 33,000 restaurants worldwide.

“We believe now is an opportune time to strategically increase new store openings while continuing a significant focus on reimaging,” McDonalds CFO Pete Bensen said in a call with investors. “We have the financial capacity and talent to invest when many others cannot.” Although McDonald’s is on a nearly-nine-year streak of global same-store sales gains — most recently reporting a surge of 7.5 percent during the fourth quarter of 2011 — some fast-casual restaurants such as Chipotle and Panera are posting similar or greater same store sales gains. By adopting a higher-end look, McDonald’s is seeking to gain broader acceptance for top-tier items already on the menu, such as smoothies and Angus burgers, and better compete with the fast-casual industry.

“The evolution of the McDonald’s brand is, I think, necessary because so many other fast-casual brands are growing up,” said Darren Tristano, executive vice president of Technomic, a Chicago-based food industry consulting firm. He added that McDonald’s has done well to offer more premium products, particularly with drinks such as smoothies and specialty coffees.

In the U.S., bright red, double mansard roofs are being swapped for a single yellow arch outside, and inside two- and four-top tables are being swapped for long, wide, community tables, tall bar tables and more modern booths. About 33 percent of the chain’s 14,098 U.S. units have undergone an interior facelift, and only 16 percent have completed an exterior overhaul.

Weil said that cultural tastes have necessitated different exterior designs by area of the world. But needs inside the restaurants are more common. On the inside, he said, major metropolitan areas such as London, New York and Shanghai share a similar look, distinct from suburban or rural areas.

The company is moving to seating “zones,” slow zones for coffee sippers enjoying the Wi-Fi, fast zones at high bar tables for single diners wolfing down a sandwich, and family zones with booths for parents to “lock” their children on the inside to prevent them from wandering.

“We have clear standards around the world,” Weil said. “The design might be different, but we have standards — sleek tables and chairs, contemporary graphics, variable lighting, timeless base materials, seating zones, flexible seating, open floor plans and clean upgraded restrooms — so these are all things you will see in all of the decors.”

McDonald’s has traditionally pushed its franchisees to complete renovations every 20 years. But the new looks are designed with a handful of graphical themes and color palettes that can be swapped out every few years to freshen up the look by updating some lights, wall art and chair coverings, without undergoing another full-scale remodel.

Although franchisees are required to make updates at determined intervals, some are electing to remodel ahead of schedule. Lisa Essig, a McDonald’s owner operator with six restaurants in the Kansas City area, saw an opportunity to increase capacity at one restaurant and get customers’ attention another.

Her first location saw a double-digit same store sales lift after the remodel, which expanded the dining area, and increases of more than 7 percent in the second location, where she felt the restaurant had become an expected part of the scenery.

She’s been particularly pleased with the second drive-through lane, which makes lines look shorter; extra outlets for Wi-Fi seekers, so they’re staying longer (and sometimes ordering more) without jockeying for space; and of course the overall, modernized look.

“Some customers have said even the food looks better,” Essig said, adding that some of the best reactions to the new look have been from seniors, whom she’d feared alienating with a more contemporary design.

Essig said she views her remodels, ranging from $350,000 to $700,000, as long-term investments, and hasn’t calculated how long it will take to break even at each location.

Although France and Australia began redesigning restaurants in the late 1990s, McDonald’s made remodeling part of its global turnaround plan in 2003. The European market increased emphasis on completing them in 2005.The chain once struggled in Europe in part because of poor brand perception, lack of culturally relevant menu items, and other issues. But average restaurant sales have increased in recent years, which the company attributes to remodeling, among other initiatives.

Today, France, Australia and Canada are among some of the most complete areas.

Morningstar analyst R.J. Hottovy said that McDonald’s sales case for the investment has been evident in the chain’s numbers for areas of the world with a significant number of remodels. He added that the remodels are making restaurants “more inviting to customers,” not just because of the upgraded look, but also added features like Wi-Fi and flat screen TVs.

Weil said the updates also help the chain sell more of its higher-end items.

“It’s about permission,” Weil said. “As (President) Don Thompson says, ‘You eat with your eyes first.’ ”

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