Fast Food

Chains scrambled to add new meals and cut calories

Taco Bell prepared to roll out First Meal and Wendy’s, the hamburger chain, offered egg sandwiches, as more chains entered the breakfast business.

The addition of new meal times was one of several strategies that QSR (Quick Service Restaurants) implemented to drive sales during the economy’s slow recovery. Taco Bell’s First Meal balanced its Fourth Meal, the late-night snack the chain introduced in 2006.

Breakfast was among the reasons that McDonald’s reported its highest samestore increases since 2006. In the US, sale-store results increased 7.1 percent, in Europe, 7.3 percent and 6.9 percent in Asia, the Middle East and Africa. On the strength of these results McDonald’s planed to open 1,300 new units this year and remodel 2,400.

Pressured to hold prices while commodity prices increased, the QSRs also continued to improve their menus, décor and service to draw diners from the somewhat more upscale family restaurant segment. Several chains experimented with snacks. Subway added more Café outlets. McDonald’s began testing baked goods in certain US markets, in 2012.

The success of Starbucks inspired the move to breakfast and coffee. In its 40th anniversary year, Starbucks expanded the brand focus with the introduction of a revised logo that retained the iconic mermaid but removed the word coffee. Total revenue increased 9 percent to $11.7 billion and same-store sales improved 8 percent. The company ended the year with about 17,000 locations, including 6,216 outside the US. It also accumulated almost 30 million Facebook “Likes.”

Wendy's became number two in the US

In August, Burger King deposed its king character. By yearend it ceded the number two total sales rank in the US burger chain segment to Wendy’s. Burger King operated around 7,500 restaurants in the US and Canada, roughly 1,000 more than Wendy’s, and compared with more than 14,000 McDonald’s US outlets.

The three major burger chains each employed what they termed a “barbell strategy,” offering a mix of both bargain and premium items to satisfy core customers while appealing to those trading down from more expensive family dining to fast food for a more affordable eating-out occasion. McDonald’s prospered in this environment.

Brands more dependent on the traditional fast food customer, felt the impact of high unemployment among young men. Burger King’s North American same-store comparisons improved but remained negative. They declined 0.5 percent worldwide with Latin America and Asia compensating for negative results in North America.

Domino’s Pizza catered to the valuehungry consumer with two special pizzas priced under $10, which it promoted with traditional advertising and mobile apps for ordering. Mobile and online ordering comprised 30 percent of sales for Domino’s.

Healthier choices offered

The chains continued to offer healthier meal options, responding to parental concerns and publicity, in the US, surrounding Michelle Obama’s “Let’s Move” campaign to fight obesity and encourage health and wellness. The word “healthy” appeared on menus 86 percent more frequently in the US, according to Technomic, a Chicagobased research firm.

McDonald’s launched Champions of Play, a global ad campaign about children’s health and linked to its Olympics sponsorship. Based on local competitions, the chain planned to send children from around the world to visit the 2012 Summer Games in London. Starbucks planned to add bottled juices to its offering. Subway, maintained its reputation for healthier options. It reduced the sodium content of its meals and provided nutritional and caloric intake information. And it continued its international growth, ending the year with about 36,500 outlets in 100 countries. Like its competition, however, it was helpless to improve the high level of unemployment that impacted business all day, especially the key lunch meal.

BRICs drove strong growth

The appeal of Western brands and an expanding middle class continued to drive the popularity of fast food in fast growing markets. Yum! Brands, owner of KFC, Pizza Hut and Taco Bell, with more than 37,000 restaurants worldwide, credited overseas sales, especially in China, for balancing domestic weakness. Same-store sales grew 19 percent in China last year, compared with 1 percent growth in the US and 3 percent outside the US overall, except for China.

Yum! opened 656 restaurants in China during 2011, and 905 in other international locations. During October 2011, Starbucks opened its 500th store in Mainland China. Starbucks and Dunkin’ Donuts planned to open their first Indian restaurants this year. McDonalds’ and Yum! Brands expect to accelerate growth in India. Yum! plans to open 500 KFC outlets in India during the next four years.

BrandZ Top 100 2012

BrandZ Global 2012 Report Top 100 Report

Top 100 Chart

Methodology and valuation by Kantar Millward Brown

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