September saw McDonald’s make two significant announcements in the US, a one-two from Taco Bell and a new format from hitherto retro-focused Johnny Rockets.
McDonald’s hopes for all-day breakfast boost
The fast food giant announced plans to serve from its breakfast menu all day in the US, with the formal launch coming yesterday (6 October), its latest move to try to revitalise its performance in its domestic market.
Mike Andres, president of McDonald’s operations in the US, told The Wall Street Journal the roll out was the company’s biggest domestic strategic move since it took its McCafe line of drinks across the US six years ago.
“This is the consumers’ idea. This is what they want us to do,” Andres said. “That’s why I think this could be the catalyst for our turnaround.”
Analysts at NPD say breakfast is the “only restaurant daypart” to see “sustained visit growth over the last several years” in the US, so it is easy to see why McDonald’s has decided to allow US consumers to eat an Egg McMuffin at 3pm, should they wish. September also saw regional US chain White Castle start serving breakfast throughout the day.
There are the obvious logistical and culinary challenges but McDonald’s has been testing the day-long offer in parts of the US. Not all breakfast items will be available all day, everywhere, and the move is unlikely to solve McDonald’s domestic on its issues but the decision does suggest the fast food giant is listening to what its customers want and prepared to act.
And eggs from caged hens to be phased out at the Golden Arches
Egg McMuffins on sale in the US and Canada will increasingly be made only with eggs from cage-free hens, the second significant announcement from McDonald’s last month.
The move is the latest initiative on animal welfare from McDonald’s after its pledge in March on the use of antibiotics in chicken. Driven by the likes of Chipotle Mexican Grill, the US fast-casual chain, food “with an integrity focus”, as Technomic analyst David Henkes puts it, is becoming more important for consumers and, consequently, foodservice operators.
“Our customers are increasingly interested in knowing more about their food and where it comes from,” Andres said in a statement. Marion Gross, chief supply chain officer at McDonald’s North American arm, added: “This is a bold move and we’re confident in our ability to provide a quality, safe, and consistent supply.”
It appears it will take some time for McDonald’s to be able to only use cage-free eggs. The New York Times says less than 10% of laying hens in the US are housed as cage free but moves are afoot for more suppliers to switch part of their production to the mark. In the meantime, the opportunities for egg suppliers majoring on cage free are clear.
A one-two from Taco Bell
September saw two pieces of news from another major US quick-service player. The company, owned by Yum Brands, closed U.S. Taco Co., a restaurant it launched in California last year to try to attract a more upmarket clientele, particularly those frequenting fast-casual outlets.
According to The Orange Country Register, Taco Bell blamed “lower than anticipated foot traffic” and “hurdles securing alcohol permits. Taco Bell chief executive Brian Niccol added: “U.S. Taco Co. remains a fantastic concept, and was very successful as a place to experiment and learn.”
The setback does not appear to have halted Taco Bell’s innovation in store formats. Last month, the operator launched Taco Bell Cantina, a “new urban restaurant concept” targeting five consumer trends the company said “balance relevancy and brand authenticity” – urbanisation, unsurprisingly; second, digitisation; thirdly, localisation; the “green” trend; and transparency.
Two outlets, in Chicago and San Francisco, have been opened. Niccol said the new format shows Taco Bell was “adapting our traditional restaurant concept to fit [consumers’] modern needs”.
Format innovation from Johnny Rockets
The US retro burger chain has also been looking at formats and last month opened Johnny’s Burger Factory in Buffalo in New York state.
Johnny Rockets is focusing squarely on one type of consumer – millennials. “Every detail about the development of Johnny’s Burger Factory, from the first design to construction, product development and marketing had a new kind of consumer in mind. It’s not possible to ignore millennials and still be competitive in the better burger category,” president and CEO Charles Bruce said.
Technomic’s Henkes says Johnny Rockets saw its US sales fall 5% in 2015. Its international expansion has continued apace this year; the company admitted the new format launched in Buffalo was a way of expanding its customer base back at home. “Our goal with Johnny’s Burger Factory is to broaden our appeal and foster an immediate connection and loyalty with a tech-savvy generation looking for a new kind of restaurant,” James Walker, the president of global operations and development at the chain, said.
The company believes the quality of its food, the ability of customers to personalise meals and order dishes themselves, will “differentiate” the format from other fast-casual brands. The segment has grown rapidly but is becoming fiercely competitive. Will Johnny Rockets’ foray take root?
More international expansion – and notable piece of M&A
September saw US fast-casual chain Firehouse Subs enter Canada, its first move outside its domestic market. Krispy Kreme said it would open stores in Peru. And Starbucks announced plans to make Cambodia its 16th market.
On the M&A front, Burger King’s franchise joint venture struck a deal to buy European fast-food chain Quick. Burger King’s owner, Restaurant Brands International, and Groupe Bertrand, the majority investor in the Burger King France venture, said Quick’s outlets would be converted to the US insignia over time.
“This transaction represents a significant step forward for Burger King France, which will have more than 500 restaurants and EUR1bn of system sales following the transaction. Following the conversion, Burger King is expected to be the number two QSR brand in France and France will become one of the largest markets for Burger King globally,” Josh Kobza, Restaurant Brands International’s CFO, said.
Read the story at just-food