Fast Food in the Fast Lane
In a world where demand for speed seems to permeate every aspect of our lives,
It is no wonder that quick-service restaurants (QSRs), known colloquially as ‘fast food’, have an important place in many people’s lives. However, notorious for their deleterious effects on health and the environment, QSRs have had to struggle with consumer demands that are increasingly health-conscious and eco-conscious. Despite consistent and striking growth in sales of natural food and beverage products over the past few years, the QSR industry has not floundered as much as one might expect.
In the US, the fast food industry is growing—currently worth about 198.9 billion USD, the industry is poised to exceed a worth of $223 billion by 2020. A particular standout is Chick-fil-A, which saw a 13.4% rise in same store sales just last quarter. The question then arises: what can explain the unexpected persistence of the QSR industry in the face of rising health and environmental concerns in the public eye? The answer may lie in the examination of the reaction of major QSRs to shifting consumer demands.
McDonald’s is by far the giant in the QSR industry, holding a whopping 17% of market share. However, even it was hit by declining sales growth in the years leading up to 2015, likely due to a consumer shift towards foods perceived to be healthier. In response, the company conducted the largest consumer-research effort in their history, an effort that led to the development of a growth strategy that includes three ‘growth accelerators’: delivery, digital, and store remodeling. By going in depth into each of these growth accelerators, the Golden Arches were able to offset their environmental and health-oriented deficits by transforming themselves into a more convenient and easy option for the consumer than even before, even when that entails deviating from long-entrenched standard practice.
Knowing that all the growth accelerators were conceived of by prioritizing max impact on max people in the shortest amount of time, it is no surprise that McDonald’s has focused a lot of its attention on delivery. With the advent and popularization of food delivery apps and services, it is a sector of sales that is essential to develop for any major QSR chain nowadays. However, where McDonald’s stands out is how quickly it launched McDelivery. Despite McDonald’s mammoth operations, a specially assembled ‘fast action’ team managed to construct and launch McDelivery in just three or four months, forgoing the usual process of testing a service in various smaller markets before potentially introducing it years later. A mindset promoted in this period by the CEO, Steve Easterbrook, was the idea of ‘progress over perfection,’ an idea that will endure and appear in the implementation of other growth accelerators at McDonalds as well. ‘Progress over perfection’ is just one example of how QSRs have had to change standard practice to keep up to pace with consumer demand.
Digital, the second growth accelerator, is meant to leverage the power of apps in an age where people’s lives are increasingly dominated by technological devices. McDonald’s clearly recognizes this, as its biggest increase in spending last year was in the technology category. The development of their app, My McD’s, followed the same philosophy as the development of McDelivery, with the app being put out before all imperfections were tested for and resolved. CFO Kevin Ozan comments on the difficulty of this shift in mindset:
Throughout this whole process of designing McDelivery and My McD’s, Kevin Ozan claims that they focused on being ‘customer-obsessed,’— constantly thinking about what is most easy and convenient for the customer, instead of simply 'customer-centered.
Becoming an easier and easier option for consumers may be one way McDonald’s seeks to grow its sales, but it is a strategy that fights against the growing tide of aversion to ‘fast food.’ In contrast, its third and final growth accelerator, store remodeling, incorporates a slightly different approach. This accelerator involves modernizing the physical restaurants through renovation, putting in digital self-order kiosks and introducing table service. Having visited and worked in one of those remodeled restaurants myself, I can attest to the fact that the remodeling pushes the general McDonald’s experience towards looking and feeling more like that of a traditional dining restaurant rather than 'fast food.' This effort is also reflected in their menus and marketing. Offers such as a ‘Mushroom and Swiss Artisan Grilled Chicken Burger’ have popped up, alongside increased transparency in their nutrition and ingredient labelling. They have even created and advertised numerous videos about their ingredients, featuring spotless environments and various professionals. Combined with how they have removed antibiotics from their chicken, the general effort to move away from the fast food stereotype of a greasy burger joint with unhealthy food, poor service, and questionable practices has transformed McDonald’s into less of a perceived 'sin' for the modern-day health-and eco-conscious consumer. Once again, the company’s capital allocation embodies the value that it places on this effort, with more than $1 billion USD being invested into remodeling US restaurants in 2019.
So McDonald’s is clearly done its due diligence in keeping up with consumer demands by wielding new trends and developments in tech, changing certain mindsets, and shifting its brand image away from that infamous, viral ‘pink slime’ nuggets video into something a little more palatable for a more health- and eco-conscious public. However, a company can only change their image into ‘healthy’ so much while still debuting menu items like “Cheesy Bacon Fries.” Besides, McDonald’s sales have been increasing, but their overall growth isn’t as good as their competitors (it reported 2.3% same-store sales growth in the fourth quarter of 2018, while Chick-fil-A had an estimated growth of 13.4%). Also, in its aforementioned huge research effort that it undertook in 2015, McDonald’s found that their sales weren’t declining because people were moving towards more upscale dining, but that they were losing customers to direct competitors (other QSRs). The question is then: what are the other QSRs doing? Looking towards the QSR with the most growth, Chick-fil-A, we see that it is employing many of the same strategies as McDonald’s, and just as quickly. Both companies are pushing delivery services, apps, new menu items, updated eco-friendly practices. Upon closer examination, though, Chick-fil-A is exploring some unique avenues. The major difference between the two QSRs is that Chick-fil-A’s main focus is on service and quality, even if that comes at the expense of offering less value deals. One way that Chick-fil-A maintains its reputation for a high quality of service and food is by limiting expansion There are only about 2,200 locations across the country, and it doesn’t have nearly the same international reach that McDonald’s has. Far from being a downside, this is actually done on purpose; the process for an operator buying and opening a new Chick-fil-A restaurant is very difficult. A smaller number of locations allows Chick-fil-A to maintain better quality control and consistency across their restaurants, bolstering their reputation for service and quality. Other strategies employed by Chick-fil-A include debuting new non-retail, catering-focused prototypes in Nashville and Louisville. This allows Chick-fil-A to manage and accommodate growth while maintaining their high service standards by alleviating the pressure on back-of-the-house operations in normal restaurants. Again, this impression of high-quality customer service lends itself to a shift away from the fast food stereotypes of low quality service and by extension low-quality food. Simply by virtue of lessened association with ‘fast food,’ a QSR like Chick-fil-A can be perceived to be healthier and become more appealing to the current consumer.
The power of simple association comes to the forefront when you compare the practices and reputations of McDonald’s and Starbucks. Starbucks received an F rating from Friends of Earth for their policy against the use of factory-farmed animals and antibiotic/hormone-tainted animal products, while McDonald’s received a C. But most people view Starbucks as being more animal-friendly than McDonald’s simply because McDonald’s is more closely associated with fast food and its accompanying barrage of negative stereotypes.
In recent years, many new trends and technologies have transformed the market, allowing for fast food giants to play into the consumer’s desire for hyper-convenience, which helps incentivize the consumer to think less about the ‘unhealthy’ reputation of QSRs. We see special success in instances where companies like Chick-fil-A focus primarily on moving towards a healthier, eco-friendlier image by putting emphasis on service and quality, disassociating themselves from the typical fast food stereotypes of grease-laden food, rude employees, and poor practices. As we move into the future and consumer demands continue to change in a context of rapidly-developing technologies, we are sure to see ever more interesting innovations on the part of QSRs. However, through all this, it is important to not forget one key aspect of development: the need for balance, taking note of traditional models that are working well even as we push forward innovation that advances us into new areas.