Article

Fast casual execs weigh successes and failures of QSR segment

Despite a few notable bright spots -- Wendy's, Domino's -- most observers agree that the QSR segment is in trouble. What are the lessons and opportunities for the fast casual segment?

October 16, 2014 by Alicia Kelso — senior editor, QSRweb.com

The rise of the fast casual segment has come during the decline of the quick service segment. What lessons can fast casual leaders learn from successes and failures in QSR?

Fast casual leaders discussed the topic at during a "brain exchange" sponsored by Simmons Prepared Foods at the 9th annual Fast Casual Executive Summit, which wrapped up Tuesday in Denver.

Here are some key thoughts from attendees in regards to this topic:

"Fast food trust has been broken and many believe it is slowly marching into a decline, although some brands – like Domino's and Wendy's – have done a good job turning things around."

The worst attribute about QSR, everyone agreed, is inconsistency – of quality, service, cleanliness, etc.

"I could go to a McDonald's in one city and have one experience, and go to a McDonald's in another city and have an entirely different experience," said one attendee. "It's frustrating."

Some believed many QSR brands have lost touch of their true identity in trying too hard to keep up with fast casual.

"You have to stay true to what your brand is. Failures start when you branch out into something else and lose focus," said an attendee.

Although some brands, for example, have struggled with an overcomplicated menu, others (like Sonic) have not.

"You have to learn from the people who are doing it well. Wendy's has a big menu, but it's still fast and clean and executes well," one attendee said.

Staffing was a popular topic and many agree that retention is tough and quality employees are few and far between in QSR. Everyone agreed any changes need to come from the franchisees to the managers and on down.

Franchise vs. company

Attendees weighed the pros and cons of franchising versus company-owned systems. One attendee said company-owned allows for tighter control, which may work better in a fast casual setting.

"Whatever your strategy is, pick it and stick with it. Support your strategy. Where people make mistakes on franchising models is that they do give up that control. They're not day-to-day partners anymore. But if you look at a Domino's or Wendy's – they're franchised but still well run because they have a lot of company involvement," said Ben Butler, an independent advisor and former Yum! Brands employee.

Joao Barbosa, CEO of Giraffas USA, said his concept recently began selling locations to franchisees.

"I believe franchisees do a much better job because they're putting their own money behind it," he said.

Other differences

Attendees agreed that fast casual operators need to work to avoid the industrialization/commoditization that has affected QSR.

"There is danger to scaling a concept and how to keep industrialization at bay," said one. "The companies that have commoditized their brands are the ones that have gotten into trouble. That's a trap that QSR has fallen into and now I think it's starting to go the other way and they're reining it in a little."

An agreement emerged about whether fast casual is an evolution of QSR or if it usurps the category. RR Rogers, from Feast BBQ, said it's an evolution of all segments.

"As a millennial, I don't want to spend time and money at fine or casual dining. But I expect a higher quality of food and I'll spend an extra $3 or $4 for it. The perception is that fast casual is better, less processed. That's fast casual in general – it's good food, I spent $10 and I'm in and out. I have other things to do," he said. "It's a response to consumer demand."

"The problem with QSR is until a few years ago, there was only QSR and casual. Fast casual broke that paradigm because it's good and it's fast. It started killing QSR and now everyone is trying to move up," Barbosa said. "Some fast foods have stepped up. They have to."

Photo provided by blog.drorhelper.com.