News

The morphing of the QSR

February 22, 2006

When the McDonald's Bistro Deli opened in New Castle, Del., the restaurant's manger saw a different crowd.

"We get people from all over because we accommodate to anybody," said Tara Lutz, manager at Delaware's only McDonald's Bistro Deli. "People are just tired of the same-old thing and want something new."

Lutz's upscale store opened in Jan. 2004 and was one of the first to feature McDonald's bistro-gourmet menu and decor. The bistro gourmet prototype was originated in Orlando, Fla., by Oerther Foods Inc. and has not yet been adopted nationally. But McDonald's has begun implementing interior changes to its regular McDonald's stores nationwide, making stores look more contemporary.

Redesign

McDonald's Corporate works with its independent operators and analyzes each market to make rennovation decisions. In some restaurants, the market does not indicate a need to change the look. In other McDonald's, the research may point toward a change as small as replacing artwork. For the major overhauls, McDonald's replaces the traditional booths with upholstered seats and installs wood and metal ceiling fans. Instead of red and yellow, the new McDonald's look has earth tones with dashes of gold, black and copper. In fact, officials said the upgrade is to drive home the "'I'm lovin' it" slogan and not necessarily to compete with the Paneras and

Starbucks of the world.

But the menus at their Bistro Deli prototypes indicate that McDonald's is indeed going head to head with fast casuals. Offered next to its French fries, Big Macs and Quarter Pounders are portobello eggplant panini, steak quesadillas and grilled-chicken wraps. And McDonald's is not the only QSR stepping into fast-casual territory. Arby's boasts Market Fresh sandwiches and salads, Sonic sells a tasty Tuscan Chicken sandwich and Carl's Jr. attracts Fuddruckers-type customers with its Six Dollar Burger. QSRs are just following the taste trends, said restaurant consultant Kevin Golding, who has worked with Baja Fresh and Wendy's. "Just look at the menus over the years."

Follow the numbers

In its annual forecast of the industry, the National Restaurant Association (NRA) estimates that Americans will spend $142 billion in QSRs in 2006. The organization does not track the fast casual segment, therefore there's no data available to indicate that the upgrade of QSRs menu and facilities will hurt fast-casual restaurants. But NRA vice president of research Hudson Riehle said the Paneras and Starbucks of the industry show the most potential for 2006, and the upscaled QSRs are bound to take away from fast-casual revenues.

"The American palate is just so much more sophisticated now and people want cuisine delivered in the format of a traditional quick-service restaurant," Riehle said.

Peter Dixon, creative director for McDonald's design firm (Lippincott Mercer), told Brand Week that if McDonald's revenues look good this spring, the new design elements could become the U.S. standard. McDonald's said in January that U.S. sales rose 4.4 percent last year. And because of this trend, the Motley Fool reported McDonald's shares will retest all-time highs in the not-too-distant future as it continues to bring customers back by offering a better-quality product.

"McDonald's has done a commendable job at becoming healthier and I admire them for that," said Erica Bohm, vice president for Healthy Dining. "Every restaurant could and should step up to the plate and offer at least a handful of healthier choices... and that would be good for business, because there will always be a percentage of customers who want to make healthier choices."

Healthy eating

The founder of Boston Market and now chairman and co-chief executiveofficer of Knowfat Lifestyle Grille, George Naddaff, said QSRs are just following the marketplace.

"It seems like every restaurant out there is featuring more salads in an attempt to capture the person looking for a healthier meal," Naddaff said.

In 1990, when Naddaff introduced Boston Market to the industry, Naddaff said there was no wide-spread panic about obesity.

"Now, you can't go anywhere today without hearing about obesity, or you hear we have to start eating better or we're not going to live longer," he said. "You have more gyms per square foot than we did 10 years ago. You have 11,000 curve locations that didn't exist 10 years ago. People are into living longer and eating better."

Naddaff's latest venture caters to the very healthy conscious audience QSRs are trying to get. Knowfat Lifestyle Grille's business model is every location will be near a gym or spa, and "if you want fries, you can have fries. Our fries are put through a convection oven, which come out crispier and are better for you."

A good thing

Scott Hughes, vice president of marketing for Bruegger's, said QSRs attempting to become more like fast-casual restaurants is actually a good thing.

"The historical QSR customer has been the 24-year-old male and that demographic group is not growing as much as the boomers and don't have as much disposable income, and I think that is part of the reason you saw fast casual come to the forefront and emerge five or six years ago," Hughes said. "Do we get concerned about competing products like salads? Sure. We watch them and we pay attention to what QSRs are doing, because of the media weights out there. But, in some ways, their 'healthy' efforts assist our brands. As QSRs are able to generate more awareness on salads, it also raises awareness across the whole category."

Hughes said QSRs may be getting away from their core target audience by offering healthier foods and more upscale facilities. But Lutz said her McDonald's has never been busier. This spring, her store will offer a bistro breakfast.

"Right now, people are already coming here instead of Starbucks, so I think breakfast will be huge," she said. "It is McDonald's, you know."