Fast Food Tries to Recapture Consumers

As the tastes of hungry, harried consumers evolve, fast food restaurants themselves are busy concocting recipes to stave off slow sales growth.

The challenges of luring a customer who is both more health conscious and time crunched than ever before has come to the forefront with the pending sale of Burger King by its parent company, the U.K.-based spirits maker Diageo.

Burger King, along with McDonald's, has been suffering from lackluster sales growth in recent years as alternatives like sandwich shop Subway and fast casual restaurant restaurants like Chili's, owned by Brinker International, and the Olive Garden and Red Lobster, both owned by Darden Restaurants, have prospered.

McDonald's, still by far the dominant player with over 30,000 restaurants worldwide and 43.1 percent share of the U.S. fast food market, nonetheless had sales growth of only two percent last year, primarily due to expansion. Burger King, whose parent company does not release its financial data, saw sales of $8.6 billion last year, only one percent higher than $8.5 billion the previous year, according to Chicago-based food service consulting firm Technomic.

At the same time, competitors Subway and Wendy's have fared better. Subway's same-store sales posted a 13 percent gain last year, with overall sales reaching $5.2 billion, up 30 percent from 2000. Wendy's, which launched a new line of Garden Sensations salads in February, saw same-store sales rise 5.6 percent in the first quarter, an improvement from the two percent rise posted for all of 2001.

Changing Tastes

To some extent, the sluggish sales of fast food restaurants can be attributed to the economic downturn.

One indicator reflecting that is the increase in consumers preparing home-cooked meals. That number jumped to 85 percent last year from 74 percent in 2001, according to the Food Marketing Institute. The institute found that people eating in fast food restaurants once or more a week fell to 32 percent from 38 percent.

Harry Milling, who follows the restaurant and consumer products industries for Chicago-based mutual fund tracker Morningstar says the trend away from traditional fast food to other areas has been striking.

"There's certainly been a secular change, and it's not lost on the fast food industry," says Milling.

But analysts say the growth of Subway and Wendy's reflects not only an increased interest in healthier eating, but also those chains' ability to provide a variety of high-quality menu choices in a consistent, fast manner that customers have come to demand.

"What a lot of players have learned is the price has gone as low as it can," says Norman Faiola, associate professor and chair of Syracuse University's Nutrition and Hospitality Management department. "Now they're trying to reinvent themselves."

Whopper of a Change

Burger King has been one chain heeding the call to update its offerings and improve service, starting with a new management team led since last April by former Northwest CEO John Dasburg.

Under Dasburg, Burger King has embarked on a dramatic revitalization effort by launching 14 new products including a veggie burger and a chicken whopper — the company's first new menu introductions in three years. Burger King has also revamped its kitchens so that the food is fresher when it gets to the customer.

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