In the highly fragmented fast food restaurant industry, margins
are limited and competition is fierce: The 50 largest companies
hold just 20% of the market, according to
research by SBDCNet
. Despite the fact that the industry has felt the recessionary
impact in recent years,
that fast food revenues will increase by about 2% this year. The
biggest gains will go to those who successfully address predominant
macroeconomic opportunities by offering healthier items and more
exotic, more specialized menus.
Judging by the flurry of copycat product releases of late,
replicating what's working for your competitors appears to be the
shortest path to achieving these objectives. Here are just a few
examples of how fast food leaders are proving that imitation may
indeed be the highest form of flattery -- and the surest road to
The Champion: Subway subs and wraps.
The name Doctor's Associates may not be as publicly recognizable as
), but as the parent company of Subway restaurants, which now has
nearly 40,000 units, it represents strong competition for the
Golden Arches, particularly because of its popularity among
Millennials. Not only does the demographic (made up of consumers
ages 18-32) repres
ent an opportunity to capture a potential audience of 80 million
indicates that they are highly influential, eat at fast food
restaurants more frequently than their older counterparts, and
spend about $175 per month or more dining out. The challenge
McDonald's has in attracting this audience? Millennials value
fitness and healthy lifestyles, preferring the lighter fare offered
at restaurants like Subway. According to
, Millennial traffic at "hamburger joints" has decreased 16% since
The Challenger: McDonald's McWrap.
To attract Millennials, McDonald's launched the Premium McWrap
(offered in three varieties, and priced at $3.99), featuring a
tortilla wrap stuffed with chicken, spring mix greens, cucumbers,
tomatoes, cheese, and a choice of dressing, in the spring of 2013.
Though the company has yet to release official sales stats around
cited an internal McDonald's memo, noting that the addition of the
McWrap (pictured) drew 22% of incremental Millennial customers who
would've otherwise chosen Subway.
The Champion: Starbucks Pumpkin Spice Latte.
Fall brings with it certain traditions: Football season, cooler
evenings... and the return of the Starbucks Pumpkin Spice Latte,
which celebrates its 10-year anniversary in 2013. When
AQ:SBUX) debuted the "PSL,"
that comparable-store sales grew by 11% over the same period in the
year prior. In a
Starbucks-issued press release
, Cliff Burrows, group president, Americas, Europe, Middle East,
and Africa (EMEA), called the PSL "[Starbucks's] most popular
seasonal beverage of all time." It is priced at $4 for a 12 ounce
"tall" drink, and it is estimated to account for at least $80
million in revenue in the fall season alone.
The Challenger: McDonald's Pumpkin Spice Latte.
In 2008, McDonald's enhanced its specialty bottled beverages,
smoothies, premium drip coffee, and coffee drinks line-up by
introducing McCafes at nearly 14,000 locations. At that time, the
Wall Street Journal
that the addition would add $1 billion in sales; the coffee line at
McDonald's reportedly accounted for more than double that in 2011.
Recently, McDonald's announced the addition of its limited-time
Pumpkin Spice Latte (pictured). Offered at nearly half the price of
Starbucks's PSL ($2.29 for a 12 ounce cup), initial reviews
indicate it likely won't steal too much of Starbucks's thunder. "If
you have a bit of a sweet tooth, a yen for pumpkin spice, plus a
dislike of the actual taste of coffee, it might be what you're
looking for," said one
The Champion: McDonald's Fries.
Though it's still the number-one French fry provider in the world
(the McDonald's website says the company serves "approximately 9
million pounds of fries a day globally"), the brand's "Our Food,
Your Questions" campaign (which invited customer questions via
social media to enhance transparency and credibility) may have
unintentionally created competitive opportunities. In the case of
its own World Famous French
Fries, for example, the McDonald's video series explained how it
sources and prepares its product, using 17 different ingredients,
including genetically modified oils like canola, corn, and soybean,
and other chemicals thought to be potentially hazardous to humans.
The Challenger: Burger King Satisfries.
On September 24,
) released its slimmed-down
, said to have 40% less fat and 30% fewer calories than the fries
at McDonald's, thanks to a batter that absorbs less oil. Though
Alex Macedo, president of Burger King in North America, said, "We
know our guests are hungry for options that are better for them,
but don't want to compromise on taste" in a company-issued press
release, the company's track record for producing a slimmed-down
fast food favorite hasn't historically been promising. In general,
burger-and-fries brands are not known for their successes with
reduced calorie foods. In 1991, McDonald's offered the McLean
Deluxe as a less fatty an alternative to the Big Mac; it was
discontinued within five years.
Chipotle Mexican Grill Burritos/Bowls.
With more than $3 billion in annual sales and about 1,500
locations, it's sometimes hard to believe that
) has been part of the QSR landscape for fewer than 20 years.
Especially loved by the highly-coveted Millennial demographic,
Chipotle has redefined traditional perceptions of fast food by
offering a simple menu focused on delivering only "food with
integrity" through its selection of burritos, burrito bowls, tacos,
chips, and salads, made using natural, quality, sustainable
ingredients -- even including some that are locally sourced.
Chipotle's formula managed to boost revenue and beat analyst
earnings projections for Q2 2013.
The Challenger: Taco Bell Cantina Burrito/Burrito
In a distinct departure from its "fourth meal" branding,
) rolled out a more upscale approach in 2012, partnering with
celebrity chef Lorena Garcia to create new "gourmet" menu items
like the Cantina Burrito Bowl and the Cantina Burrito, made from
carefully crafted recipes including black beans, cilantro rice,
marinated chicken, and cilantro dressing. Offered at around $5
each, the items cost about $1.50 less than similar offerings at
Chipotle. That said, Chipotle CFO Jack Hartung made no secret of
his opinion of Taco Bell's competitive strategy. While on CNBC's
, Hartung said, "The experience we provide is very different from
Taco Bell's. We don't think our customers are on their way to eat
lunch or dinner thinking, 'Gee, should I have Taco Bell or should I