On the Margin
McDonalds breakfast

In defense of cheap food

This post is part of the On the Margin blog.

As my colleague Lisa Jennings wrote, Chipotle Mexican Grill released a new web video today, “A Love Story,” in its bid to recover its message following a year of very bad news.

It’s typical Chipotle: Doubling down on the chain’s freshly prepared message, and doing so without a burrito in sight. It depicts traditional fast-food chains as evil, robotic concepts with flavor additives and microwaves and overly expanded menus in the name of profits.

And yet many of these traditional quick-service chains are doing just fine. In recent quarters, it’s been Chipotle that has had to win back customers’ hearts and minds.

Quick-service chains’ same-store sales averaged 2.7 percent in the first quarter. The “big three” quick-service burger chains in the US averaged nearly 4.5 percent same-store sales growth in the first quarter. By comparison, fast-casual chains’ same-store sales averaged 0.3 percent. Take away Chipotle’s decline of 30 percent and the average was 3.3 percent.

On Wednesday, McDonald's announced plans to expand that menu by adding biscuit sandwiches and McGriddles nationwide.

McDonald’s added all-day breakfast and, on Wednesday, announced plans to expand that menu by adding biscuit sandwiches and McGriddles nationwide. Same-store sales rose 5.7 percent in the fourth quarter last year and 5.4 percent in the first quarter.

The chain has worked to burnish its quality image by adding real butter to McMuffins, introducing Buttermilk Crispy Chicken and shifting to cage-free eggs and committing to antibiotic-free chicken. It’s testing fresh beef.

Burger King has been introducing attention getting products like the Mac n' Cheetos. Photo: Jonathan Maze

Burger King, meanwhile, has been going in the completely opposite direction: It’s introduced innovative, attention-getting products like Whoppers with red or black buns and a line of hot dogs. And then this summer it introduced Mac n’ Cheetos, a not-healthy-for-you combination of macaroni and cheese and Cheetos.

And The Wendy’s Co. has been growing lately in part because of its low-cost items are selling well. Love Story takes a shot at low price point promotions.

Meanwhile, Chipotle is coming off the worst sales decline related to a food safety outbreak by any publicly traded US restaurant chain in modern history. While the company’s sales can almost certainly recover, it will take some time before it can recover its pre-outbreak sales. And there are many who believe the chain was starting to fall out of favor even before the outbreak began.

To be sure, Chipotle remains a growth chain, increasing in size at a much faster rate than just about any other large quick-service concept. And it’s not entirely fair to judge chains based only on same-store sales over a couple of quarters in a given year.

Still, there is no broad shift in the way customers are eating at restaurants. Customers have long dined at restaurants for three primary reasons: Because the food is good, it’s served at a good value and can be done quickly. According to the Boston Consulting Group, that’s the primary emotional need for half of restaurant consumers. “Quality ingredients” drives only 8 percent of consumer choice. “Healthy” drives just 6 percent.

“Traditional fast food,” as Chipotle puts it, provides a basic need for a lot of customers. Many have low incomes, and the chains provide a low-cost visit. Or they simply don’t have that much time.

And as heavy demand for McDonald’s breakfast sandwiches can attest, or the striking popularity of Burger King’s Cheetos-encrusted macaroni and cheese bombs can attest, customers crave the food. Even if it is processed.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze
 

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