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May 2019 Insights



Restaurant Research Thermometer

Industry Insights Edition



Key Points from RR's 2019 Menu Report 


  • We calculated the correlation between the changing value mix of total promotions to comp sale performance from 1Q17 to 1Q19.
  • Next, we calculated comp correlations with changes to the premium promotional mix and new product promotional mix.
  • Surprisingly, increases in the QSR value promotional mix was negatively correlated (-63%) to quarterly comps. This means that a QSR value focus has been detrimental to past sales, suggesting deal fatigue. Not surprisingly, increases in the FSR value promotional mix helped drive comp growth (positive correlation of almost +18%). 
  • Rather, QSR sales have benefited from premium promotions & new product news. This is the inverse for FSR where value is all that matters after years of steady price increases.


  • The chart below suggests that QSR discounting did at least drive add-on sales, with 2018 check growth for $1B+ chains outdistancing QSR CPI growth last year.
  • Conversely, FSR customers simply substituted the discounts for core menu items as reflected by a 2018 check growth which was below FSR CPI.
  • Perhaps the conclusion is that deals are more effective when they provide an actual discount (FSR) as opposed to their use for driving add-on sales & a higher check (QSR).     

Source: RR's Menu Report (outline)



Drive Revenue and Brand Engagement with AI


  • Delivery prospects vary dramatically by brand, but some chains like Chipotle and Dunkin' have more positive sentiment.   


  • Further, only a handful of brands are driving significant interest among their customers.

  • With questionable economics around 3rd party aggregator delivery services, the brands may be reticent to put marketing muscle behind this channel. 

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McDonald's - RR Executive Summary


McDonald's is gaining traction with an extremely ambitious modernization program with many moving parts. Its repositioning strategy includes: retaining existing customers by bolstering core strength in family occasions & food-led breakfast; regaining lost customers by improving food taste, quality, convenience & value; and converting casual customers to committed by elevating & leveraging the McCafé platform while also improving its food health profile. To this end, its menu positioning continues to transition to fresh & healthy and its food journey has included: adding fresh beef to its Quarter Pounder burgers (an answer to Wendy’s); re-introduction of McCafe espresso products to better position against Dunkin'; intro of Buttermilk Crispy Tenders (an answer to Chick-fil-A); reduced use of antibiotics in its beef supply chains; removal of artificial preservatives in its Chicken McNuggets; and improved health profile for its Happy Meals. The goal is to convert casual traffic into committed customers who can be comfortable that higher frequency at McDonald's can support good health. In turn, the brand’s people & facility investments provide it with authority to discuss menu improvements which appeal to families & younger consumers. While comps have outperformed for the last 2 years, traffic declined in 2018 and into 1Q19 (which reflects the chain's upscale repositioning). Going forward traffic should benefit from: an effort to run better restaurants (digesting all the recent changes & reducing executional complexities) with a renewed focus on drive-thru ops; plans to fine-tune value deal promotions; refinements in digital & delivery; and progress with EOTF and re-imaging. Also, corporate expects to win back breakfast traffic with a combination of: national value; a return to local breakfast deals in recognition of differing regional preferences; and new food offerings. In any case, the brand continues to struggle with balancing its need to provide value to drive traffic with its desire to move towards higher margin, more upscale products. Just as value is foundational to this brand, so is service speed/convenience and in a well justified sprint to modernize, the system has added operational complexities which have slowed speeds. Declining store-level profits, increased capex requirements and increasing operational complexity has prompted the recent organization of the National Owners Association to represent the concerns of 1,000 franchisees and operators report that cooperation between franchisor & franchisees has improved as a result. In conclusion, there was no easy way to modernize McDonald’s in a timely fashion and now the hard work of digesting & integrating all these changes is underway – hopefully, execution will proceed as fast as the implementation of the pivot.



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Wendy's - RR Executive Summary

Wendy's “Quality is our Recipe” brand positioning stresses a commitment to fresh, never frozen, North American beef in the form of distinctively square cooked-to-order patties that are juicier, hotter and made with more melted cheese. The brand's “freshness” positioning is reinforced by: daily produce prep; bakery style buns; mayo on its burgers; and use of smaller birds which make its chicken filets more tender & juicy. Wendy's menu strategy is to: reinforce its hamburger quality leadership; raise consumer expectations with its chicken products; drive unique visits through salads & beverages; innovate with on-trend flavors; and offer a multi-faceted approach to price/value. Menu renovations extend beyond upgrades to more tender and juicy burgers/chicken to improvements across all menu items including salads & fries. While the chain's successful 4 for $4 value platform is driving traffic, the challenge is to move beyond traffic-drivers to mix drivers with its $5+ price point offers that should represent the reward for Wendy's high quality QSR+ halo. Marketing is well balanced between mainstream media (TV) and social media marketing which is anchored by a 5 person team well known for aggressive comebacks (particularly as it relates to securing credit for its use of costly fresh beef) and progress with consumer-facing digital initiatives include the initiation of mobile ordering, mobile offers as well as the roll-out of delivery. Facilities benefit from lower cost fast casual-like remodel options which work better for lower AUV stores and 50% of the system is currently updated. However, despite executing around all these elements for improvement, comps have generally under-performed the segment average even though they have been positive since 2011. Resultantly, store-level EBITDAR margin pressure reflects that AUV growth has not kept pace with higher food and labor costs. In conclusion, while Wendy's is doing a good job of accentuating all the accompanying elements around its fresh beef/premium positioning, the 5th largest player in the QSR sandwich segment is still working on the mechanics of translating this core competency into a higher check sufficient to drive comp out-performance.



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Think'in It Through...


With a $4B IPO, it better be Beyond Burgers...



Please pass on to your colleagues


Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research’s analysis and opinions are not a guarantee of the future performance of any company or individual franchisee.  RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2019.



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