Marketing Spend

  • Restaurant industry traffic weakness is inconsistent with traditional marketing spend growth which may explain its declining rate. 
  • We believe the industry needs to do a better job of reaching customers online where they are spending more time and converting “followers” into traffic.  
Marketing Spend Overview by Chain

Little Caesars

 Little Caesars enjoys simple, effective brand positioning around HOT-N-READY speed & convenience, the lowest price points in the pizza segment and an increasing focus on quality ingredients.  The brand's HOT-N-READY format requires no calling, waiting or online ordering (fresh, hot pizzas are ready in inventory throughout the day) and its carry-out service model provides a labor cost advantage relative to national delivery competitors, facilitating low price points in a price sensitive market. To this end, a third party consumer survey rated Little Caesars #1 in value and affordability for 10 years in a row and attractive value offers include $6 ExtraMostBestest pizza (with the most cheese & pepperoni at the nation's best price) and various $5 price point deals (including its large Classic pizza & $5 Lunch Combo). In a direct challenge to Papa John's, brand value is further magnified by use of quality ingredients that include fresh, never frozen, mozzarella & muenster cheese, dough made fresh daily in the stores (only national chain to do so) and sauce made from fresh-packed, vine-ripened California crushed tomatoes. While we REALLY like its new Reserve-N-Ready platform (2018 rollout) that allows customers to order and pay via mobile app and pick up their pizzas from an automated, heated self-service station (Pizza Portal), it is notable that the chain is late to the game with mobile and customer facing technology. Notable sales underperformance during the last few years is attributed to lack of product innovation/digital-mobile ordering platform/delivery capabilities in a market which is rapidly being transformed by the other 3 leading national chains with tech enabled order/delivery options. Also, Little Caesars' value positioning may be weakened by competitive offers from the Big 3. Further, customers addicted to $5 large Classic pizzas don't leave much room for margins especially when cheese prices rise. In conclusion, while we believe Little Caesars is well positioned as the low cost carryout player in the burgeoning pizza segment, the brand must still prove that it knows what convenience means in the age of the smart phone & delivery and hopefully tech innovations like the Pizza Portal can help address this challenge. 




Sonic Drive-In

Sonic is a unique brand (with high loyalty in core markets) distinguished by: a fun drive-in format featuring skating carhops; and specialty drinks & affordable dessert treats with countless flavor options. Its drive-in format increases the chance that every customer will be first in line and car hops (brand ambassadors) help to generate high scores for friendliness. The brand's format also allows customers to take their time ordering without concern about slowing a drive-thru line while its unique 5 daypart segmentation is well suited to the growing consumer snacking trend. However, Sonic's sales appear vulnerable to periods of economic stress when consumers are most likely to forgo treats and specialty drinks and the chain's top-line is also pressured by increased specialty beverage and snack competition. While Sonic seeks to define its value equation in terms of a differentiated product and experience (drive-in/car hop), this has proved difficult in a hyper-competitive pricing environment. New marketing leadership seeks to recapture traffic with a combination of menu innovation, higher-end products and more targeted promotions (the goal is to drive results with a greater focus on core products and fewer, more impactful promotions). Going forward sales should also benefit from the brand's new ability to offer customized promotions with its on-lot touch screen digital menu boards that are integrated with its recently re-designed mobile app. Also, forthcoming mobile pay and order-ahead app capability increases customer convenience. In conclusion, Sonic's opportunity is to add to its attractive business model a more compelling value equation to go with a tweak to its brand positioning capable of prompting consumers to consider the chain as more of a core meal destination rather than a stop for a discretionary treat.


3Q:17 Same Store Sales

  • Modest +1.4% 3Q:17 comp growth for $1B+ chains was tempered by hurricanes (-30 bps. to -100 bps headwind) as the large chains continue to struggle for top-line growth.
  • While the $1B+ QSR chains are keeping pace with their smaller peers, the $1B+ FSR chains are losing ground to regional and mom-and-pop sit-down competitors according to government data. This contrasts with the idea that delivery and carry-out platforms are helping the national casual chains to take share from the smaller players in the same fashion as the pizza category.
  • Surprisingly, sit-down industry sales outperformed QSR industry sales by 80 bps during the quarter according to government data.
  • CPI for food-away-from-home turned positive for the first time since 4Q:15 which is good news for the restaurant industry. All-the-same, grocery food price increases remain very muted (under +0.5%) with grocery sales growth somewhere between QSR and FSR industry sales growth.
  • C-store sales growth (ex. gas)  is outpacing restaurants and grocery stores.



KFC's focus on bundled value, relevant marketing and quality improvements continues to propel sales growth and builds on the chain's considerable brand equity in the form of its world famous Original Recipe and Extra Crispy seasonings/coatings (contemporized by the addition of its Nashville Hot spicy & Honey Mustard BBQ regional flavor profiles). KFC's compelling value strategy offers consumers price certainty for complete, "real" meals and a promotional focus on $5/$20 Fill-Ups & $10 Chicken Share deals keeps things simple and affordable. Strong, innovative marketing benefits from creative Colonel impersonations and KFC's education-plus-humor ad strategy has helped increase ad awareness. Further, KFC does well with online marketing, generating digital share of voice that far exceeds digital spend and, resultantly, the chain has enjoyed a +45% increase in Millennial consideration over the last 3 years. Investments in equipment & training provide a more consistent customer experience and going forward sales should benefit from remodel program acceleration with plans to update 70% of the system by 2020. In conclusion, KFC is making Southern fried chicken cool again with its holistic, 360 degree “re-Colonelization” concept upgrade.