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The Top Five Limited-Service Burger Chains Offer Five Lessons for QSRs

Photo 1: McDonald's, NYC; 2: BK Chef's Choice; video: Jack in the Box "Late Night"

The Top Five Limited-Service Burger Chains Offer Five Lessons for QSRs

Based on sales, the top five traditional (fast food) burger chains posted a collective 1.4 percent increase in sales, after a few years of declines, and drew a lot of interest in the media and in the investment community. As "better burger chains" continued to gain traction, and these newer fast casual burger joints came into their own, the traditional fast food burger chains were successful too.

What can QSR operators learn from the top traditional restaurants, which produced a lot of buzz and invested heavily in new marketing initiatives along the way? Here is a look at the lessons offered up by the resurgence of the top five traditional burger chains¹:

#1 McDonald's   - Understand the Pulse of the New Consumer

The pundits jump on McDonald's "Plan to Win" and the moves it made in 2004 to be more "fast-casual-like." In reality, McDonald's strategy was a bit more complex and a bit more central:  McDonald's became relevant to the new generation, and to the changing consumer lifestyle preferences of the working class. With the development of the McCafé concept, and using that as a beverage-focused platform, the company sold more espresso drinks, new blended beverages and even units of its historic shake line, than most could have predicted.

And the healthy and smaller offerings? They go beyond giving customers choices, to understanding the emerging trends in the on-the-go busy lifestyle of consumers, and the complementary snacking craze ─ eating more meals, but smaller portions throughout the day. Snack wraps, parfaits, salads and greater variety in burger and chicken selections speak to its success. Think Chicken McBites.

McDonald's is more consumer-relevant today than it ever was.

See related story, "Top Better Burger Chains Offer New Spin on Burgers."

#2 Burger King  - Don't Let Marketing Get in the Way

Burger King tapped the McGarry Bowen ad agency to develop a more food-centric approach to marketing long before the Justice Holdings deal became public. The new Justice deal is part of a strategic move to gain access to the public capital markets and quadruple earnings in just a few years, based on some assumptions related to cash flow, unit volumes, and stock price-to-earnings ratios that Wendy's and McDonald's and other key fast food chains garner today.

On marketing, McGarry Bowen will allow Burger King to turn its attention to spotlighting its food. "Don’t let the creativity of the marketing itself get in the way of the products you are marketing," says Aaron Jourden, editor for Technomic, Inc, a foodservice research and consulting firm based in Chicago. He says the new focus will appeal to a broader audience.

More than Burger King's desire to be like McDonald's, it offers a lesson to chains looking to fine-tune marketing that has gone off-track.  Although a bit over-the-top, its new advertising with the help of celebrities that include Salma Hayek, Mary J. Blige and David Beckham, is symbolic of its changing philosophy.

It has also helped that Burge King retired its mascot, although popular with young males, the King alienated most other segments.

#3 Wendy's - Let the Food Speak for the Brand and "Where's the breakfast?"

Burger King Chef's ChoiceBy returning to its original platform of being differentiated, Wendy's is on to something. For its company-owned stores, its North American same store sales increased 2 percent on average in the last three quarters, showing that there is momentum in the changes that it's making.

"Focusing on quality of ingredients, customization and fresh preparation are all key for burger chains in this competitive environment,” says Jourden. "Offering guests value for the money—regardless of the price points—is also essential for any burger chain."

He adds that chain marketing should highlight the differentiation in its burgers, including local sourcing, preparing fresh patties that are made to order, or hand-slicing tomatoes. Wendy's own marketing has highlighted its square, never-frozen patties for decades, scoring big in consumers’ minds, as it now turns to premium offerings such as The "W" Burger, Dave's Hot N' Juicy, and Black Label Burger that is currently being tested.

With breakfast, the expansion of the program has been well-received in its test markets, and the chain is bent on expanding it system-wide, with the necessary buy-in from franchisees. New store design prototypes for Wendy's have been erected in such a way as to showcase the fresh preparation of products, including its fresh, "in-store" preparation of many of its new breakfast menu options, and to cast a spotlight on its new premium coffee.

#4 SONIC Drive-In - Bank on Innovation

Sonic posted a 5.7 percent decline in total system sales in its fiscal 2010. In 2011, the no. 4 traditional burger chain increased its annual total system sales by 1.9 percent, showing significant improvement. With a very connected social media presence and cutting-edge programs, including the recent online ordering Groupon deal developed by OLO Online Order, its drive-ins are picking back up, and the Oklahoma City-based chain is showing that a smart investment pays dividends.

With the Sonic Groupon deal redeemed using the OLO mobile online platform, Sonic had 4 1/2 times the typical Groupon deal redemption rate, and the order was three times the average Sonic food order size. A whopping ninety-two percent of customers using the Groupon deal were new, not repeat customers looking for the next deal, according to this recent interview with OLO's founder and CEO.

See related story, "Executive Q&A with OLO CEO Noah Glass."

#5 Jack in the Box - Develop a Social Media Personality

If there is a fast food burger chain that deserves special attention in the category of social media marketing, it must be Jack in the Box. Its popular and familiar character from TV ads has now been embedded in the social media channels of the fast food chain based in San Diego, Calif.

"The character of Jack Box and his personality really don’t change much from what you see from him on all of the chain’s TV commercials, so there is a continuity from one medium to the other," notes Technomic's Jourden. "The chain’s really been able to transition their quirky messaging from TV to social media fairly seamlessly. If you look at some of Jack’s posts on Facebook and Twitter, you’ll get some of the same humor from the TV commercials that’s also really engaging in a new way to fans and followers."

Jourden also says that while the mascot is able to include product promotions in his posts, the pitches aren't seen as a sales pitch. The chain has scored high marks in its recent Marry Bacon effort and 2010’s “like”-building "Be a Rich Fan" contest on Facebook.

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1Chains are ranked by total system sales in 2010 and the source of the data is the 2011 Technomic Top 500 Chain Restaurant Report.

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(04-16-12)

Copyright: Kandessa Media. All rights reserved.

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