Troubles at McDonald's
do not mean restaurants are singing the burger blues. In fact, it's
been a "banner year" for the American staple despite challenges in the
broader fast-food industry.
Americans ordered 9 billion burgers last year, up 3
percent from the prior year, according to market research firm The NPD
Group. This increase is especially high at so-called better burger or
fast-casual restaurants that are known for serving up premium
ingredients at quick speeds. Fast-casual burger servings rose 9 percent
due in large part to an increase in locations from several chains,
including Shake Shack, The Habit Burger Grill and Smashburger.
Fast-food burger joints servings rose 3 percent even as visits to these restaurants dropped 3 percent. Helping to prop up that number has been the
fast casual segment, which is a subset of fast food.
Read MoreMcDonald's CEO steps down after tumultuous year
Fast-food burger chains have also faced increased burger competition from casual dining, where people have been ordering burgers as a way to keep the cost of the check down.
Americans ordered 9 billion burgers last year, up 3
percent from the prior year, according to market research firm The NPD
Group. This increase is especially high at so-called better burger or
fast-casual restaurants that are known for serving up premium
ingredients at quick speeds. Fast-casual burger servings rose 9 percent
due in large part to an increase in locations from several chains,
including Shake Shack, The Habit Burger Grill and Smashburger. Fast-food burger joints servings rose 3 percent even as visits to these restaurants dropped 3 percent. Helping to prop up that number has been the
fast casual segment, which is a subset of fast food.
Read MoreMcDonald's CEO steps down after tumultuous year
Fast-food burger chains have also faced increased burger competition from casual dining, where people have been ordering burgers as a way to keep the cost of the check down.
"This is the product [restaurants have] been promoting and
paying a lot of attention to because they've seen success with fast
casual," said Bonnie Riggs, a restaurant analyst at NPD Group, about
fast-food chains' emphasis on burgers.
Some innovative items at Wendy's currently include the company's bacon and blue cheese burger on brioche and its pretzel bacon cheeseburger. Meanwhile, privately held Carl's Jr. launched its all-natural burger last year, and McDonald's plans to continue to roll out its Create Your Taste customizable sandwiches to more U.S. locations.
Some innovative items at Wendy's currently include the company's bacon and blue cheese burger on brioche and its pretzel bacon cheeseburger. Meanwhile, privately held Carl's Jr. launched its all-natural burger last year, and McDonald's plans to continue to roll out its Create Your Taste customizable sandwiches to more U.S. locations.
The burger trend hasn't been a big boost to McDonald's
business. In fact, it has seen dismal numbers from its U.S. unit and
Wednesday announced the departure of CEO Don Thompson.
Instead, much of the focus has been on the better burger segment, a trend that hasn't been missed by investors who are closely watching Shake Shack's IPO, set to happen Friday.
Instead, much of the focus has been on the better burger segment, a trend that hasn't been missed by investors who are closely watching Shake Shack's IPO, set to happen Friday.
While many of these better burger chains remain small,
they're embarking on rapid-growth plans to capitalize on the interest in
the segment and shifting customer tastes, particularly among
millennials.
"What consumers tell us the reason they like fast casual: its fresh ingredients, quality food, good-tasting food at reasonable and affordable prices," Riggs said.
In a phone interview, John Gordon, principal at Pacific Management Consulting Group, said he sees customization and fresh ingredients as key to attracting diners.
"What consumers tell us the reason they like fast casual: its fresh ingredients, quality food, good-tasting food at reasonable and affordable prices," Riggs said.
In a phone interview, John Gordon, principal at Pacific Management Consulting Group, said he sees customization and fresh ingredients as key to attracting diners.
Although Burger King made a name for itself decades ago
with its "Have It Your Way" slogan, it ditched the customization-centric
slogan last year in favor of "Be Your Way." Meanwhile, McDonald's has
acknowledged its need to adapt to shifting customer tastes.
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"The pace of change outside of McDonald's has become faster than perhaps the pace of change internally. Consumers have redefined quality and value," said McDonald's USA President Mike Andres at its investor meeting last month.
Fast casual has taken the lead on the fresh perception of customization, which is closer to today's customers' definition of quality, he noted, adding that the company will be thinking of paring down its ingredient list.
Read MoreWhat are McDonald's fries really made of?
"The pace of change outside of McDonald's has become faster than perhaps the pace of change internally. Consumers have redefined quality and value," said McDonald's USA President Mike Andres at its investor meeting last month.
Fast casual has taken the lead on the fresh perception of customization, which is closer to today's customers' definition of quality, he noted, adding that the company will be thinking of paring down its ingredient list.
In general, Gordon sees the better burger space growing
but expects it to battle a honeymoon period after new restaurants open
up to fanfare.
"Anyone who's operating with frozen burgers is in a difficult place," he added.
"Anyone who's operating with frozen burgers is in a difficult place," he added.
Katie Little
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