Chipotle, Five Guys Burgers and Fries and Smashburger grab the headlines today. These chains are part of the growing fast-casual restaurant category. And consumers today prefer this segment to traditional fast food. Just ask McDonald’s and Burger King, two fast-food giants that are seeing their sales drop quarter after quarter.
But this doesn’t mean that traditional fast-food restaurants — known in the real estate business as quick-service restaurants — can’t fight back.
JLL has done its research on the steps that quick-service chains such as Wendy’s and Chick-fil-A can take to beat back the Chipotles of the world. The key? Steve Jones, managing director of retail multi-site program management at JLL says it all comes down to the three “f”s: fast, fresh and friendly.
If chains such as Wendy’s or Arby’s can focus on those three keys? Jones says that they do have a chance to regain their lost market share.
Consider the first of the “f”s, fast.
“We are in a mobile society today,” Jones said. “People want things fast, whether they go inside or to the drive-thru. Quick-service restaurants have realized that drive-thrus are always increasing in importance. That’s why so many are adding second drive-thru lanes today. That is important to keeping the fast pace that quick-service restaurants need.”
The second “f,” fresh, is just as important. Chains like Chipotle promote their fresh ingredients. To compete with that, and to win the dollars of today’s fussy consumers, quick-service restaurants must offer fresh food, too. This means that the days of letting burgers sit wrapped under heat lamps are coming to an end, at least for those quick-service restaurants that don’t want to keep losing customers.
“Look at the fast-casual chains. They charge a bit more, but their food is perceived as being fresher,” Jones said. “The quick-service restaurants have to take note so that they don’t keep losing market share to the fast-casual chains.”
Finally, there’s “friendly,” the third “f.” One quick-service chain already does this well. Think of the last time you stepped into a Chick-fil-A. The odds are high that your server asked you how your day was or smiled when you stepped up to the counter.
Consumers want to feel special, even when they’re just eating at a quick-service restaurant. Friendly service helps.
“People have to recognize that consumers have more options today,” Jones said. “You want to eat somewhere where people are friendly.”
To grow today, quick-service restaurants must appeal to Millennials, according to JLL’s research. JLL reports that these young consumers account for about 23 percent of all annual restaurant spending in the country, or about 46 billion restaurant visits every year.
Quick-service chains that focus on Jones’ three “f”s will give themselves an advantage in trying to win over these consumers. But these chains are also making real estate decisions to help grow in a more competitive industry.
JLL points to Wendy’s, which is overhauling its basic restaurant design. The odds are high that at least one Wendy’s restaurant in your community has been closed for remodeling. That’s because Wendy’s is now building restaurants with more comfortable seating, fireplaces and more soothing lighting.
The goal now is to encourage customers to actually sit down inside the restaurant to enjoy their meals.
“The traditional quick-service dining experience encourages customers to get their food, eat and leave,” said Bruce Allendorfer, regional director of construction at Wendy’s. “We’re changing that standard by making the environment in our dining rooms more inviting and comfortable. Customers can stay longer and can make an event out of their visit.”
JLL worked with Wendy’s to design the new restaurants. In addition to the fireplaces and new seating, the revamped Wendy’s design includes Wi-Fi service, flat-screen televisions and digital menu boards.
It’s important for quick-service restaurants to tackle these challenges today. JLL reports that in 2013, sales for fast-casual chains rose by 11 percent. Quick-service restaurants, though, have mainained revenue growth at about 1.2 percent every year because of flat sales.
Chick-fil-A might be the exception. The chain still makes big news whenever it opens in a community.
JLL has worked with this chain, too, to help it manage its expansion and renovation plans without breaking its budget. Chick-fil-A, after all, has been far from shy about expanding into new markets these days.
“The biggest challenge that Chick-fil-A was facing was a large increase in the number of projects we needed to manage within the reinvestment portfolio,” said John Mark Wood, a program manager from the chain.
Wood said that Chick-fil-A’s budget for its reinvestment portfolio soared from about $30 million to $100 million in a span of one-and-a-half to two years.
Jones said that those quick-service chains that are doing well, such as Chick-fil-A, recognize that consumers’ tastes are changing. They want every meal that they eat out to be special. It’s no longer good enough to run to McDonald’s for a cheap hamburger to eat in the car.
“People have to understand who their customers are,” Jones said. “They are not the same customers that these chains had 15 or 20 years ago. The ones that are struggling are the ones who don’t understand that. If they are struggling, they haven’t recognized that customers have changed. They haven’t focused on being fast, friendly and fresh.”