KANSAS CITY — Mobile ordering, menu innovation and food delivery are some of the initiatives quick-service restaurant chains are rolling out as part of efforts to improve performance.
Many of the biggest brands are removing artificial ingredients from menu items or switching to meat raised without antibiotics or hormones. McDonald’s, Panera Bread, Chipotle Mexican Grill and Yum! Brands are among the national chains announcing such efforts this year.
Fast-food companies also are introducing new technology platforms that deliver a more personalized customer experience or enable easier ordering and payment. Mobile apps, self-order kiosks and loyalty programs recently have debuted from Starbucks, Taco Bell, McDonald’s, Wendy’s and others.
Read on for a closer look at recent performance and business strategies of top restaurant chains.
|||READ MORE: McDonald's|||
One-year stock performance (July 31, 2014-July 30, 2015): Up 8.6%
Most recent results: Since announcing the initial steps of a global turnaround plan in May, McDonald’s Corp. has made “meaningful progress,” said Steve Easterbrook, president and chief executive officer, but sales, particularly in the United States, remain challenged. In the second quarter ended June 30, Oak Brook, Ill.-based McDonald’s net income declined 13% to $1,202.4 million, and total revenues tumbled 10% to $6,497.7 million.
Burned in the U.S.A.: The chain’s U.S. comparable sales fell 2% in the recent quarter, following three years of declines, as featured products and promotions failed to deliver expected results. In the United States, which represents 40% of McDonald’s business, actions taken so far have included reducing the number of menu items displayed on drive-thru menu boards by a third and modifying cooking methods to create hotter, juicer sandwiches. In the coming months, McDonald’s plans to expand all-day breakfast to more markets, reduce more menu items, and launch a mobile app. The company also is testing delivery with a third-party service in New York markets.
Chicken changes: Earlier this year, McDonald’s introduced a new grilled chicken filet featuring no artificial flavors, added colors or preservatives. The chicken is seasoned with “pantry spices” and herbs, such as parsley, salt and onion powder, and cooked in a canola and olive oil blend. Previously, the grilled chicken was prepared with liquid margarine, which included hydrogenated oils and artificial flavor. The introduction followed a new policy McDonald’s announced in March to only source chicken raised human antibiotics.
|||READ MORE: Yum! Brands|||
One-year stock performance: Up 30%
Most recent results: Net income tumbled 30% for Yum! Brands, Inc. to $235 million in the second quarter ended June 13, but the Louisville, Ky.-based parent company of Pizza Hut, Taco Bell and KFC expects to deliver double-digit earnings per share growth for the full year. Excluding a special charge related to a refranchising loss, the company said earnings per share fell 5% for the quarter.
Total revenues for the quarter fell 3% to $3,105 million as a result of foreign exchange headwinds and a slower-than-expected recovery in China following a food safety scare.
More of the same: “Overall, I would summarize our second-quarter performance as very similar to our first-quarter results,” said Greg Creed, chief executive officer, during a July 15 earnings call. “Taco Bell is firing on all cylinders. KFC delivered another solid quarter. China continues to improve. And while we are making progress, there is still much work to be done at Pizza Hut.”
Saved by the (Taco) Bell: To maintain strong momentum at the Mexican chain, Yum! has been testing Taco Bell delivery in select markets and announced plans to remove all artificial flavors and colors from the chain’s food by the end of 2015. The company also has set a goal of 2017 to remove all artificial preservatives and additives.
Humble pie: A comprehensive menu overhaul introduced late last year at Pizza Hut has failed to deliver desired results for the company. Recent efforts to reheat sales include the introduction of a gluten-free crust and the removal of artificial flavors and colors from the chain’s pizzas.
Finger lickin’ good: Efforts to revive the flagging KFC brand have included a marketing campaign starring a resurrected Colonel Sanders and a planned expansion of the menu with such items as barbecue baked beans and slow-pulled chicken. The chicken chain may launch delivery, too, according to Yum!
|||READ MORE: Wendy's|||
One-year stock performance: Up 28%
Most recent results: Wendy’s Co., Dublin, Ohio, reported a 39% increase in net income for the second quarter ended June 28 to $40,195,000. Revenues declined 3.3% to $385,048,000, reflecting Wendy’s ownership of 141 fewer restaurants at the end of the quarter compared to the beginning of the comparable quarter.
The company lowered its full-year guidance after comparable sales at North America company-operated restaurants increased 2.4%, and system-wide same-restaurant sales increased 2.2%, below the company’s expectations.
Bye-bye, bakery: This year, the company sold its bakery operations in Zanesville, Ohio, and announced plans to refranchise 640 restaurants by the end of next year with plans to reduce its ownership of company-operated restaurants to approximately 5% of the total system.
This is a test: The chain has been experimenting with a number of initiatives recently, including a value bundles platform, a new grilled chicken recipe with meat raised without antibiotics and mobile ordering and payments.
|||READ MORE: Chipotle Mexican Grill|||
Chipotle Mexican Grill
One year stock performance: Up 11%
Most recent results: Chipotle Mexican Grill reported fewer transactions during the second quarter ended June 30. Executives pointed to a shortage of pork in its restaurants as a reason for the drop in traffic.
Chipotle had net income of $140,204,000, up 27% from the prior-year period. Net revenues advanced 14% to $1,197,783,000. Comparable restaurant sales rose 4.3% for the quarter, driven in part by higher menu prices.
Pork lift: Earlier this year, Chipotle suspended a pork supplier who did not meet the chain’s animal welfare standards. Recently, the company said it has found a new pork supplier and expects to be fully supplied by the end of the year.
Clean label efforts: Earlier in the year, Chipotle said it had eliminated bioengineered ingredients from its food menu. The chain is in the process of reformulating its tortilla to contain only flour, water, starter, vegetable oil and salt.
Knock, knock: Chipotle has begun testing delivery in select markets. The company said it has begun delivering on-line and mobile orders for individuals and small groups in more than 60 cities using the PostMates delivery app.
|||READ MORE: Burger King|||
One-year stock performance: Up 18%
Most recent results: Chicken Fries and other new products drove strong comparable sales growth at Burger King, boosting profit for parent company Restaurant Brands International Inc., Oakville, Ont., in the second quarter ended June 30.
Restaurant Brands International, which also operates Tim Hortons restaurants, reported adjusted EBITDA increased to $427 million, up 19% from the prior-year pro forma amount. Revenues for the quarter advanced fivefold to $1,041.4 million.
Crowning achievement: Same-store sales at Burger King increased 6.7% in the recent quarter, marking the chain’s best quarterly performance in the metric in nearly a decade. The chain credits its strategy of “fewer, more impactful launches” for some of its success.
|||READ MORE: Starbucks|||
One-year stock performance: Up 52%
Most recent results: Seattle-based Starbucks’ net income in the third quarter ended June 28 increased 22% to $626.7 million, and revenues jumped 18% to $4,881.2 million. Global comparable store sales increased 7% during the quarter, driven by a 4% increase in traffic, while Americas comp sales increased 8%, driven by a 4% increase in traffic.
Going mobile: Mobile Order & Pay, Starbucks’ digital initiative that allows customers to use an iPhone app to order ahead, is one of several game-changing initiatives the company believes will help it deliver world-class service and convenience. Starbucks is on track to offer Mobile Order & Pay capability across the entire U.S. company-operated store portfolio in time for the upcoming important holiday season.
Special delivery: Starbucks is conducting dual delivery experiments in New York and Northwest markets after learning people will pay more to skip the lines at the coffee shop.
|||READ MORE: Sonic|||
One-year stock performance: Up 43%
Most recent results: New menu items and a national media campaign contributed to strong sales growth for Sonic Corp. in the third quarter ended May 31. Net income increased 22% to $20,442,000. Excluding tax adjustments, net income increased 15%. Revenues for the quarter advanced more than 8% to $164,748,000. System same-store sales advanced 6.1%.
Getting personal: Expected to drive continued momentum for the fast-food chain are technology initiatives designed to provide a more personalized experience for customers, “particularly a millennial consumer and their use of 21st century forms of communication beyond what their parents have utilized, you might say,” said Cliff Hudson, chief executive officer of Oklahoma City, Okla.-based Sonic Corp., during a June 22 earnings call with financial analysts.
|||READ MORE: Panera Bread|||
One-year stock performance: Up 39%
Most recent results: Net income at St. Louis-based Panera Bread in the second quarter ended June 30 fell 15% to $41,929,000. Revenues increased 7% to $676,657,000 behind strength at company-owned cafes.
Keep it simple: During the quarter, Panera unveiled its “no no list” cataloging the more than 150 artificial additives it is removing from its bakery-cafes. Ron Shaich, founder, chairman and chief executive officer, called the list “a transparent line in the sand intended to ensure customers that they can count on Panera for food that is free of artificial colors, flavors, preservatives and sweeteners.”
Panera 2.0: Introduced last year as a strategic effort to enhance the experience for dine-in and to-go customers, Panera 2.0 is enabled by technology and operational improvements designed to keep up with high transaction volumes and to deliver “unrestrained production demand,” according to Panera. The individual elements of Panera 2.0 include web, mobile, kiosk and e-commerce ordering; new operational systems; extra labor; deliver-to-the-table service; and “the wall,” a wall that was added to certain cafes to close off the back of the house to support Panera’s equipment needs.