Don’t bury Fast Food yet.

Cancel the funeral for fast food. When McDonald’s revealed their same-store sales growth and revenue for the first financial quarter of 2017 this past April, the numbers surprised even their own CEO. In just a few months, the golden arches earned $5.68 billion in sales (beating their $5.53 billion expectations) and their domestic same-store sales growth had risen 1.7 percent, a far cry from the 0.8 percent decline the company had anticipated.

In a dining landscape that more and more frequently favors fresh, local ingredients and farm-to-table menu concepts, these numbers are thrilling for the overcrowded and much-maligned fast food industry. Such growth is a reminder to other fast food restaurant chains that in an age where customers have more dining options than ever, the industry must think outside the box in order to set themselves apart. For McDonald’s, that means focusing on four pillars (menu innovation, store renovations, digital ordering and deliver) in order to retain long-time customers and re-introduce themselves to consumers that moved on a long time ago.

In their successful first quarter of 2017, McDonald’s attempted to capture attention in an increasingly overcrowded marketplace with big announcements and enticing limited time offers. The company announced that they would no longer be serving frozen beef patties on their burgers (something other burger juggernauts like Wendy’s have been claiming to offer for years). McDonald’s also rolled out three different sizes of their classic Big Mac, offered $1 soft drinks and $2 McCafe beverages, and expanded all-day breakfast offerings. In other words, smart uses of LTOs and a commitment to healthier options, along with the value and convenience that a fast food restaurant represents, are doing their part to save Ronald and his pals from extinction.

The industry isn’t slowing down; if anything, they’re doing everything they can to grow, evolve and stay relevant.

How fast food keeps getting off the mat

A huge part of the fast food industry’s success on both global and domestic levels is the familiarity and comfort the restaurants provide. Consumers can walk into the Pizza Hut down the street from their house or one in Hong Kong, for example, and have a similar experience; they know what they’re getting themselves into. In an age where consumers have so many choices, that comfort can go a long way. The reasons fast food became a dominant part of the food landscape in the first place hold true – people want food quickly and cheaply. It doesn’t matter if that food is processed or higher in calories than a health-conscious population would perhaps like it to be.

Such reasons, and many others, are why the U.S. fast food industry grossed $200 billion in 2015. That is a far cry from the $6 billion the industry earned back in 1970. The industry isn’t slowing down; if anything, they’re doing everything they can to grow, evolve and stay relevant. That desire for relevancy includes going after the most coveted marketing demographic: millennials. Fast food chains have joined the home delivery bandwagon, partnering with companies like Postmates to bring their cheap and convenient eats to consumers’ homes.

Don’t bury me, I’m not dead yet.

Recently, McDonald’s released some inspired advertising targeting that same demographic. The company tapped actress Mindy Kaling (the internet’s best friend) to star in a series of commercials. The twist? The ads never once mention the name of the restaurant they’re promoting, focusing instead on aspects of the recognizable brand that we know to be true. The ads prove that McDonald’s has the name recognition and savvy to evolve with the times and make their case for continued relevancy.

McDonald’s recent successes are proof that the fast food industry is not dead, nor is it going anywhere anytime soon. The upward tick in the industry will likely continue, but only if restaurants take big steps to change and grow with the dining landscape. What’s gotten them this far won’t take them any farther, and the industry would do well to remember that.

The paradox of choice and missed opportunity

Watch new guests walk into your restaurant and stare at the menu. Do they scan quickly and nod or do they drift across the options, mouth dropping open?

In 2004, Barry Schwartz wrote Paradox of Choice, in which he proves that more options can actually reduce the quality of the customer experience (which was not yet a buzzword). This theory explains the growth of fast casual restaurants. The concepts are simple to understand, the menu is void of the clutter that QSR and casual dining brands have added over the years to keep up.

While choices are necessary to fight the veto, too much choice confuses guests and weakens their understanding of the concept. As Zac Painter, VP of Marketing at Fatz Cafe told F&RM, during the great recession the brand had added a Chinese chicken salad to its menu of home cooked southern classics. The item has since been removed from the menu.

Options like these create confusion for the guest. It’s why Chick Fil A and In-N-Out Burger continue to succeed. Customers know what they come in for, and the brand doesn’t make them search to hard for it.

choice, veto, menu
Four food items, three of which are hamburgers. How’s that for choice?

That’s not to say that every brand should restrict choice to less than ten items. But a key point here is that brands like these offer streamlined menus, and execute on every item. Can you even imagine the wait at In-N-Out if they added more items?

Look at the top growth brands and you’ll see that they all have simple menus in common. Chicken brands like Zaxby’s and Raising Cane’s keep the menu options tight and reap the benefit. Guests crave chicken, they go to a place that executes what they have on their mind.

When guests order from a busy menu they aren’t thinking very logically about making the optimal selection. That’s just not how we’re wired. Instead, in an environment scattered with choice, they simply try to meet the requirement of the task – choose something.

Being overwhelmed by choice can leave people feeling lonely and even depressed, according to Barry Schwartz. Not exactly the aim of hospitality. People are looking to choose but don’t know how to make the choice.

But this harried execution of selection leads to a state that Schwartz calls ‘missed opportunity.’ This happens when they realize they chose something they didn’t really want, or later find a selection they believe would have been more satisfying. This also creates a bad brand experience because they feel that they ‘ordered the wrong thing.’

Of course brands like The Cheesecake Factory deliver on a menu as thick as a phone book every day. There will always be exceptions to any rule. For whatever reason, that brand has driven loyalty by offering tons of choice – even on the dessert menu. This is because, like Chick Fil A and Raising Cane’s, they execute every time.

It is hard to make the wrong choice. But most restaurants are not The Cheesecake Factory. To simplify on execution, simplify the menu. As a brand, there shouldn’t be a wrong thing to be ordered. There shouldn’t be that Chinese chicken salad.

Brand recognition vs. Exclusivity

All of these are brands that have an Oreos product on their menu: Baskin Robbins, Burger King, Dairy Queen, Dunkin’ Donuts, Jack In The Box, McDonalds, etc. Drawing in a large audience means finding items with mass recognition and appeal. Oreos has done a great job over the past decade of growing recognition and revising their brand appeal through quirky messages and tone largely on social media platforms.

Media fragmentation has made it hard for impatient brands to build products as quickly as they want. Stunts like the Unicorn Frappuccino or mass media vehicles like Shark Tank are some of the ways brands try to break through.

Oreos’ high awareness makes them an idea partner for product or LTOs. People’s recognition of the name sets expectations for the flavor and experience of the product. This make the product appealing for consumers and for brands in need of hits.

The Oreos logo or the distinctive cookie on the menu board or in a TV tag is certainly a positive. The question is how many different menu boards can have that logo before consumers feel the product is no longer different. Differences, even subtle ones, are what drive favorability and preference for consumers. Jack in the Box new use of flavored ‘butters’ is a good example.

As you can see, the Oreo trend is probably going to be successful for each of these brands. It will ultimately be more successful for Mondelez as they grow awareness and preference for Oreos.

Top QSR menus have plenty of similarities, they are nearly standardized. Hamburgers, french fries, chicken sandwiches, salads and shakes. Burger King has made strides in growth by finding novel takes on these standards going all the way back to onion rings, but including Chicken Fries and the addition of hot dogs. Jack in the Box has focused on the ‘munchie’ set with their tacos and late night special combo offers.

For either brand an LTO is the way to create difference and (hopefully) traffic. Oreo has proven to be a brand that generates interest from consumers; whether to retailers with unique flavor varieties or product partnerships like these QSR LTOs. It is strategically sound to add such a differentiator to the menu as an LTO. Look at the success Sriracha has had in its own partnership and licensing deals.

Oreos, LTO, QSR
Oreos, Oreos everywhere!

But it is less clear whether there is any advantage to having a ‘me too’ product. Once Burger King launches an Oreo product, Jack in the Box should be pursuing other ingredient partners or LTOs altogether. The attention Oreo provides will be there in a diminished capacity.

McDonald’s has its successful McCafe line and its powerful $1 beverage offer that drives value. The Oreo offer for them probably works best to fend off the challengers by eliminating differences in the dessert or beverage category.
The biggest and most visited restaurant chain has made the Oreo shake a standard.

Going back to Sriracha, their rise to near omnipresence on menu boards (and as a flavor additive in CPG products) was inarguably better for their brand than for any of their partners. Having a Sriracha flavored item on the menu became an expectation, not a surprise and delight it was originally, for consumers.

As you can see, the Oreo trend is probably going to be successful for each of these brands. It will ultimately be more successful for Mondelez as they grow awareness and preference for Oreos. The impressions the brand receives through LTO promotion by QSRs is a huge value, though certainly factored into the licensing negotiations.

If there is one way both brands could expand the benefit of partnership or continue to create differentiation it would be to add alternate Oreos flavors to LTOs in lieu of the original flavor. At least one brand has a Golden Oreo variety in some markets. If exclusive, this is a way to get the benefit of Oreos’ awareness and the exclusivity needed to break through parity.