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Mid-Size Chains Could Steal Fast Food Customers

In the midst of slumping sales and stale strategies, big fast food chains are leaving a hole in the market for mid sized businesses to fill.

Who wants to buy a hamburger when you have a host of healthier alternatives?

That’s the question that’s plaguing big fast food chains as they contemplate their next moves in an increasingly tough market. McDonald’s is in the midst of its biggest downward slide in the past ten years thanks to Millennials breezing past the Golden Arches in favor of healthier options at other restaurants, while Burger King plots an expansion strategy that would relocate its HQ to Canada to avoid the high cost of U.S. corporate taxes. Earlier this year, Arby’s hired a new ad agency to help revive its sagging sales, while parent company Jack in the Box counts on Qdoba, to give its bottom line a boost.

What’s surprising is that this is happening despite an increase in consumer confidence and spending on the tails of lower unemployment and rising home prices. Yet even with a plethora of dollar menu items that could easily feed a family of four for less than $20, value-hungry consumers aren’t biting. Though ‘good prices’ are the top reason (90%) people choose a restaurant according to a recent Harris Poll, healthy menu items drive a purchase for more than half (58%) of diners.

Dropping calories and fat doesn’t always do the trick as Burger King discovered. Less than a year after the debut of “Satisfries,” the chain is pulling the less greasy version of its spuds off the menu. As one reviewer noted, the reduced calorie count might just be due to the “terrible” taste and “gravelly texture” prompting diners to throw them out before finishing.

That leaves a big opportunity for mid-size companies to grab market share. The timing couldn’t be better, as CIT Group Inc., a provider of financing to middle market companies, sees the fast casual sector growing quickly, in part because they’ll be able to finance acquisitions, remodeling, and new construction to attract a new clientele.

But how, exactly, do you create insatiable cravings among a more health-conscious set of consumers?

Less Is More

Midmarket chain Five Guys Burgers & Fries is one to watch. Not only did the same reviewer who trashed Satisfries give the burger chain’s skin-on Idahos high marks, but the business model also wins for simplicity. Burgers, dogs, fries, and fixings. The less complicated the menu, the easier and faster it is to cook and serve the food. The chain has over 1,000 locations but nary a freezer. The meat is fresh, and because the business has been operating since 1986 and has a handle on store performance, there’s little risk of food waste due to spoilage.

Tasty Twists

Qdoba Mexican Grill is still flying under the radar with just over 600 locations. For comparison, Chipotle has nearly 1,600 restaurants and continually rising sales. Qdoba’s model is similar to Chipotle’s beloved cafeteria line, but unlike its competitor, Qdoba’s been trotting out new items like two kinds of queso dip this year, to capitalize on its 7 percent leap in sales. Yes it’s cheese and that often equates to extra fat. But it’s important to note that while Chipotle won a loyal following for offering sustainable alternatives such as local produce, Qdoba and Chipotle’s similar “build your own” models can result in gut busting entrees. One of Chipotle’s salads clocks in at 1,300+ calories (with chips) while a certain Qdoba burrito packs 1,240 calories.

There are plenty of healthier alternatives at both chains. Could the next step to win consumers hearts and appetites be a total menu makeover that details the nutrition info? Maybe not, if this midmarket franchise is any indicator.

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