This Surprising Fast Food Chain Is Tops in Customer Loyalty. Hint: It's Not McDonald's

According to a Pew Research Center study released at the beginning of the year there are approximately 160,000 fast food restaurants in America that serve around 50 million people a day (that's nearly one out of every six people in this country) and which generate $110 billion in annual revenue. While nearly 3-in-10 people interviewed noted they never eat fast food, 44% of respondents admitted to eating it once per week while 14% said they eat it at least three times per week. 


Source: Ebruli, Flickr.

This fast food phenomenon has a stranglehold on American eating habits for two particular reasons.

First, it's all in the name: it's fast! There are few things that consumers value more than their time and fast food restaurants promise the consumer a quickly made meal that's customized to their liking and likely won't inconvenience their schedule.

The other factor is price. Speaking honestly, not everyone can afford to go out to eat at a casual dining restaurant on a daily basis, nor do certain consumers have the willingness to purchase groceries and cook for themselves. The solution is simple and it litters the corners of major cities and highways around the country: fast food establishments. With a relatively inexpensive menu the perceived "bargain" proves too great for many consumers to ignore.

Fast food is a very profitable business for the companies involved, but it's also a dynamic and rapidly evolving business that requires constant innovation and adaptation to consumers' changing palates and nutritional wants and needs. Those fast food restaurants which aren't up to the task simply wallow in mediocrity. Those who do step up to the task can relish in a loyal customer base and a steadily growing business.

Loyalty, though, isn't the easiest thing to measure in the quick-serve sector. Luckily, research firm Brand Keys has done the dirty work for us and in its annual compilation using its proprietary Customer Loyalty Engagement Index determined which quick serve restaurant chain is the best at engaging with customers and keeping them coming back through the door. Today, I'm going to reveal the surprising company that took the top honor, but first, let's have a closer look at why customer engagement and loyalty even matter in the first place for the fast food industry.

Source: Parade.

Why customer loyalty is important
Customer loyalty is increasingly important in the fast food sector because it's getting tougher and tougher to differentiate between a growing number of fast food options, even beyond just the major chains. The price point for fast food restaurants is often the same, so being able to reach consumers via advertising and having distinguishable branding, as well as a memorable menu that speaks to a variety of consumers, is paramount.

"Why?" You ask? If fast food chains are unable to build up their brand image then their advertising dollars are completely wasted. Most chains rely on promotional offers or collaborations with production companies or celebrities in ads to initially draw consumers into their restaurants. However, fast food chains need their menu selection, interior appeal, and a handful of other factors to do their job of creating an enjoyable experience that will bring these consumers back into the store over and over, otherwise its efforts are wasted. Without loyal customers fast food chain growth would slow to a crawl and brand innovation would likely suffer.

Now that we have a better understanding of why customer loyalty matters, let's check out a few names that didn't make the cut.

Fast food, faster exit
Of the 10 quick-serve restaurants on Brand Keys' list, toasted sub shop Quiznos ranked dead last. But, should we really be surprised? In March Quiznos filed for bankruptcy protection and is currently in the process of restructuring its operations to reduce its long-term debt by $400 million. Unfortunately, with nearly the entire company franchise-owned it's going to take more than just menu innovation and newer technology in its stores to fix its deep-rooted problems.

Taco Bell breakfast waffle, Source: Mike Mozart, Flickr.

Despite not finishing last perhaps the bigger disappointment is Yum! Brands (NYSE: YUM  ) with both Taco Bell and KFC harboring the bottom-half of the list. You'd think that Taco Bell's innovation, such as its Doritos-based tacos and introduction of breakfast would be spurring customer traffic, but ongoing questions surrounding the quality of its beef have plagued much of its traction. Similarly, KFC's slightly higher price points tend to place it below other names on this list.

Close, but no combo!
The top half of the list is filled with a number of familiar names, but none were quite good enough to take the top honor in Brand Keys' eyes.

Ohio-based Wendy's (NASDAQ: WEN  ) slid into the No. 4 spot likely because it lacks the brand power of the handful of chains ahead of it. Since founder Dave Thomas, the spokesperson and face of Wendy's, passed away in 2002 the company has struggled to find its identity. Although uniquely shaped burgers, a revamped menu, and ridding itself of the underperforming Arby's has helped, Wendy's clearly has a long way to go before it can consistently count on customers walking through its doors.

Big King, Source: Burger King.

Burger King Worldwide (NYSE: BKW  ) claimed the No. 3 spot ahead of Wendy's largely due to its emulation of McDonald's (NYSE: MCD  ) in recent years. Following in McDonald's footsteps hasn't been a bad idea in the past with peers emulating its interior redesign and value menu to drive traffic through its doors and drive-thru's. However, Burger King's menu additions, including salads and the Big King, look like a spitting image of McDonald's menu. Until Burger King can build its own identity independent of McDonald's it's unlikely to ascend to the top spot, or ever get ahead of the Golden Arches.

Source: McDonald's.

Not even McDonald's can claim to have the most loyal customers despite having one of the most recognizable logos in the world. Having a recognizable logo affords McDonald's a number of advantages over its peers, including more effective advertising since it doesn't have to worry about building up its image all too much. McDonald's has been an innovator for years when it comes to bringing new food options to consumers, including salads and snack wraps. It also redesigned the interior of its restaurants to make them more family friendly.

However, McDonald's has also come under fire for its employee practices on a handful of occasions, and its recent lack of innovation, or perhaps the improved innovation of its peers, has put it behind the eight-ball and stopped any chance of climbing from its current No. 2 spot.

This fast food chain is tops in customer loyalty
With McDonald's taking second place that leaves only one quick-serve chain to occupy the top spot in Brand Keys' study. Before I do the great reveal would you care to venture a guess?

Got your answer?

If you're a fan of eating fresh then you've correctly figured out that privately held Subway took the top honor for keeping its customers loyal.


Source: Mauritsvink, Wikimedia Commons.

Not only has Subway dominated the quick-serve industry in terms of bringing customers back through the door, but it's mopped the floor with the Golden Arches, growing its store count (of which many are franchised) by an annualized rate of nearly 7% per year between 2003 and 2012 while McDonald's store count managed an approximate annualized growth rate of just 1% over this timespan.

There are a number of reasons why Subway is the kingpin of fast-food loyalty.

To begin with, there are few fast-food businesses that will allow you to customize your order as easily as Subway. While you can order a burger without pickles or onions at a number of fast food restaurants, Subway allows true customization with all foods and condiments displayed right in front of the customer. This means no fear of pre-made food and the perception that the food you're receiving has been made freshly, and just for you.

Source: Examiner.com

Another key point is that Subway's menu really hits the full spectrum of food quality. The rapidly changing landscape of fast food has evolved to include salads and other healthier options because the public demands it – but you can just as easily pile on the condiments to turn your healthy sandwich into your gym trainers' worst nightmare. The point being that Subway has something for everyone whereas the national chains mentioned above don't have nearly as wide of a selection.

Brand ambassadors have been another big difference between Subway and its peers. Whereas McDonald's has typically aligned itself with movie companies, Subway has an fluid list of some of the most popular athletes in sports today. These brand ambassadors allow consumers to easily forge an emotional attachment to the company.

Finally, don't discount the importance of loyalty cards. The Subway card is a great way to reward return customers and keep them loyal to the brand.

Subway will certainly need to stay on top of its game if it's to stay ahead of McDonald's, but based on where the two businesses are now all the momentum is in Subway's corner.

If you think Subway is dominant, wait till you see the potential of this top stock over the long term 
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (29) | Recommend This Article (53)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 24, 2014, at 4:43 PM, TheDude1 wrote:

    Nice ad

  • Report this Comment On May 24, 2014, at 4:44 PM, TheDude1 wrote:

    Nice ad disguised as an article , refreshing

  • Report this Comment On May 24, 2014, at 4:53 PM, TruthBe wrote:

    I'd bet In-n-Out really holds the top spot.

  • Report this Comment On May 24, 2014, at 5:06 PM, TMFUltraLong wrote:

    TruthBe,

    In-N-Out wasn't included in Brand Keys' survey, but as a San Fernando Valley-born guy I'd always put In-N-Out at the top of my list.

    Sean

  • Report this Comment On May 24, 2014, at 5:19 PM, MotleyShark wrote:

    Subway? seriously? I've gone there plenty of times in the last 12 months, usually when there is little other choice nearby or it is the de facto (only) inexpensive / quick food around that won't kill you by the time you're 50. But while fast I've also had mediocre customer service plenty of times, most commonly having to repeat my order more than once.

    My guesses for #1 customer service were going to be Chipotle or Chik Fil A... both huge chains, and definitely considered fast food. why aren't they even mentioned on this list? I'd put both of them ahead of Subway without even batting an eyelash.

  • Report this Comment On May 24, 2014, at 5:30 PM, MotleyShark wrote:

    I downloaded the full report...

    Chick-Fil-A tied with McDonald's for 2nd place in Fast Food and not mentioned in this article, at all. terrible writing!!

    and, turns out -surprise- the people who did the research don't consider Chipotle fast food. hey, whatever. they ranked #2 in "fast casual" category behind Panera Bread. which is pretty ridiculous, because almost all the competitors in this category have waiter/waitress service, or at least bring your food to your table, while Chipotle is Mexican made to order subway-style and comparatively priced against Wendy's, KFC, Subway, and the rest.

  • Report this Comment On May 24, 2014, at 6:08 PM, MotleyShark wrote:

    I downloaded the full report.

    Chick-Fil-A tied with McDonald's for 2nd place in Fast Food and not mentioned in this article, at all. terrible writing!!

    meanwhile Chipotle is #2 listed in a different category called "quick service" which is mainly sit-down restaurants with waiter/waitress service or at least bring you your food, even though they've got quick assembly line food and comparably priced to Wendys / KFC / Subway.

  • Report this Comment On May 24, 2014, at 6:38 PM, Jim85035 wrote:

    Subway tricks people into believing they are eating healthier , but in reality they eat the subs with more calories than a Big Mac Meal!

  • Report this Comment On May 24, 2014, at 6:44 PM, Taz wrote:

    Subway quality is inconsistent and quantity is receding.

  • Report this Comment On May 24, 2014, at 7:13 PM, zn392 wrote:

    lol. nothing says loyalty like putting rubber in bread so it holds it's shape better.

    Subway is a joke

  • Report this Comment On May 24, 2014, at 8:08 PM, rose528 wrote:

    BUT THEY PUT PLASTIC IN THEIR BREAD

  • Report this Comment On May 24, 2014, at 8:24 PM, Vitabrits wrote:

    Following Yahoo!'s footsteps: an article described as an ad. With so many sub shops around the country, why choose a chain over a local joint.

    The only fast-food place I like is Wendy's. I would NEVER touch a fast-food joints' beef unless you paid me to do so.

  • Report this Comment On May 24, 2014, at 9:04 PM, Jared87 wrote:

    T-Bell is awesome.(as is most fast food)

  • Report this Comment On May 24, 2014, at 11:36 PM, bigfoot wrote:

    Will never understand the Chipolte thing. Next to zero selection. Nothing but tacos and burritos.

  • Report this Comment On May 25, 2014, at 12:15 AM, DeeoGranny wrote:

    Now I know these ratings are rigged according to who pays the writers for their high ratings. Of 5 nearby Subways, I would not rate one of them in the top 10, let alone #1!! They are rude, sorry service, want your order like, yesterday, and yet have no time or patience to answer questions. Don't believe I've ever seen even one employee smile. Please. Wheres Jack in the Box? That should be #1.

  • Report this Comment On May 25, 2014, at 2:20 AM, vinnieboiblue wrote:

    Subway too is guilty of poor pay. So much so, they have tip jars by the register.

  • Report this Comment On May 25, 2014, at 3:47 AM, frellmedead wrote:

    Love how subway passes as healthy food with all of the chemicals they stick in their lunch meat, and their veggies are tasteless..

  • Report this Comment On May 25, 2014, at 5:01 AM, spinod wrote:

    Subway sucks. No wonder you "lose weight" eating there because they barely put anything on their subs to begin with.... Go to a REAL sub place and watch them load subs with stuff, then go to Subway and it's worse than a school turkey sandwich. I don't mind them for lunch, or a snack maybe, but every time my family decides on eating their for dinner I prepare an after sub meal so I'm not starving within an hour. The only sub that is even close to filling is their meatball sub....

  • Report this Comment On May 25, 2014, at 8:23 AM, bb907 wrote:

    vinnieboiblue, I used to work at Subway, and it's minimum wage, but that's just what many fast food places pay. I also worked at Chick-fil-a (I'm a college student, which I guess is synonymous in my case with fast-food employee) and it was minimum wage but no tips. The tips at Subway would only be about $3 per worker at the end of a shift, so it wasn't much.

    My bosses at Chickfila and at Subway both emphasized customer service. It's typical at Chickfila, I think, but the Subway I used to work at is now one of my favorite places to eat because of what a great guy my boss was.

  • Report this Comment On May 25, 2014, at 8:26 AM, hanktioga wrote:

    I was one of those foolish readers; Sorriest sub i've ever eaten Tasteless, bread is yukky, scarce ingredites. Never again. Article appeares to be a pack of lies

  • Report this Comment On May 25, 2014, at 9:43 AM, lm1b2 wrote:

    If you like a Salad on a bun,Subway is definitely number 1 LOL!

  • Report this Comment On May 25, 2014, at 9:46 AM, wildwillie wrote:

    Subway is OK, but stores can be inconsistent in their topping portions, and the meat portion is disappointing at best. Blimpie had much better quality, and for size and portion, Jersey Mike's tops both. Also, Chik-Fil-A is great too, and the service is fast and courteous.

  • Report this Comment On May 25, 2014, at 11:40 AM, Bradknowsall wrote:

    Well, its a good thing their customer service is good because their food sucks. Have you noticed they never compare their sandwiches against TOGOS? And rightly so. The first time I went to Subway I ordered a pastrami sandwich. When I got it, it had 3 pieces(slices) of meat. The rest was bread and salad. At TOGOS, the whole sandwich is practically all meat.

  • Report this Comment On May 25, 2014, at 2:25 PM, cwebb2327 wrote:

    How 'bout posting the #@##! list

  • Report this Comment On May 25, 2014, at 6:23 PM, GREGO366 wrote:

    I recently tried something. Took my 3 grand kids to my regular super market. We, individually, got 6 sub rolls, 2 lbs. roast beef, 2 lbs. ham (Deli), 2 avocados, 3 lbs. fresh potato salad, 1 head lettuce, 2 tomatoes and a 12 pack of soda. Went home, fixed 6 plates full of food and spent $9.39 less than Subway AND it took only 6 MINUTES LONGER THAN NORMAL! (Had leftovers too)

  • Report this Comment On May 25, 2014, at 10:55 PM, SouthernStates wrote:

    Bojangle's is the top fast food spot, hands down. NC all the way. Except for Kay Hagan.

  • Report this Comment On May 25, 2014, at 11:20 PM, scrufymale wrote:

    Subway is good at times and not so good at times. There is little consistency at different places.

    I expected that Chic Fi La would be the number 1 choice for fast and great service. In the area that I live in I have noticed that they provide great service through the Drive Through Window.

    Just saying that the line can have your car backed up on the main high way and find yourself at the window in short order. I know of no other place that processes so many orders in such a short period of time than Chic Fi La

  • Report this Comment On May 26, 2014, at 7:11 AM, michael9346 wrote:

    Subway? How much did they pay you to report this hype? Fresh? True fresh wouldn't require nitrites and nitrates. They also are the skimpiest with their meats. You want a real sub? Try DiBella's. And lastly, store count beating McDonalds? Even McDonalds has more class than locating restaurants in some of the stupid places you will find Subways!!

  • Report this Comment On May 26, 2014, at 7:13 AM, yardomd wrote:

    subway has value and quality. Period.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2970742, ~/Articles/ArticleHandler.aspx, 12/21/2014 11:00:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement