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How Far Will Fast-Food Restaurants Push Innovation?

By Daniel B. Kline – Sep 19, 2016 at 8:26AM

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Mac 'n Cheetos and Doritos Locos Tacos may be just the tip of the iceberg.

At a time when Doritos can serve as the base of a taco shell and Cheetos dust has become a star ingredient, it's hard to see where fast-food chains will draw the line.

The battle for consumers has gotten intense, so simply adding a thicker slice of bacon or trotting out a new sauce no longer moves the needle. Instead, consumers need to be wowed, and that often means doing something outrageous.

In a world where both bacon and hot dogs have been stuffed into the crust of a pizza, even the truly absurd seems plausible. Yum! Brands (YUM 0.48%) Taco Bell, Pizza Hut, and KFC continue to come up with even wilder menu items, and Restaurant Brands International's (QSR -0.26%) Burger King must have some kind of test kitchen working on new ways to merge its products with Cheetos.

Cheetos Chicken Fries may only be the beginning. Image source: Burger King.

Why is this happening?

Jonathan Deutsch, a professor of Culinary Arts and Food Science at Drexel University, said in an email interview with The Motley Fool that fast food and quick-serve restaurants (QSR) have been trying bolder innovation due to how competitive the sector has become.

By introducing a new, must-try item like this, they get people in the door. Even if the item is somewhat niche, it gets people, groups of friends and families to purchase additional products as well and reminds guests of that restaurant as a meal option.

Deutsch also noted that adding familiar products (like Doritos or Cheetos) to the mix makes people want the item even more. "By associating a product with a highly crave-able snack food, it puts in the consumer's head that their taco, burger, or fries are similarly crave-able," he wrote.

Scott Rothbort, chief market strategist for Seton Hall University who specializes in food and restaurant stock investing, echoed his colleague's sentiments. "These chains need reasons to attract marginal customers," Rothbort told the Fool. "They do so by introducing these limited time offerings of new products."

In a separate email, Blaze PR President Matt Kovacs, whose fast-casual clients include Chronic Tacos, Bareburger, Burgerim, and Blue C Sushi, said that QSR trends reflect the nature of our society.

Everything is bigger now. Just look at the political landscape; Donald Trump has shown us that the more shocking something is, the more of an impact and impression it makes on people. We're just seeing that being reflected in the fast-food industry.

This is not going to slow down

Kovacs expects the extreme trend to continue in the fast-food space.

We've seen it grow and develop over the years, thanks to shows like Guy Fieri's Diners, Drive-Ins and Dives or Bizarre Foods with Andrew Zimmern. The fast-food industry is picking up on the fascination with the exotic in a race to outdo the last guy.

Michael Mohammed, CEO of Chronic Tacos, a chain built on classic recipes, told the Fool he believes that although this trend has just started, it does have an end date. "It's become a creativity competition between brands; but there's a point where it gets over done," Mohammed wrote. "The outrageousness creates confusion and starts to contradict what people actually want to eat."

Mohammed believes that gimmicks can get people in the door, but ultimately that is only a short-term fix.

The real battle for consumers comes down to are they going to have a good experience when they dine, will the food taste good, and can they share it with their friends? That's how the awareness of a brand spreads. The Cheetos Chicken Fry doesn't really seem to carry itself beyond the initial trial.

What's coming next?

If you think the items already being sold are over the top, Brent Dowling, CEO of RainTree, a franchise development organization, said to expect even more outrageous offerings going forward. Dowling, who has worked with brands including Doc Popcorn, Kono Pizza, Rush Bowls, Vitality Bowls, and many more, sees the mixing of brands as something that will become even more prevalent.

You'll also see an increase in brands incorporating products by other well-known brands into their offerings, not unlike Burger King's Cheetos Chicken Fries. ... Brands will continue to stretch the creativity line.

He also expects portability to be a growing trend, and he noted that one of the chains he works with, Kono USA, has introduced pizza, breakfast, dessert, and deli options in an edible pizza dough cone that can be held in one hand. And despite his pushing pizza cones, Dowling does believe healthy items will make a comeback.

Consumers demand variety and are more concerned with eating healthier than ever before. But they have also demonstrated that they are not willing to compromise on taste.

Mohammed agreed that healthier choices will be part of the next wave of innovation. "I'm starting to see a trend of chef inspired meals; something visually appealing and creative but that you feel good about eating, as well," he wrote.

Rothbort is also bullish on the future of healthy foods, saying he believes that "we will see QSRs begin to roll out non-GMO products."

Deutsch does not think fast-food companies will stop marketing ridiculous menu items tied to snack foods, but he does agree that healthier choices will be part of the future. "We are seeing overall trends like interests in healthier but still delicious options, more opportunities for fresh flavors, global flavors, and lower-on-the-food chain options," he pointed out.

Daniel Kline has no position in any stocks mentioned. He was fine with chicken in nugget form and did not need it to look like a french fry. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Yum! Brands Stock Quote
Yum! Brands
YUM
$126.53 (0.48%) $0.60
Restaurant Brands International Stock Quote
Restaurant Brands International
QSR
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