As recently as a decade ago, few would have suspected the fast-food industry capable of fresh thought and innovation. For years, the sector operated on a basis of regularity and familiarity, churning out the same menu items cooked the same way to the same customer base. But competition has increased, and the clientele has become more discerning. In such an atmosphere, what's an old-time burger slinger to do?
Find clever new ways to make a buck, that's what.
In the days before people started to be more careful about what they ate, fast-food restaurants could get away with having a limited menu of bland, nutrition-deficient items. Leading the charge was McDonald's
That isn't the case anymore. Since most of the major fast-food empires are publicly traded and have to do battle with determined rivals, they need to come up with ways of boosting revenue that top those of the competition.
Sometimes that results in a company that moves in what amounts to a new direction entirely. Several years ago, McDonald's, encouraged by the high margins Starbucks
In spite of the commanding presence of Starbucks in American cities, people can't seem to get enough designer coffee, and Mickey D's has been selling plenty of it; two years after they were rolled out nationwide in mid-2009, the McCafe products were contributing more than 6% to overall company revenues.
In turn, a onetime innovator like Starbucks has been encouraged to come up with its own "new and improved!" items. This past summer it introduced its line of Refreshers beverages, odd-tasting concoctions that attempt to blend thirst-quenching, fruity drinks with the kick of caffeine. But different can be risky in chains so heavily identified with one type of product. Recent visits by this writer to various Starbucks indicate that Refreshers haven't been all that successful; customers overwhelmingly seem to prefer the chain's coffee staples.
Another company taking the designer-java route is Dunkin' Donuts, the flagship chain of Dunkin' Brands. The company's move into this area was more synergistic than for McDonald's, as much of its business was already derived from coffee; it needed only to broaden those offerings with espresso-based drinks.
Cleverly, the company also expanded beyond the doors of its 10,000-plus doughnut shops, selling its brews in "K-Cup" pods for the popular Keurig home coffee-making units from Green Mountain Coffee Roasters
Tasty taco twist
Recent fast-food menu hits aren't based on the popular hot brown liquid. The success story of the year belongs to Yum! Brands'
Simple but effective. More than 100 million of the funky tacos were sold in the first 10 weeks after nationwide rollout. By comparison, it took McDonald's 18 years to sell that many hamburgers.
Now seemingly everyone is trying for the next Doritos Locos. For many, that means tapping into the rising health-consciousness of the American eater. For example, privately held Subway has apparently discovered a way to keep avocados naturally fresh, and it's pushing the healthy green ingredient in such offerings as its Turkey and Bacon Avocado Sub.
Fast food isn't what it used to be. In the old days, could anybody have imagined McDonald's offering, for example, something like its Blueberry Banana Nut Oatmeal (packed with -- gasp! -- fresh fruit)? But these days, doing something new, different, interesting, and buzzworthy is not only a way to increase customer numbers. It's also essential for any chain that wants to thrive and survive.
Survival, though, is tough in the competitive food and beverage business. Green Mountain Coffee Roasters, for instance, has seen top- and bottom-line erosion in recent quarters. Can it turn itself around? For an expertly brewed cup of analysis on the company, download our premium report. Get a full year of analysis and regular updates.
Fool contributor Eric Volkman owns no shares of the companies mentioned in this article. The Motley Fool owns shares of McDonald's, Green Mountain Coffee Roasters, and Starbucks. Motley Fool newsletter services have recommended buying shares of Green Mountain Coffee Roasters, McDonald's, and Starbucks, creating a lurking gator position in Green Mountain Coffee Roasters, and writing covered calls on Starbucks. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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