The $299 billion and growing fast-food industry continues to become more competitive each year. One aspect that is somewhat overlooked is the drive-thru experience among the major chains. The drive-thru currently contributes 60-70% of all sales among the top fast food companies. Improvements outside of menu changes are one way companies can grow revenues while also differentiating themselves from their peers.
Making fast food more portable
After over two years of design work and finally receiving a patent in April of 2012 , Yum! Brands (NYSE:YUM) recently introduced the Go Cup through its KFC subsidiary. This shallow bowl, which is designed for fries and smaller chicken snacks, may foreshadow where the rest of the industry is headed.
The current design is said to fit 83% of all cup holders in today's cars. Due to the lack of standards for cup holders in the automotive industry, it is nearly impossible to design a food container that will fit all cup holder designs and sizes – at least so far.
Pizza delivery once resulted in cold, soggy, and squashed pizza. If several pizzas were stacked, the bottom pizza boxes were usually crushed to the point where the bottom pizza was flattened. If the delivery took longer than 10-15 minutes, the customer wound up receiving a cooler than expected pizza. Thermal bags and corrugated fiberboard boxes solved the cold and soggy problem while pizza savers, which are those small 3-legged tripod stools that sit in the middle of the pizza, prevented squashed pizza.
The new Go Cups may give a boost to Yum! Brands and possibly slow down the company's profit decline. Profit declined for the fourth quarter in a row mainly because of lagging sales due to the chicken crisis in China. However, the Go Cup may actually become a problem solver for industry competitors.
McDonald's (NYSE:MCD) Salad Shakers are on many lists as one of the top 10 most missed fast food items in recent memory. Introduced in 2000, these shakers haven't been seen for years after being mysteriously discontinued throughout the world. Creating a car cup holder food container that can fit McDonald's fries, hash browns, nuggets, and even recent introduction Mighty Wings only makes sense.
In September, McDonald's replaced the packaging of its foam coffee cups with paper-based cups as an environmental sustainability initiative. The introduction of a McGo Cup that holds many of McDonald's most popular menu items could provide several benefits for the chain. First, more consistent food packaging containers could reduce the overall costs of supplies and materials. If the same cup design can be used for multiple menu items, this can reduce the need to order unique supplies for menu items that are less popular.
Second, a McGo Cup would capitalize on mobile trends in today's hectic work environment. KFC did a study recently that said 35% of Americans describe themselves as "One Hander" eaters in the car . If this is generally true throughout the fast food industry, then providing customers with a method so they can eat more of their meals one-handed is only logical.
Fast-casual food isn't cup-holder-worthy
While fast-casual restaurants like Chipotle (NYSE:CMG) and Noodles & Co (NASDAQ:NDLS) provide menu selections that are typically much healthier than your average fast food choice, nearly nothing on their menus is cup-holder-worthy. The additional fact that neither chain has a drive-thru means these companies aren't able to use current drive-thru statistics to their advantage.
The lack of a drive-thru prevents each from attracting potential customers that are in a hurry or would rather not get out of their car to go inside. One of the big reasons why top industry leaders do nearly two-thirds of their business through a drive-thru is the speed factor. Fast food drive-thru line performance is typically judged by time per order. Time between orders is frequently analyzed since an impatient driver results in a loss sale.
Chipotle and Noodles & Co represent the fast-casual industry's business model. This model provides higher quality food and atmosphere. However, the inability to improve upon a key business aspect prevalent among fast food chains highlights why fast food is not endangered by fast-casual trends.
If pizza delivery is any indication of where fast food containers could be headed, then there is a lot to love about being a shareholder of a major chain. Accordion style containers that expand or contract with aluminum-lined compartments to keep the food heated and separated for as long as possible while fitting in nearly all car cup holders could be the next step. Or it could just be something as simple as a platform that raises the food above the cup holder so there is no searching involved by the driver. In the end, a cup holder container should not be an obstacle for the hungry driver.
Michael Carter has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald's. Try any of our Foolish newsletter services free for 30 days. 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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