When it launched Satisfries less than a year ago, Burger King (NYSE:BKW) thought it had an answer to McDonald's (NYSE:MCD) longtime dominance that's been partially driven by its more popular french fries. It didn't work out, and the vast majority of the burger chain's franchises have dropped the lower-calorie offering.
This is a blow to the fast-food chain, which has struggled to keep up with its direct rivals McDonald's and Wendy's (NASDAQ:WEN) while also dealing with customers fleeing for brands like Chipotle and Panera, which are marketed as healthier options. Satisfries were supposed to make burger fans feel better about their fast-food meal.
What are Satisfries?
Satisfries are made with a special batter that absorbs less oil, causing them to have 20% fewer calories than regular Burger King fries. A small serving of Satisfries contains 270 calories and 11 grams of fat, while the conventional version has 340 calories and 15 grams of fat.
Price may have been one factor in why customers largely rejected the lower-calorie option. A small order of the lower-calorie fries typically costs about $1.89, compared to $1.59 for a bag of its regular fries, USA Today reported.
What has happened?
Earlier this week, Burger King's 7,500 North American eateries were given the option of continuing to offer Satisfries. Owners of only 2,500 restaurants decided to do so.
"The remaining restaurants will treat the product as a limited-time menu offering and have begun phasing it out after this unprecedented run," Burger King North America President Alex Macedo said in a statement.
The company maintains that it always planned to allow customer demand to decide the fate of the product.
Essentially, Satisfries are dead at 5,000 Burger Kings and on life support at 2,500 others. The product was launched to cater to what seemed like a specific consumer demand -- healthier products -- but ultimately it seems people who eat fries are not going to change their habits to save a few calories.
Why did Satisfries fail?
Traditional burger-and-fries chains have struggled due to the perception that they offer less healthy food than fast-casual options like Chipotle. In many cases, perception is not reality.
Chipotle has carefully crafted its reputation as a purveyor of higher-quality fast food. The company details information about its ingredients on its website and liberally uses terms like "organic" and "locally sourced." Those "better" ingredients do not necessarily translate into healthier food, even if customers don't see it that way.
A Chipotle burrito can easily have over 1,000 calories even before you add a drink or chips and salsa. A Burger King Whopper meal with a small fries and a drink comes in at 1,180 -- a little higher, but not in any meaningful way. Burger King is facing the same problems that have caused McDonald's to suffer through seven straight months of declining sales in the U.S. One reason Satisfries failed is that no matter how much better for you Burger King makes its fries, the public is unlikely to perceive fast-food french fries as a healthy choice.
Satisfries may also have been a victim of bad timing, as they were released at a time when Americans are consuming less potatoes, according to The Wall Street Journal, which wrote:
Total annual consumption of all types of potatoes has fallen by nearly 25% since peaking in 1996, to 52 pounds a person in 2012, the last year for which the U.S. Department of Agriculture has data. Consumption of fresh potatoes -- the kind that are baked, chopped, mashed or hashed -- has been dropping even further, to about 27 pounds in 2012, down more than 40% from about 47 pounds in 1970.
Potatoes have lost favor as Americans have focused more on their carbohydrate consumption. It's an unfair rap -- they can be a healthy food, depending upon preparation. A medium plain fresh russet potato has about 168 calories, 37 grams of carbohydrates, virtually no sodium or fat, and plenty of potassium and vitamin C, according to the USDA.
Burger King failed with Satisfries because it did a bad job convincing the public that they were a healthier choice. Satisfries were a better choice than regular fries, but the public took that in the same way it sees a medium milkshake as a better choice than a large. Both are bad, and if you're avoiding such things, both are to be avoided.
Where does Burger King go from here?
Unlike McDonald's, Burger King has actually shown growth in North America for the last two quarters. In the second quarter, the company gained .4% in the United States and Canada.
That could mark the beginning of a turnaround for a brand that has been struggling for a while. The failure of Satisfries is a blow, but innovating and offering unique menu items -- like its Bacon Sundae and expanded drink offerings -- have worked so far, albeit slowly. It's very difficult to change public perception of your brand, and people are unlikely to see Burger King as a healthy option even if it offers healthier choices.
Satisfries failed, but Chicken Fries, which are chicken strips that look like fries, are being brought back this week due to what the company described as public demand. It only takes a couple of hot products to reignite a brand and bring customers through the door. Burger King failed with healthier french fries, but it should keep pushing the limits looking for new items that click with the fast-food public.
Daniel Kline has no position in any stocks mentioned. He prefers Chipotle for lunch because he has a gluten allergy. The Motley Fool recommends Burger King Worldwide, Chipotle Mexican Grill, McDonald's, and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. 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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