It's been tough for long-term incumbents in the quick-service restaurant, or QSR, industry. For years, customers concerned about food nutrition and quality have been defecting to the slightly more upscale fast-casual restaurant concept. More recently, a combination of a slowly improving economy and lower inflation due to falling energy prices have also given Americans a stealth tax cut, allowing former cash-strapped consumers to pay the higher prices associated with fast-casual restaurants.
Against that backdrop of a highly competitive industry with many operators and substitutes, where the consumer's purchasing decision is considered multiple times a day, brand perception is important. And that's where the YouGov BrandIndex ranking comes into play. For 2015, here are the QSRs that had the highest brand perception.
No. 3: Chick-Fil-A
Although only coming in at No. 3 with a score of 14.0, it can be argued that no company had a better year than Chick-Fil-A. In addition to nabbing the third spot, the company also claimed the title as the most-improved restaurant this year in terms of perception. In 2012, the company had been a lightning rod for what its detractors called hostile anti-LGBT stances, and for the funding of non-profits that detractors allege promote anti-LGBT agendas.
Although Chick-Fil-A's position also won supporters, with a quickly arranged Chick-Fil-A Appreciation Day setting records in sales, the company released a statement vowing to "leave the policy debate over same-sex marriage to the government and political arena." With the attention turned strictly toward its food, the company appears to be winning over converts.
The company has been successful with its unconventional franchising model that stresses the fit of business franchisees over liquid assets, and rolls out new stores on a prudent basis to maintain product quality. It also limits most franchisees from purchasing multiple units, forcing owners to be involved with the day-to-day operations of each restaurant.
Competitors have noticed Chick-Fil-A's success, and have responded with new products. Recently, both McDonald's and Shake Shack (NYSE:SHAK) have launched high-end chicken-sandwich offerings to compete with the brand.
No. 2: Wendy's
Wendy's (NASDAQ:WEN) occupies the second spot on the YouGov BrandIndex, with a score of 14.3. Although the restaurant is in the "Big 3" of burger chains, alongside McDonald's and Burger King, Wendy's has proven to be adept at creating and marketing new products targeted to taste-discerning millennials. More recently, the company has sought to occupy a space in-between traditional fast-food, like its fellow brethren, and new items like the Gouda Bacon Cheeseburger and Bacon Fondue Fries, to compete with high-end purveyors like Shake Shack.
Going forward, Wendy's is hyper-focused on this unique value proposition. During the company's third-quarter earnings call, the company outlined its plans to become a "new QSR" that emphasizes consumer experience more than price competition. If 2015 is any indication, the company is succeeding in the execution of this idea.
No. 1: Subway
Although it's been a tough year for privately owned Subway, the company still takes top place with a 17.2 score. Last year, the company's high-profile pitchman, Jared Fogle, pleaded guilty to child-pornography charges, and brought considerable negative press to the company. In the wake of the revelations, the company parted ways with its long-term ad agency to focus less on its previous message of weight loss, and more on its fresh ingredients and history.
This new marketing approach may be complicated by the prior-year's controversy: In 2014, the company removed azodicarbonamide, a substance also present in yoga mats, from its bread due to negative attention from food activists. While the substance in the amounts Subway used was approved by the Food and Drug Administration, the company quickly removed it to avoid the public-relations fallout.
Although the company is No. 1 in the rankings, there's little doubt that it's looking to turn the page on these incidents to focus on its food. In the long run, great food is what should drive consumer perception.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.