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3 Ways Fast Food Can Break Away From Bad Supply Chain Design

Posted by Frank Barcelona

Jun 3, 2016 11:30:00 AM

Outdoor runner jumping up midstride

What is it that hinders innovation in the fast food industry? We’ve seen many QSR companies publically state that they recognize the need to change in order to compete in tight market, but are they making the right changes?

They’re starting to.

Results haven’t been that great of late for some of the venerated names in QSR. McDonald’s, for example, saw two consecutive years of declining sales heading into the last quarter of 2015. Restaurant Brands International (parent company of Burger King and Tim Horton’s), Wendy’s and Yum! (parent company of Taco Bell, Pizza Hut and Long John Silvers) all also experienced sluggish sales in 2014 and early 2015. Now there are signs that they’re all starting to turn things around.

McDonald’s reported global sales were up 5 percent in Q4, which the brand attributed to the launch of its all-day breakfast menu and a new Buttermilk Chicken Sandwich.

Meanwhile, Burger King’s sales were up 4.4 percent in the first quarter of 2016 — a result Restaurant Brands International told its investors was likely due to its new “four pillar” strategy, addressing “menu, marketing, image and great operations.” And Wendy’s reported same-store North American sales were up more than 3 percent in Q1.

What’s the common factor?

They’ve moved away from focusing solely on price points and gotten back to focusing on the food.

Although each has introduced some form of value-based pricing within the past six months, they’ve all brought new products onto their menus (examples include the abovementioned chicken sandwich at McDonald’s, Grilled Hot Dogs and “Angriest Whoppers” at Burger King, and Wendy’s Power Mediterranean Chicken Salad) and continued marketing premium ingredients.

That last bit is what is probably helping them turn the tide in their competition with fast-and-fresh chains like Chipotle and Panera.

Although QSR companies have had a difficult time marrying their traditionally low price point strategy to supply chains that yield the sustainably-raised meats, organic produce, transparently-procured and non-GMO ingredients fast-and-fresh customers demand, they’re beginning to find happy mediums.

Core fast food customers are still mainly attracted to value prices; others that migrated away to fast-and-fresh outlets can be lured back by new tastes and premium items that incorporate some (if not all) healthy/sustainable/organic/non-GMO/cruelty-free ingredients.

So how can fast food companies continue to recoup customers? How can they profitably redesign their supply chains for a changing market? Here are 3 things QSR companies should keep in mind:

1. Don’t try to do too much at once.

Burger King’s four pillar strategy seems to be working out well — mostly because the chain isn’t trying to reinvent its entire business overnight. It’s making a few changes in each area and allowing momentum to build.

It has rolled out several new items to lure in taste tourists, but thus far they’ve been iterations of the foods it was already serving (say what you will, a grilled hot dog isn’t that far a cry from a grilled burger and a red bun is, well, a red bun). It’s been remodeling some — but not all — of its restaurants.

And rather than rush to source locally, drop meat suppliers that use antibiotics or completely revamp its ingredient list, Burger King has for now focused its marketing efforts on reminding customers what it has always done well: make great-tasting, flame-broiled burgers.

2. Make changes in the most immediately impactful areas first.

As the past few years showed the industry, price points are only part of the equation: Businesses that resorted to competitive discounting as their sole means of winning share saw declines in sales. Some chains stopped trying to keep up with discounting and saw their sales counterintuitively grow.

Consumers today have become highly inquisitive; they want to know where their food is coming from, how it was farmed, what exactly is in it, how it was prepared, etc. A little honesty goes a long way.

Thus, one of the greatest areas of opportunity for QSR companies to impress their consumer bases is in increasing supply chain transparency. By signaling willingness to make incremental changes and then following through, companies can win back consumers who had written them off as obsolete.

3. Use supply chain technology to its full potential.

Data, data, data. Get it. Store it. Analyze it. Apply it.

QSR companies that invest in supply chain data analysis and consumer data analysis can position themselves for long-term success. They can quickly identify areas of potential savings, developing food trends and exploitable consumer behaviors and preferences.

Moreover, fast food companies can use data analysis to help fashion sustainable supply chains that will enhance both their profitability and profiles over the longer term. Poor supply chains are based on guesswork and patchwork; Big Data can help the fast food industry do away with unanswered questions and design better business foundations.

How Quick-Service Restaurants Can Find Balance

Written by: Frank Barcelona

Topics: Food Service, Supply Chain, QSR