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McDonald’s Game App Extends Digital Strategy

McDonald’s has launched a combo smartphone app/game promotion in Australia that further uncovers the digital strategy the chain says it plans to spend as much as $100 million developing.

McD_Aussie_DropMaccas1“Drop into Macca’s” (using the local colloquialism for McDonald’s) is a game app that can be downloaded from Apple’s App Store or Google Play. Players guide Carl’s daredevil skydive toward a McDonald’s, moving him to avoid collisions with s creaming goats, toasters and more. But the app doubles as a prize game: More than $1 million in free food will be given between Oct. 29 and Dec. 23, 2014. Players can log in once a day and each player who meets or exceeds daily target score during that day will receive one food prize voucher via the app or an automatic entry into a grand prize draw. Grand prizes are 10 $1,000 Visa debit cards, for which winners will be drawn on Jan. 7, 2015.

Speaking to analysts last week, McDonald’s Corp. President-CEO Don Thompson stressed that the company’s commitment to digital engagement with customers is a central part of what he envisions as the “Experience of the Future.” These include the changes in food and service—such as the Create Your Taste burger customization and menu localization—that Thompson said will rebuild the brand’s trust with customers. “Based on our preliminary work we are targeting to identify and redirect nearly $100 million in savings for future long term growth initiatives such as the digital strategy and McDonald’s Experience of the Future,” Thompson said.

“The Experience of the Future is much more than just Create Your Taste, it is a broader service experience, it is a broader digitally engaged, if you would, mobiley engaged experience in the restaurants,” Thompson added. “Drop into Macca’s” is an early expression of what the chain may have in mind globally.

The Myth Of Millennials’ Fast-Casual Migration

It’s an assumption too often repeated as fact that McDonald’s and other QSRs are losing customers to fast-casual restaurants and their claims to better food at higher prices. But interesting new data from The NPD Group provides strong reasons to doubt that assumption.

Here, from a Motley Fool post in May, is how this assumption is commonly packaged: “McDonald’s has a problem. For years now the global fast-food giant has been losing sales to fast-casual restaurant chains Chipotle Mexican Grill and Panera Bread. Customers, especially in the U.S., are turning to other restaurants that offer a more appealing menu with fresher ingredients, allowing them to eat healthier and get more bang for their buck.”

The Wall Street Journal recently reported that data compiled for it by Technomic that it said shows, “Customers in their 20s and 30s—long a mainstay of McDonald’s business—are defecting to competitors, in particular so-called fast-casual restaurants like Chipotle Mexican Grill Inc. and gourmet-burger chain Five Guys Holdings LLC.”

But NPD Group’s data finds that while Millennials’ visits to QSRs indeed have declined over the past five years, this age group still patronizes QSRs far more often than it does fast-casual restaurants. Further, the average number of Millennials’ fast-casual visits has not greatly increased.

NPD _ QSR Fast Casual

NPD Group’s research suggests that while QSRs are having trouble keeping Millennials, fast casuals are having more difficulties attracting increasing Millennial visits than is widely assumed. For the year ended June 2014, for example, younger Millennials (ages 18 to 24 who make up 43% of the cohort) made 164 visits while older Millennials (ages 25 to 34) visited QSRs 171 times during the year. That’s down from 174 and 198, respectively, in 2009.
Click here to continue reading The Myth Of Millennials’ Fast-Casual Migration

Paul’s Da Burger Joint at 25: One and Holding

Paul's Second Ave. Slider (credit:nycfoodphoto.com)

Paul’s Second Ave. Slider (credit:nycfoodphoto.com)

Eater.com’s Robert Sietsema recently asked, “Is the slider dead?” The answer is “No” at Paul’s Da Burger Joint in New York City’s East Village. It celebrated its 25th anniversary earlier this year by adding “Second Ave. Sliders” to the menu along with Paul’s Bacon-Wrapped Jalapeňo Poppers and Saint Marks Baileys Shake.

The sliders, which can be ordered as beef or turkey, have done well at a burger joint that seldom adds new items (or raises prices) because kitchen space is limited and the menu already is diner-size full. In addition to nearly two dozen 8-oz. burgers (priced from $5.40 up), the menu has omelets, salads, hot meat platters and more.

Matt Wardrop, who took over  when his cousin, Paul Koval, retired in 2007, calls it a “cross-over menu.” Some burgers are topped with an egg, so why not offer omelets? Similarly, Paul’s has lettuce and tomato for the burgers so creating salads is a natural. But there’s little room for anything that doesn’t play a role in making burgers. “Everything we make is cooked to order so there’s no waste,” he says. “There’s a lot on the menu but the guys I have in the kitchen are pros: They can do tis in their sleep.”

The only new piece of equipment added recently was a bun toaster. And it only made it in because it didn’t take much of the precious kitchen space.

PaulsDaBurger_InteriorBut unlike so many other burger-joint owners, Wardrop isn’t itching to become a multi-location chain. He’s not opposed to the idea, but he’s not rushing into expansion. “I did spend a lot of time in 2012 looking at adding another location. I looked all over the city; Manhattan, Brooklyn, everywhere. But I didn’t pulled the trigger. I didn’t want to venture out and have the second store be a failure,” he says.

There are so many failed restaurant locations in New York City that it’s difficult to know you’ve checked all the demographic angles. “You wonder, ‘Why has this corner failed so often? What will make me different?’” he says. “It’s scary but it’s something you have to confront if you want to grow.

“When we go, we should go strong so that when the second location catches on we can segue into a third and fourth. That’s how I’d want to do it. It will just depend on the right location with the right build out and so on. If I found the right spot, I’d take a chance on it.”

Last Week’s Most Intriguing Burgers

Most of the talk last week focused on Big Chains. That’s fine, but let’s not lose touch with the independents who are keeping burger creativity alive with creations such as those below. All appeared on menus last week. Tuck in.

Click here to continue reading Last Week’s Most Intriguing Burgers

McDonald’s Cooks Up Steak Menu in Australia

McDonald’s has put steak on the menu in Australia, adding two new McWraps (Steak & Garlic Aïoli and Steak & BBQ), a Steak Salad with Thai-Style Dressing and a Steak & Egg Brekkie Wrap for mornings. For budget buyers there is a $3 Mini Steak Taster wrap that’s less than half the AUS$7.95 (US$6.96) price for the full-size wraps.

A lunchbox-like pop-up restaurant is dispensing free $3 Taster wraps to build awareness and trial.

A lunchbox-like pop-up restaurant is dispensing free $3 Taster wraps to build awareness and trial.

Unlike the steak products on its U.S. menu, which are chopped steak (as on the Steak & Egg Bagel), the Aussie menu features marinated and slow-cooked pieces of rump steak (which we call sirloin).

McDonald’s is promoting the launch not only with broadcast and online marketing but also with a pop-up restaurant designed to look like a huge lunchbox. Free $3 Tasters are being handed out to announce the new menu. It is in Melbourne now but will pop up in Gold Coast, Sydney, Adelaide and Perth.

Australia remains one of McDonald’s four troubled markets (along with the U.S., Germany and Japan). President-CEO Don Thompson this week said Australia’s September performance was its best monthly comp sales since August 2012. The Loose Change value meal is helping and the rollout of the “Create Your Taste” customization kiosks could bring additional traffic.

Hot Dogs, Chicken Boost Sonic Sales

Sonic Drive-Ins reported a robust 4.6% increase in same-store sales for its Q4 (ended Aug. 31, 2014) and credited the strong showing in part to a menu shift to hot dogs and chicken. However, the chain said its sales would have been even stronger had it not encountered “glitches” with its new point-of-service technology.

Sonic_CheesyDog“In the last three years chicken, the absolute amount of chicken that we’re selling has roughly doubled. So chicken is [a] much greater part of the entree business and hotdogs [are] also playing a big role,” President-CEO Cliff Hudson told analysts this week. Sonic hasn’t introduced a new burger since its Island Fire Burger last October (added along with an Island Fire Spicy Chicken sandwich). But it added Chili Cheese Pretzel Dogs in January 2014 and Cheesy Bread Dogs in July. Its chicken additions in the past year have included a Honey Mustard & Swiss Chicken sandwich, Cheesy Pub Chicken sandwiches in August and Boneless Wings in September.

“One out of every seven hot dogs eaten outside the home is eaten in Sonic in America,” said Hudson, citing data from NPD Group. He indicated Sonic will continue to add hot dogs and chicken to its new-item pipeline.

Earlier this year, Hudson announced plans to add an improved point-of-sale (POS) system and a Point of Personalized Sale or POPS platform to all company stores. These were forecast to improve food and packaging costs, reduce waste, optimize labor scheduling and increased suggestive selling capabilities when implemented. The rollout has continued but problems with the operating system were encountered in August and lasted until this month, Hudson said, resulting in a “negative impact on sales and service with our customers.”

Sonic_CheesyPubChicken2014“It has caused us to push back slightly some of the other implementation, the schedule which will be moving to this winter with franchisees, but we have assured franchisees as we had these experiences, that we would work this through and to their satisfaction before rolling it out with our franchisees,” Hudson said.

What Sonic has learned, he said, was that “we would have benefited in our owned stores had we done it in stages, first adapting the system as just a software based order taking system and then using the other elements, inventory, labor management, etc., the back office systems later.” As a result, instead of having 30 days to implement the technology, franchisees will do so over three to nine months.

Next year, when the glitches are worked out and all elements—including a digital loyalty program—are fully integrated, Hudson says he expects it will be a “distinctive and differentiated competitive advantage that Sonic has versus the competition.”

McDonald’s Pledges to Simplify, Localize, Customize

Relevance, simplicity, localization and customization were the watchwords of McDonald’s Corp.’s embattled response to a Q3 sales report that was even worse than the most dire forecasts. Insisting he is “confident in our ability to regain momentum,” President-CEO Don Thompson told analysts today that the brand needs to provide more choices and customization, which is what he says consumers are looking for. “We haven’t been changing at the same rate as our customers’ eating-out expectations,” Thompson conceded. “So we’re changing and changing aggressively.”

The "Create Your Taste" customization kiosks testing in Australia will be in three U.S. markets next year.

The “Create Your Taste” customization kiosks testing in Australia will be in three U.S. markets next year.

Whether it’s aggressiveness will be counter-productive remains to be seen. In January McDonald’s will simplify its menu, tossing out low-volume products (which he would not specify). At the same time, McDonald’s will restructure its U.S. system to give more local markets autonomy over their menu so they can add products they believe will do well in their markets. If Mozzarella Sticks or Chorizo Burritos (both currently testing) are somehow determined to be “relevant” to a region, the co-op can add them to the menu without an OK from corporate. This sounds like an echo of one franchisee’s recent complaint in the Janney Montgomery Scott survey that “They simplify…and then just add more products.” But Thompson insists it will make menus more local, relevant and appealing.

Core products like Quarter Pounders will get more national marketing support.

Core products like Quarter Pounders will get more national marketing support.

Readers of BurgerBusiness.com already are aware of the next element of what Thompson calls the “McDonald’s Experience of the Future”: the “Create Your Taste” customization kiosks now testing in Australia. This site wrote about them earlier this month; others followed. But while McDonald’s Australia promises to have the build-your-own-burger kiosks in all 900+ stores there within a year, Thompson said just three U.S. markets will begin testing by the end of 2015.

Thompson once again vowed to ramp up the company’s use of digital tools, including the rollout of the Apple Pay mobile payment system to all its U.S. stores (including the drive-thru). A reprioritization of resources will help fund all these initiatives, resulting in fewer new stores than had been expected in 2014. “We are targeting to identify and redirect nearly $100 million in savings for future, long-term growth initiatives such as the digital strategy and McDonald’s Experience of the Future,” said Thompson.

McDonald’s U.S. comp sales were down 4.1% for September and 3.3% for Q3. Europe’s quarterly comps were off 1.4% while the Asia/Pacific/Middle East/Africa region was down 9.9% for the quarter. But at least these declines had more easily identified causes. Russia’s political game-playing, resulting in more than 200 McDonald’s stores undergoing examinations for health violations, and the closing of Crimea’s stores accounted for the bulk of Europe’ decline. The tainted-food scare in China (which accounts for 10% of global sales) that reverberated through Japan and Hong Kong continues to depress Asian sales. Thompson said it likely will take six to nine months to fully restore consumer confidence there.

McD’s Operators: Monopoly Has to Stop Sales Slide

Janney Montgomery Scott analyst Mark Kalinowski has lowered his projection of McDonald’s Corp.’s September same-store sales to -3.6% from -2.5% based on a survey of 32 domestic franchisees’ opinions. The company will report September and Q3 sale on Oct. 21; the consensus forecast for September is -2.7%.

The Janney survey also finds that McDonald’s operators are heavily relying on the current Monopoly promotion to stop the ongoing sales slide.  “Everything depends on Monopoly,” one franchisee told Kalinowski.

McD_MonopolyGame“Hopefully Monopoly will give us a few more transactions,” said another. “Sales are trending down but Monopoly will help sales since it [did] in the summer of 2013 even if it will not help profits,” another operator said. “I am counting on Monopoly to stop the bleeding,” said another.

One franchisee said, “McRib should prevent further declines.” But the company has said that this fall’s McRib promotion will be a local option, not a national effort, which could reduce marketing support.

So what’s gone wrong? Franchisees pin blame for McDonald’s sales slide on a number of factors. “We just have nothing new to offer our customers,” was one explanation. Another cites “total loss of momentum.” Corporate management is a frequent target for these operators. “We are leaderless,” says one franchisee. “McDonald’s Corp. is scrambling to find answers to their problem,” says another. Click here to continue reading McD’s Operators: Monopoly Has to Stop Sales Slide