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Monday Meeting: QSR Spending & Meat Beasts

The average Vermonter spent $28 on fast food in May. In Oklahoma, however, that’s slightly more than a week’s worth since consumers there spent $101 during the month. These two states are at the extremes in the Intuit Consumer Spending Index’s state-by-state spending data. Intuit uses credit- and debit-card data plus its consumer budgeting tool to compile the data.

Fast-food spending differs by state, gender and marital status.

After Oklahoma, the biggest spenders in May were Arkansas ($84) and Kansas ($83). The lightest spenders cluster in the Northeast: New York (tied with Vermont at $28), Massachusetts, New Jersey and Connecticut. Californians come in toward the low end at $47 for the month of May. Residents of New York State spend about $330 on fast food for the year. Oklahomans spend four times that amount: $1,314.

Not surprisingly, spending differs by gender. Men spent $58 in May; women spent about $47. The average married adult spent $60 on fast food for the month; singles spent just $46.

 2) Last year, Burger King in Japan created the Meat Monster Whopper with extra cheese, bacon and beef plus a chicken patty. How to top that? The Garlic Meat Beast. There’s just one beef patty, but it’s a quarter pounder. And instead of bacon there’s a ground-pork patty to go with the chicken breast fillet. So that everyone knows what you ate, the toppings  are plenty of fried garlic slices with red miso, green-onion and teriyaki sauces, lettuce, mayo and tomato. For all that, ¥650 (roughly $6.62) seems reasonable.

Can’t handle the Beast? BK has a second new LTO: the Double Garlic Cheese burger. That’s two beef patties with fried garlic, Cheddar and spicy Caesar sauce. According to NeoGAF, this burger is priced at ¥200 ($2.04) for the first four days, after which it jumps to ¥350 ($3.56).

Meanwhile, Wendy’s, which is just fairly new to creating overblown burgers in Japan, has introduced the Prosciutto and Mozzarella Italiano burger there. Its other toppings include bacon and a basil cream-cheese sauce.

Dunkin’ Donuts Readies Pretzel Roll Sandwich

[Update: Dunkin' Donuts introduced its Pretzel Roll Roast Beef Sandwich LTO on Aug. 5. Additionally, other bakery sandwiches can bee served on a pretzel roll for a limited time.]
Dunkin’ Donuts jumps on the pretzel-roll bandwagon next week (7/29) by rolling out a new Pretzel Roll Bakery Sandwich, the chain told analysts this week.

Wendy’s Pretzel Bacon Cheeseburger got the fad rolling.

The introduction follows Wendy’s introduction of a Pretzel Bacon Cheeseburger and Sonic’s Pretzel Dogs in operators’ never-ending search for something new and interesting. The Pretzel Roll Bakery Sandwich also reflects Dunkin’ Donuts continuing push to establish itself as more than just a coffee/breakfast concept. Mornings are still vital to its success, of course, as evidenced by the recent addition of a Hot & Spicy Breakfast Sandwich and Hot & Spicy Breakfast Wrap.

For burger chains like McDonald’s, which get 25% of sales from breakfast sales, Dunkin’ is thus becoming an more serious competitor. McDonald’s CEO Don Thompson likes to talk about the need to steal market share in a low-growth marketplace. Dunkin’ has a solid share of the morning market, but it’s looking to steal lunch and afternoon sales from other QSRs by cycling in more limited-time offer products.

McDonald’s has tested a Steak & Egg McMuffin and Biscuit.

“The introduction of the Chicken Salad and Tuna Salad Wraps and the launch of the new chicken sandwiches both exceeded our expectations and are further examples for growing outside of the morning daypart with products that build on our bakery heritage,” Dunkin’ Chairman CEO Nigel Travis told analysts this week. The Pretzel Roll Bakery Sandwich name clearly is meant to emphasize that heritage to consumers.

To protect its breakfast share, McDonald’s looks to leverage the popularity of its McMuffin. The new Egg White Delight McMuffin is an example. The chain also has tested a hybrid that melds its standard McMuffin with its Steak, Egg & Cheese Bagel.  The Steak and Egg McMuffin and Steak and Egg Biscuit have been tested in selected markets, including in Ohio.

Dunkin’ Donuts has more than 10,500 restaurants in 31 countries worldwide. Global systemwide sales last year were about $6.9 billion. But the company has said its goal is to have 15,000 locations in the U.S. alone. At the beginning of 2012 McDonald’s had 14,157 U.S. locations. Its U.S. sales were $35.6 billion; global systemwide (company and franchised) sales in 2012 were $88.3 billion.

Technomic Names Diners’ Top Specialty Burgers

Pondering your next burger special? If you don’t have a Philly-style cheesesteak burger, that could be a good choice. New consumer research from Technomic finds Philly Burgers are the top choice (54%) when diners are given a list of specialty burgers and asked which they’d be most likely to order.

Nearly two-thirds of diners say the build-your-own-burger option at operations like The Counter appeal to them.

That means the eight-unit Jake’s Uptown burger chain in Texas is right on trend: Its Burger of the Month for July is a Philly Burger with double meat, provolone cheese, sautéed green bell pepper, onion and mushrooms.

What else would diners order? No. 2 is a Cajun Burger (40%), followed by Southwest (37%), Cuban (32%), Hawaiian (28%) and Asian (27%) burgers. Suggested builds for each of these are on our “Killer Burger Recipes” page.

Skeptics who predict a imminent deflating of the “burger boom” please take note: Technomic finds that 95% of consumers say they eat a burger at least once a month (no doubt this includes nonmeat burgers). What drives burger buying? Nearly half the sample (46%) says “cravings” are among the top reasons.

Other findings from Technomic’s newly updated Burger Consumer Trend Report research:

» Asked for their beef preference, consumers are most likely (41%) to say they like Angus beef. It’s followed by all-American ground beef  (33%), sirloin (11%) and Kobe (3%) with 12% expressing no preference. More than half the survey respondents (55%) want the menu to give information on kind of beef used.

» Fast-casual burger concepts are visited by 51% of consumers at least once a month. That’s a significant rise from last year’s 43%.

» Is the desire for gluten-free burger buns real? Technomic finds that 23% of diners (especially young adults) want that option. Vegan choices are requested by 23%; vegetarian by 22% (vs. 18% a year ago).

» The build-your-own-burger option appeals to nearly two of three diners and 64% say they want to at least customize their burger’s toppings.

» Using fresh, never-frozen beef? Let diners know because 51% say that’s important to them

London’s Other Delivery News This Week

With all hype and hoopla given to the London arrivals of Shake Shack and Five Guys, it’s nice to see that a local burger bar is opening with the distinction of being the first to offer delivery.

Andy Shovel and Pete Sharman are the founders of Chosen Bun, now open on Fulham Road. Perhaps you know them because the two came to the U.S. at the end of last year to check out our burgers. They claim to have eaten three burgers a day (at least) on a 10-day trip from New York City to Naples and Miami, Fla., and Los Angeles. “We learned lots and got a little sick of beef. Only for a few days though,” they report on their website.  All told, they estimate they at 1,000 beef patties in the past 10 months as well as “10 different types of lettuce, 12 types of pickled gherkin, dozens of different buns, 30 different onion ring recipes, and 50 triple-cooked chip recipes.”

They vow to deliver a hot, juicy burger by motorbike within 30 minutes to any address in a 2-mile radius of the shop.

How do you keep the burger bun from getting soggy (the bane of burger delivery schemes)? “The order of ingredients is also crucial—we coat the bottom bun in chutney to stop it sagging with juice and we protect the top bun from sauce with lettuce,” Shovel told The Telegraph. The chutney trick is one that Burger King surely is not trying with its delivery test in the U.S.

Proprietary packaging keeps Chosen Bun’s burgers together for transport.

Their other fail-safe is proprietary packaging. A flat ring keeps the burger layers in place during the bike ride and keeps its aerated so steam doesn’t make it all go limp. Shovel and Sharman have patented the idea. “We used to test our packaging prototypes by throwing them across the street to one another for 15 minutes—we only stopped when we found a design that stood up to this!” Shovel told the newspaper.

So what did all their burger research yield? A selection of pricey, interesting, inarguably British burgers, for each of which the Chosen Bun “C” is branded on the crown of the bun (as Umami, BurgerFi and several others do here). The basic burger is The Patty (£7.75/$11.92): a Scottish beef patty, caramelized red onion and garlic chutney, lettuce, ketchup, mayo and Nicks pickles. That price includes a side of “Belgians”: crunchy, skin-on, triple-cooked fries with rosemary salt (£3.25/$5 as a standalone side).

The Shoveman (£9.50/$14.61) is Scottish beef with that caramelized red onion & garlic chutney, lettuce, Cheddar cheese, Shoveman sauce, smoked streaky bacon and Nicks pickles. Again with Belgians included. There’s a chicken burger and a veggie: The £8.75/$13.46 Edemamy with a shredded chestnut mushroom, shitake mushroom and edamame bean patty topped with mozzarella with caramelized red onion chutney and Garrick aïoli. Free Belgians? Yep.

Other sides include “Onyeung” Rings, fried mac&cheese bites in panko breadcrumbs and a “broccoli and jesamame slaw” (that one stumps me). A limited selection of wines and lagers are offered.

McDonald’s New Tactic: Free Food

Speaking to analysts earlier this week, McDonald’s CEO Don Thompson said the Dollar Menu frees the chain from having to use “aggressive short-term discounting tactics” in the U.S. But in Australia, McDonald’s next week will begin offering the ultimate discount: free food

On July 29, McDonald’s stores in Australia will be giving away free Bacon & Egg McMuffins.

On Monday (7/29) between 7 a.m. and 10 a.m. McDonald’s stores in Australia will give free Bacon & Egg McMuffin sandwiches to the first 1,000 customers as part of a “Making Early Easy” promotion aimed at building breakfast sales. The promotion repeats on the following three Monday mornings as well, with giveaways of a hash brown patty (Aug. 5), small orange juice (Aug. 12) and Sausage McMuffin (Aug. 19) respectively.

The giveaway is an uncharacteristic tactic for McDonald’s, which historically has used discounting sparingly. But this promotion suggests a bit of nervousness at the chain about Australian sales trends. The chain’s second-quarter report issued this week showed negative same-store sales in Australia, one of the chain’s three main Asian markets (with Japan and China).

Thompson ascribed the same-store sales decline to tough comparisons with the year-ago introduction of the Loose Change budget menu as well as “lower levels of consumer spending and heightened competitive activity.” But he also told analysts that McDonald’s still has increased its share of the eating-out marketing in Australia, “by balancing our focus on the core with new product introductions and promotional activities.” Recent product introductions have included Big Tasty burgers and a three-item line of chicken burgers (the McChamp, McSpicy and McGrilled). Breakfast additions have included a Chorizo & Egg McMuffin and Double Bacon & BBQ Roll.

Australian rival Hungry Jack’s (Burger King) has discounted, too, with a 2-for-1 deal on Whopper Jrs. and Stunner Deals such as a Double Cheeseburger, fries, drink and sundae for AU$5.95.

Wendy’s Pins Sales Hopes on Pretzel Bacon Cheeseburger

Wendy’s reported a limp +0.4% gain in company-store comp sales for Q2 (vs. a Wall Street consensus expectation of +1.1%). The company is relying on its pricey new Pretzel Bacon Cheeseburger to rescue 2013 sales.

The Pretzel Bacon Cheeseburger needs to be a big hit if Wendy’s is to reach its goal of a 2%-3% same-store sales gain for the year.

Franchised stores fared worse, rising just +0.3% in Q2, but Wendy’s responded by announcing an initiative to increase the number of franchised stores. The company that devised “Image Activation” for remodeling now gives us “system optimization” as a new way to say refranchising. Wendy’s plans to refranchise 425 restaurants in its 6,500-store system, thus reducing the share of company-operated stores to 15% from 22%. System optimization thus reduces the company’s need to spend for Image Activation, putting more of the financial burden for remodeling the system on franchise operators.

The essentially flat Q2 sales suggest that the Flatbread Grilled Chicken entrée introduced in April wasn’t a huge hit with consumers. But CEO Emil Brolick told analysts the Pretzel Bacon Cheeseburger introduced earlier this month at $4.69 is “meeting our high expectations” so far. He said the menu/marketing calendar has some “very exciting ideas” coming in the next several quarters.

“We’re used to building sandwiches to order,” Brolick said, “You’d be hard pressed to fund that [elsewhere] other than at fast-casual restaurants.”

Year-to-date comp sales for the company are +0.7%, which didn’t dissuade Wendy’s from standing by its projection that total-year same-store sales will be +2% to +3%. Brolick acknowledged that anticipated strong sales for Pretzel Bacon Cheeseburger are a major reason for its comp-sales confidence. Wendy’s company-store profit margins were at 16.7%, up from 14.1% a year ago (but below the 18.7% margin reported by McDonald’s).

In addition to refranchising its system, Wendy’s expects to shrink it in North America. This year Wendy’s expects to close 20 to 30 units while opening 25 stores (all with the new design). Franchisees are expected to close as many as 100 stores while opening 40. Overseas, growth will be positive with 60 openings and 15-20 closures.

Wendy’s says franchisees have applied to remodel nearly 150 stores under a $10 million corporate program to help fund the improvements. Approximately 100 reimaged stores will be operating or under construction by year-end.

Can Suggestive Selling Save McDonald’s?

Would you like an order of high-profit fries with that? McDonald’s Corp. says it is using more suggestive selling at U.S. restaurant counters to combat “challenged” sales.

New Quarter Pounders were Q2′s major menu addition.

It likely will take much more than that to keep McDonald’s growing, but CEO Don Thompson offered no new tactical shifts when asked during today’s earnings call what his chain will do differently to regain sales momentum. For Q2 ended June 30, 2013, McDonald’s reported that global comp sales were +1.0% both globally and in the U.S.  Comparative sales in Europe and APMEA were down

However, Thompson insists the problem lies with the marketplace—especially the declining Informal Eating Out (IEO) market that the company loves to cite. “We recognize that this is a challenging market but we’ve been through challenging markets before.” The economic recovery of the IEO has been slower than for the broader retail segment, he said.

Thompson insisted that the real measure of success in this challenged marketplace is market share and that “we’re winning in the marketplace” by this measure. McDonald’s gained 0.1 share points in Q2. Since the beginning of the year, McDonald’s has outperformed the IEO market by a full 1.0 point. Click here to continue reading Can Suggestive Selling Save McDonald’s?

Research Finds Calorie Info Counterproductive

McDonald’s posted detailed calorie information nationally in 2012.

Overloading consumers’ brains with nutrition information may not be the way to keep them from overloading their plates.

A new study of McDonald’s patron’s food-purchasing behavior finds that providing information about recommended calorie intake coupled with posted calorie information not only doesn’t reduce calorie intake, there is some evidence that such recommendations may promote purchase of higher-calorie items.

The study, “Supplementing Menu Labeling With Calorie Recommendations to Test for Facilitation Effects,” has been published online in the American Public Health Association’s American Journal of Public Health. The paper’s authors are Julie S. Downs, Jessica Wisdom and George Loewenstein of Carnegie Mellon University, and Brian Wansink of Cornell University. Wansink also is the author of the influential 2006 book, “Mindless Eating: Why We Eat More than We Think.”

This new study finds a good deal of mindlessness as well. The stated objective of the tests conducted was to see how food purchasing would be affected by providing information on per-day or per-meal calorie-intake on top of mandated posted calorie information. Data was gathered during lunchtime at two New York City McDonald’s restaurants (one in Manhattan, the other in Brooklyn). Data was gathered before and then again after New York City’s 2008 mandate that restaurants post calorie counts for menu items. On entering the restaurant, customers were handed a slip that showed recommended calories per-day (2,000 for women; 2,400 for men), handed a slip explaining recommended per-meal calories (650 or 800), or given no recommendation information (the control group). As they left, customers returned their slips coup0led with their meal receipts.

All of this calorie information did not result in healthier eating. More than half the 1,121 adults involved exceeded the recommended per-meal calorie intake. Women’s meals average 824 calories; men’s averaged 890 calories. About one in three adults purchased meals exceeding 1,000 calories.

Before calories were posted, the entrées diners purchased averaged 334 calories for those who received no recommendations and 369 for those who were given per-day or per-meal intake targets. After menu labeling took effect, both numbers rose rather declined: 348 per entrée for no recommendations; 410 for those receiving recommendations.

So why the increase in calorie intake? The study authors speculate that because “many popular entrées are below the recommended guidelines (e.g., a Big Mac contains 570 calories) [they] may provide a false sense of staying within the calorie allowance, which could license larger purchases and allow consumers to ignore the calorie load of other components of the meal, which would push the meal total beyond the recommended amount.”

Whatever the reason, the inescapable conclusion they draw is that the results “provide little hope that calorie recommendations will salvage the apparent weak or nonexistent effect of menu labeling.”

But rather than concluding that restaurant operators shouldn’t be held responsible for educating consumers about healthy eating, the authors of the study suggest exactly the opposite. Why not “incentivize restaurants and manufacturers to promote high-margin, healthier items,” they ask. As an example, they suggest lowering the price on combo meals that include a diet soft drink or water.

This study seems to conclude that the problem lies not with the information restaurants provide but with consumers unwillingness or inability to use that information wisely. As such, it seems unreasonable to ask restaurants to do more before consumers are required to make improvements.