Last Year's Winners And Losers In Fast Food Franchising
Written by Ken Gaebler
Demand for burgers was up, while demand for chicken and sandwiches was down in food service and restaurant chains in 2014.
Remember how consumers were moving away from burgers toward healthier fast food menu items a few years ago? Well, Americans' love affair with the burger is definitely back on as burgers were a leading menu item at restaurant franchises in 2014--even though beef prices increased and store traffic was essentially flat.
Burgers Rise, Chicken and Sandwiches Fall
A recent NPD SupplyTrack study showed that consumers ordered 9 billion burgers at restaurants last year, a 3 percent year-over-year increase. Although total bulk ground beef shipments to food service businesses only rose by 2 percent, bulk ground beef orders to quick service hamburger restaurants climbed by 4 percent. According to Fast Casual, hamburger chains account for 70 percent of all bulk ground beef sales.
"The success of burgers in 2014 was a combination of factors," said Bonnie Riggs, NPD's restaurant industry analyst. "Quick service restaurant chains launched new burger items, casual dining restaurants added more burger items to the menu to offset higher beef costs, and Americans simply love their burgers."
Demand for sandwiches, on the other hand, saw a year-over-year decline of 2 percent, representing a volume loss of 201 million units. Grilled chicken sandwiches suffered a 9 percent drop, falling by 129 million servings in 2014.
McDonald's Problems Continue
Rising demand for burgers didn't seem to help one of the nation's most ubiquitous burger chains. Recently, McDonald's CEO Don Thompson stepped down amidst reports that the franchise continues to report falling earnings and declining same-store sales.
Industry experts cite multiple reasons for McDonald's financial issues. In addition to a failed rebranding effort that involved a push for healthier menu items, the chain has experienced serious challenges due to consumers' preference for fast casual restaurants.
The remedy? "I think they need to look at the local demand, the different preferences, taste preferences, different demographics in each market and start to come out with more localized product decisions and localized marketing decisions as well," RJ Hottovy, Morningstar's global director of consumer equity research, told CNBC.
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