Over the past several years, consumers have been shifting away from greasy fast food restaurants such as McDonald’s, Burger King and Wendy’s in favor of “fast casual” options that are perceived to be fresher or healthier, such as Panera Bread and Chipotle.
Fast casual restaurants are quickly becoming popular because they are able to provide the convenience of fast food without all the calories. Although a typical meal at these restaurants tends to range from $8-$15, significantly more expensive than the $3-$6 fast food meals, consumers are willing to pay the price. Chipotle is an example of this, with revenue growing at close to 20 percent for the past five years.
Faced with increased competition, fast food restaurants are turning to new strategies. McDonald’s has attempted to be more competitive with their breakfast offerings and has been heavily promoting its McCafe beverages.
Wendy’s is giving its restaurants a makeover and is adding new items, such as pork, to the menu. Burger King is purchasing Canadian chain Tim Hortons and is relocating to Canada in order to take advantage of lower Canadian tax rates.
Although they have been making improvements in order to keep up with fast casual dining chains, fast food restaurants continue to struggle. Analysts doubt McDonald’s will continue to grow. Wendy’s did not have the level of success that was expected with their new menu items, and the process of redesigning restaurants will be costly. Burger King is getting closer to finalizing the purchase of Tim Hortons, but the Canadian government still needs to approve the deal.
As fast casual restaurants increase in popularity, it remains to be seen whether there is still room in the market for traditional fast food chains. Only time will tell if the changes that fast food restaurants are making will be enough to keep them from losing market share to their newer competitors.