“The thing about Jamba is we don’t lack opportunity,” Clayton says. The challenge will be focusing on a few things while ensuring a high level of execution.
With more than half the year behind us, there are issues that can be identified that will affect the next QSR 50. Increasing petroleum and energy costs continue to impact consumers’ use of dining out options, says WD Partners’s Lombardi. An additional side effect of petroleum prices is the increase in use of corn for ethanol production. As corn demand increases for fuel, prices for animal feed increases and pushes chicken, beef, and milk product prices higher.
With McDonald’s adding premium coffee, Burger King expanding breakfast, and Wendy’s trying to break into the breakfast daypart, Lombardi predicts breakfast wars as the big chains search for growth on the unit level.
“Breakfast is the logical area since they’ve beaten each other up over lunch and dinner,” says Lombardi.
The influence of private equity investments might be reaching a crescendo as well. Lombardi notes that the multiples paid for restaurant chains were higher than ever in 2007. Though he expects that trend to continue in 2008, Lombardi says it is possible in the next several years that the firms will become more involved in operating management if their purchases don’t lead to anticipated returns.
On the consumer side, Lombardi warns that foodborne illnesses, which increased in 2006, will change the way things are done. Whether or not illnesses arise in restaurants, the implications could be big.
“Each time it happens it leaves a little more doubt about the food supply process,” Lombardi says. Consumers will become more aware and vocal about restaurant processes, he predicts.
Lombardi also predicts that traditional quick-serves will continue its move upscale. With the continued growth of fast-casual chains, that only makes sense.
“The quick-service part of this business used to be about speed and how much you get for a dollar,” says Panera’s Yanofsky. “Customers are smarter than that and they want quality.”
So for 2008, expect the QSR 50 to once again highlight the quality the industry has to offer. McDonald’s will still rake in the cash. Subway will be in every strip mall. Panera will give us quality food. Starbucks will sell more coffee than anyone. Burritos will be in every hand, and smoothies will all help us feel better about ourselves.