Long before New Year’s Eve, it was clear that 2019 was a momentous year for the nation’s fast-food and fast-casual restaurants. Some chains soared as they rebuilt from past stumbles. Others faltered as they sought to identify a winning strategy. Some of the biggest brands changed hands, and one got plain lucky from a wildly successful viral sensation.
Here’s a look at some of 2019’s biggest storylines—and what they might mean for the direction of the industry.
Bruno Cardinali, who leads Popeyes’ marketing for North America, says the sensation began with the quality of the food. But it quickly grew to something more, as customers organically posted photos and videos of trying it out or waiting in line to get a taste.
“The hype around the product left a lasting impression and became a part of pop culture,” Cardinali says. “Any brand can launch a new product, but it takes something special to spur the crazy demand and hype that our Chicken Sandwich generated.”
This year, the company made significant investments in technology, including a new rewards program and tests of Chipotlanes, which are drive-thru windows designed for digital orders.
CFO Jack Hartung says executives don’t define success by Wall Street performance, but it’s a nice endorsement nonetheless. Even with a hallmark year, he says, there’s plenty more room for menu innovation, digital investments, and store count growth. While the stock price has rebounded, he notes that average unit volume is still well below 2015 levels, signaling plenty of runway.
“We are not even halfway in terms of our total restaurant potential,” Hartung says. “We think we can open up at least 5,000 restaurants, if not more.” Chipotle has around 2,500 locations today.
Why it matters: Chipotle not only overcame its previous battle over foodborne illnesses, but it also cemented its place as a formidable and high-growth competitor for the future.
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McDonald’s acquires tech providers
In March, McDonald’s paid some $300 million for Dynamic Yield, a digital data tool that provides personalized promotions to customers on the menuboard, particularly in the drive thru. That acquisition was followed by the September purchase of Apprente, a leader in voice-based technology. That tool should offer McDonald’s customers a faster, simpler, and more accurate experience at the drive thru by largely automating the ordering process using artificial intelligence.
Restaurant operators largely grasp the growing importance of technology, but there’s widespread confusion about the best ways to adapt to changing consumer behaviors, says R.J. Hottovy, restaurant analyst at Morningstar.
McDonald’s isn’t traditionally known as a technological leader, he adds. But the two acquisitions show that the company is serious about shaping the future of restaurant technology—not just reacting to it. “I think it sends a signal that they really want to be ahead of the curve,” Hottovy says. “It just shows you how important technology is going to be to the restaurant experience going forward.”
Why it matters: The move underscores a growing truism in the industry: Restaurant companies are no longer just users of technological innovation but often drivers, too.
Burger King’s LTO adds to a growing lineup of quick serves—including Del Taco, White Castle, and even McDonald’s in a recent test—offering plant-based proteins. But adoption by one of the biggest fast-food concepts lends even more credibility to such products, says David Portalatin, a vice president and food industry adviser for The NPD Group. Veggie burgers have been around forever, but he credits recent innovations that created better-tasting alternatives for the growing recent demand.
The acquisition means the Roark Capital Group–backed umbrella company will operate more than 11,200 restaurants with $14 billion in annual sales.
Inspire should be able to lean on Jimmy John’s expertise with in-house delivery. And the parent company will help Jimmy John’s accelerate menu innovation, marketing, and new store development.
“I couldn’t be prouder of the company we’ve built,” Jimmy John’s founder and chairman Jimmy John Liautaud, who will step down as chairman, said at the time of the announcement, “and I can’t wait to see what Jimmy John’s is able to accomplish under Inspire’s leadership.”
Why it matters: Jimmy John’s addition catapults Inspire to the nation’s fourth-largest restaurant group—just the latest milestone for a company with even more audacious ambitions.
Wendy’s will make a $20 million investment and hire 20,000 crew members to staff the expanded daypart. The breakfast news received an icy reception from investors, who seemed unsure that the investment would pay off.
But Portalatin says Wendy’s interest in growing the day-part is obvious: Breakfast is the occasion consumers remain most likely to prepare and eat at home. So quick serves can convert those customers from their home kitchens rather than battling with competitors for existing share. Plus, research shows many American consumers eat multiple times in the morning, he says.
“I may have a piece of fruit and a cup of coffee at home and on my commute, I go through the drive-thru window and get a breakfast sandwich,” Portalatin says. “And then I may have a doughnut at the office. There’s three.”
Why it matters: After previously dabbling in breakfast, Wendy’s is betting big that the daypart can expand sales across its 6,000 U.S. stores. This could ignite another round of breakfast wars in the industry.
In 2018, Steak ’n’ Shake unveiled plans to build out single-unit, operator-run stores, like Chick-fil-A; the company asked for an initial investment of just $10,000 per store. But efforts to convert to that model stalled in 2019, with more than 100 stores sitting empty awaiting conversions. In July, Steak ’n’ Shake reopened a St. Louis outpost under the new model, but it was the only one publicized as part of the transition.
Gary Stibel, founder and CEO of the New England Consulting Group, says the refranchising struggle is indicative of the brand’s wider failure to identify and execute a solid strategy.
“It seems like Steak ’n’ Shake is a brand whose strategy is not as solid, because it keeps changing,” he says. “There are times when you want the strategy to change. But strategy of the day is not strategy at all.”
Why it matters: Sales and traffic have been sinking for years at one of the nation’s oldest restaurant chains, and it’s unclear how it will bounce back.
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The never-ending delivery saga
Restaurants’ relationship with one of the biggest industry trends—delivery—continued to evolve in the last year.
As more evidence of the bubbling fee frustration with third-party delivery providers, several restaurants this year filed a class-action lawsuit accusing Grubhub of inappropriately charging fees for phone calls customers make to complain or check the status of orders.
Collectively, 2019 showed that the delivery conversation is rapidly changing.
Stibel expects most brands will soon settle on some sort of a hybrid model, offering a mix of in-house and third-party delivery. But he says they should consider more than just delivery.
“Delivery of the future will morph into convenience, which includes takeout, it includes home and office delivery, it includes catering,” he says. “It’s more than just delivery.”
Why it matters: Nothing has reshaped the restaurant in recent years more than the rise of delivery—a force that restaurants continue to grapple with.
The new faces joined as the chain worked to rebuild after the prolonged battle with founder and former CEO John Schnatter, who came under fire following an allegation he used a racial slur. In the wake of that scandal, Papa John’s suffered its first sales decline in a decade.
But new leadership seems to be righting the ship, says Jason Moser, restaurant analyst at The Motley Fool. He dubs it their “Brian Niccol” moment—a key leadership change indicative of their turnaround efforts, referencing Chipotle’s hire of Taco Bell’s old CEO. None of the controversy was ever about the food at Papa John’s, Moser says, but really about a personality many found distasteful. Thus, the brand rolled out a marketing campaign that highlighted the role of local store owners and employees.
“It was almost genius, really,” he says. “You had more of a personal sense that you were helping someone in your community as opposed to supporting a business with a guy you don’t believe in.”
Why it matters: New leadership and marketing has poised Papa John’s to win back customers and sales that previously slipped away.