Economic Downturn in 2008-2009 - QSR Industry
Insights surrounding the quick service restaurant (QSR) industry's response to the economic downturn in 2008-2009,in US include experimenting improper marketing strategies, franchising more, growth in breakfast and lunch promotions, promoting more cutomer-focused deals, and exploring new consumer markets and offerings.
Experimenting Improper Marketing Strategies
- During the 2008-09 recession, most of the quick service restaurants applied improper marketing strategies such as setting a low menu price to cope with the situation and be able to attract customers to come to eat and persuade them to order more expensive items.
- Burger King sold its double cheeseburger for $1 when the cost is $1.1 in 2008 as a promotion strategy to attract customers to spend more on more profitable items but this did not cater in profits although resulted in a lawsuit sued by franchisees.
- "McDonald’s, as a global powerhouse, spent 7% more on advertisement in 2008 while others cut back". The QSR also tried to introduce its new and improved drink Mc Cafe coffee during the recession and applied the marketing strategy of keeping prices down with better quality for customers without sacrificing their own profit, resulting in increased sales by 5.4% in January 2009.
- Taking advantage of the "growing unit count by leaps and bounds with a combination of private-equity investment and cheap loans," most of the QSR companies in US adopted re-franchising along with turning their corporate ownership to franchisees.
- In 2008, Mc Donald's owned 15% of corporate ownership by operating more than 2,000 of its outlets in US but turned the same reducing to less than 900 of its more than 14,000 locations recently.
- Other companies, such as Burger King, Yum Brands, Wendy’s, Applebee’s, TGI Fridays and many others also sold corporate stores to franchisees.
Growth in Breakfast and Lunch Promotions
- According to Harry Balzer, chief industry analyst, the growth in breakfast and lunch visits to quick service restaurants to leverage discounts at lunch and other strong promotional activities, contributed to the slight gains in the industry. This made food service traffic to advance by +0.2 % in for year ending November 2008 and consumer spending growth by 2%.
- During the 2008-09 recession, consumers intended to spend less and considered full service restaurants as luxuries and low menu priced.
- This tempted cheap meal menus of QSR's as necessities wherein the Industry adopted logic of “trading down” theory, giving customers affordability who could not afford to eat at full service restaurants any longer.
- Subway launched its $5 foot-long subs of Subway which was quite a value to the customers leading to an incremental increase in sales.
- Buffalo Wild Wings (BWLD) brought in its lower price all day menus along with luxury to enjoy televised sports while enjoy beer and chicken wings leading to an increase in profits by 34% in 2009.
Promoting More Consumer-Recognized Deals
- According to the NPD report, quick service restaurants adopted more of some type of consumer-recognized deals leading to the 6% increase in promotion-related deal visits out of which 90% came from QSR's along with 1% slip in non-deal visits during annual period ending November 2008.
Exploring New Consumer Markets and Offerings
- During the economic downturn, most of the QSR explored the strategy to look for new opportunities wherever they could by either expanding or altering their food menu options for consider expanding to new territory and find new audience.
- In 2009,Dominos began to reinvent its 50 year old legacy pizza and announced a change in its signature pizza recipe and launched a million dollar spending national ad campaign.
- The campaign was based on the study of change in the perception of people and interacting with consumers about the new improvised pizza through blogs, in newspapers, on television news shows, and even the late-night entertainment programs.
- McDonald expanded its offering by leveraging,"higher-margin good that could appeal to a new class of trading-down consumers: coffee". The national launch of the McCafe premium coffee line-up contributed to 3.5% increase in its 2009 sales.
- McDonald also expanded its territories and explored new market in and outside United States delivering strong comparable sales in the U.K., France and Russia regions.