QSRs Freshen Image as C-store Competition Heats Up

JERSEY CITY, N.J. -- Out with the old and in with the new. That seems to be the mantra of many quick-service restaurants this summer. And while it may just be coincidental that most of the fast-food chains are sprucing up their images now, it may also be in response to stiffer competition from the convenience store industry.

According to a recent report, "Convenience Store Foodservice Trends in the U.S.," convenience stores are going head to head with QSRs with their own proprietary branded foodservice, as CSNews Online previously reported.

"By enhancing foodservice quality and variety, we believe convenience stores are poised to benefit from increased sales of gasoline and other merchandise, as consumers eek to consolidate their purchases in the interest of efficiency," explained David Sprinkle, publisher of Packaged Facts. "Because it is so well positioned, we anticipate that convenience store industry foodservice sales growth will outperform the retail and restaurant foodservice industry average through 2013."

To this end, Packaged Facts projects that c-store foodservice sales, which grew 6 percent in 2010, will increase another 6 percent this year and another 5 percent in 2012.

But are quick-service restaurants really feeling the heat?

"There is always pressure put on fast-food chains by anyone else that sells food to go, whether that's a convenience store or a deli," Joel Cohen, president of the Cohen Restaurant Marketing Group, told CSNews Online. "To me, people go to convenience stores for food for two reasons: strictly out of convenience, or to get food to be eaten right away and not taken home."

He acknowledged, though, that there are some exceptions."For example, Wawa has great subs and people go there [specifically] for them. They have made a name for themselves," he added.

More than trying to hold off the competition, quick-service restaurants and fast-food chains could be responding to changing consumers' needs and wants. For example, both McDonald's and Burger King have revamped their menus to appeal to mothers and children. For its part, McDonald's reduced the amount of French fries in each Happy Meal from 2.4 ounces to 1.1 ounces and added a piece of fruit or vegetable to each meal. In addition, the chain is working with mom bloggers to spread the word that it's not your mother's McDonald's anymore.

Burger King is also trying to attract women, specifically with the addition of strawberry smoothies, Asian chicken salads and Quaker whole-grain oatmeal. The company took its food-focused approach a step further recently when it decided to retire its iconic King character.

"I think their audience is growing up and becoming much more attuned to what's healthy and what's not," Cohen said. "Healthy food for kids and obesity are big topics lately, and I think that has really caused these chains to focus on that."

It may just be time for a change, as well. "To some extent, [the changes] are cyclical but it is also dependent upon competition," Juelene Beck, president and CEO of Juelene Beck and Associations, told CSNews Online. "Fast food has been extremely competitive. Overall, the category has been up by single digits and, in general, the major players are competing with each other for market share."

Part of the competition has been this emphasis on healthy foods or the perception of healthy foods, Beck added. "For the last eight years or so, the QSR category has really made huge improvements in the quality of their food," she said, agreeing that it was a major area that needed improvement.

The trend toward fresh quality food began with Arby's and its Market Fresh sandwiches, she explained, and McDonald's soon followed suit across all its menu offerings. "If you compare the food today at all the chains to 15 years ago, you will see a marked improvement in quality and freshness," Beck said.

However, the chains are not stopping at their menus. McDonald's has embarked on a massive remodeling effort, debuting its new look in Tampa this past spring. The majority of the company's 14,000 restaurants will receive a makeover at an estimated cost of more than $1 billion. Gone are the fiberglass tables and industrial steel chairs, the neon yellow and bright red interiors, and the McDonald's signage, front counter areas and well-known red roofs. Instead, customers will find wooden tables and comfortable faux-leather chairs, muted oranges, yellows and subtle greens, and earth-toned and glass exteriors.

"They are trying to slow down the fast-food experience and make [it] more comfortable for families to come and eat," Cohen explained. "It's more comfortable instead of real, real fast."

Speaking from firsthand experience, Cohen likes what he sees. "The change in McDonald's is really amazing," he said. "Some have McCafés and you almost feel like you are in Starbucks. It's a home away from home."

Burger King's new owner, 3G Capital, has also been implementing changes to BK restaurants since taking ownership in October. The new design features a black tower to give the locations more street-front visibility, and big letters proclaim the restaurant as the Home of the Whopper. Drive-thrus now have canopies. Inside, Burger King will have more seating options, with movable tables for large parties and booths with banners designed as privacy partitions.

Also making news, Beck said, is Wendy's. The chain, based in Columbus, Ohio, recently announced it was redesigning four test stores to have an ultra modern look.

"Their image was pretty dated and they haven't used it as a competitive advantage. They have generally focused on their food," she explained.

While these changes may keep customers coming back to fast-food restaurants, convenience stores will continue to challenge them for a piece of the pie. As CSNews Online reported exclusively in July, dining frequency at convenience stores was up 63 percent, from an average of 1.6 times a month to 2.6 times per month, according to a study conducted by AlixPartners. The study also included a business review of more than 120 foodservice concepts from QSRs to fine dining to convenience stores.

In comparison, fast-food and fast-casual restaurants achieved flat to 2-percent gains in dining frequency over the past year. The report predicted that QSRs will continue to gain strength as the economy improves, but that c-stores will keep making inroads on the fast-food business.