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Fast food chains freshen their menus

With fast food under the gun from health advocates, and public tastes changing, the industry is trying to cook up a new recipe for growth. It centers around being fresh and different. By Philip LeBeau.
/ Source: CNBC

With fast food under the gun from health advocates, and public tastes changing, the industry is trying to cook up a new recipe for growth. It centers around being fresh and different.

THE BURGER AND FRIES guys know they have to change. Theirs has become a very slow growing market. So fast food is trying to slow down and re-make itself with fresh concepts and fresh items that people want.

Fast food doesn’t have the best image with consumers right now, many of whom say price is no longer as important as health when they choose from the menu. So whatever the name, whether it’s McDonald’s, Burger King, or Taco Bell, these are tough time for the fast food chains.

So they are branching out, both on the menu and in the restaurant business.

“I think these new fast food places are telling Americans there is a different way to eat fast food — not just your traditional places,” said Harry Balzer, who follows the fast food industry at the market research firm NPD Group. “We can give you places that have a little more atmosphere, maybe not as fast, maybe made to order you see it being made, not fried but it is a new alternative for us to try.”

The new alternative is a category known as “quick casual.” Chains like Subway, Panera Bread, and Cosi have exploded in growth by offering fresh sandwiches at restaurants that seldom have drive through lines. Last year, while fast food revenue was up 3.4 percent, quick casual chains grew almost 5 times faster.

“From what we can tell there is about 7,000 units that fall into this newer segment,” said Ron Paul, president of Technomic, a consultant to the food service industry. “And they seem to be doing quite well. We believe they are experiencing about double-digit growth, and our forecast would suggest that would continue for at least 5-7 years.”

The current and projected growth in these quick casual restaurants has caught the attention of the fast food giants. That’s why McDonald’s is slowly expanding its Mexican food subsidiary, Chipotle. Wendy’s Intl. is following a similar approach with Baja Fresh. And just last month, Jack in the Box bought Qdoba, another chain with Mexican flair.

These subsidiaries are still so small that they barely impact the bottom line of their fast food parents and their potential growth is changing the approach of the traditional burger boys.

“I think they’re saying it’s not just hamburgers, it’s not just chicken, it’s not just pizza, but people want variety — let’s offer them this,” said Balzer.

In some cases, the push for freshness is changing fast food menus. For example, Arby’s is offering fresh deli sandwiches. While Wendy’s “garden sensation” salads have become a hit for that chain. And McDonald’s is pushing it’s chicken flatbread sandwich. Expect more offerings like these as the fast food chains to reinvigorate sales.

“I think as the traditional players improve their quality, deliver what the consumers want as a fresher product, improve their decor package, I think they can again begin to compete more effectively again against these new players,” said Paul. “Because I don’t think the big guys are going to sit back and watch their business erode.”

Make no mistake: the public’s taste is changing. Burgers and fries may be tasty, but a growing number of customers want more vegetables and more variety.

Another criticism with fast food, and frankly all the restaurants, is the size of the portions. Whether it’s “super sizing” at McDonald’s, or asking for an “extra large combo” meal somewhere else, if you want you can have it. This has helped the fast food chains boost profits.

And while critics may say we don’t need portions that large, they are not going away because they are not only profitable, but also popular.