Yum Brands Inc. (NYSE:YUM) subsidiary Taco Bell just announced four new store design concepts that will be tested starting this summer: Heritage, Modern Explorer, California Sol, and Urban Edge. The test concepts will be at four of its restaurants in Orange County, California.
"As we continue to expand into different markets ... we realized pretty quickly that having a one-size-fits-all design really isn’t very effective," said Taco Bell’s VP of development and design Deborah Brand. "We want to be where the customer is, and we want to reflect the community we’re going into."
Since Taco Bell’s busiest time of the day is lunch, the company hopes the new designs will attract customers in for dinner and breakfast too. "We hope that we see a renewed interest in actually using [Taco Bell] as a place to go out to dinner vs. picking up convenience and food to go home," Brand continued.
The Fast-Casual Effect
The Mexican-style fast food chain isn’t the only restaurant to revamp their franchises. Thanks to the rise of more upscale, fast-casual chains like Shake Shack Inc. (NYSE:SHAK) , Habit Burger Grill (NASDAQ:HABT) , and even Chipotle Mexican Grill (NYSE:CMG) , it’s almost a necessary step for traditional fast food restaurants to stay relevant.
Iconic burger chain McDonald’s Corp. (NYSE:MCD) unveiled six new store designs earlier this year, saying goodbye to its “Cafeteria Look” with wood veneer, a clownish color scheme, cheap Formica tables, and harsh fluorescent lights. The company hopes the new designs—dubbed “Allegro,” “Craft,” “Form,” “Fresh and Vibrant,” “Living Room,” and “Simply Modern”—will make McDonald’s restaurants feel more intimate.
Burger King, owned by Restaurant Brands Inc. (NYSE:QSR) , rolled out new restaurant designs last year, which will launch in the United Kingdom. The designs will include materials like copper, brick, bamboo, and reclaimed wood, and will have an outdoor look and feel.
Just recently, the company launched the Burger King spa—yes, you read that correctly—in Helsinki, Finland that features a 10-person sauna in addition to a media lounge with both a 55-inch TV and a PlayStation 4.
Menu Innovation
Instead of putting time, effort, and money into a more upscale dining atmosphere, fast food chains should think of ways to add more flavor to their menu. Don’t get me wrong. McDonald’s definitely made the right choice in ditching their shudder-inducing, cafeteria-style design, but the company needs to look to their menu to drive turnaround.
In addition to its all-day breakfast, McDonald’s has started to test a number of new menu items including breakfast bowls like an egg white and turkey sausage option, Chobani Greek yogurt parfaits, the Chicken McGriddle, a side kale salad, chocolate-covered French fries, and McTasters, a slider sandwich with a Greek or Italian influence.
Taco Bell has also been taking risks with its menu for some time now. Its Doritos Tacos Locos has been a success for the company since its launch in 2012. Other menu item hits include the DareDevil Loaded Griller, which debuted last year, and is made with beef, tortilla strips, nacho cheese, and one of three spicy sauces, all wrapped in a tortilla. Taco Bell recently expanded its breakfast menu where you can order a Biscuit Taco with egg, cheese, and choice of bacon or sausage.
Burger King has combined its classic Whopper and its new Grilled Dog to create the Whopper Dog. It’s made up of all the ingredients that constitute the company’s signature sandwich, but on a hot dog instead of a burger. Hopefully the Whopper Dog will be a perfect pairing with Whopper Wine, a Spanish wine that has been aged in flame-grilled wooden barrels.
Some fast-food chains may go overboard in their menu initiatives—think KFC’s Chizza, a pizza made on a piece of fried chicken (it’s only available in the Philippines), or Pizza Hut’s Hot Dog Bites Pizza—but at least they’re doing something. The menus at fast food chains is what keeps customers coming back, and bold, flavorful offerings is the kind of innovation these companies should continue.
It’s Still Just Fast Food
Despite these valiant efforts in design and atmosphere, a Big Mac is still a Big Mac and a Crunch Wrap Supreme is still a Crunch Wrap Supreme, no matter where you eat them. These food items are not fine dining cuisine. No architecture or color scheme is going to diminish that crucial fact. And that’s ok.
When you want to indulge in a greasy cheeseburger and fries or a quesarito that won’t hurt your wallet, you’ll most likely still venture to your favorite fast food joints. But if you want to splurge and spend those extra dollars on fresh ingredients and grass-fed meat, you may visit a Chipotle or a Shake Shack instead.
Modernizing the look of restaurants is always a good idea for companies in the industry, but chains like Taco Bell, McDonald’s, and Burger King need to realize that consumers who had no interest in their menu before will continue to have no interest—but those that love their menu will also continue to do so—no matter how contemporary and authentic their restaurants feel.
YUM! BRANDS INC (YUM): Free Stock Analysis Report
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
RESTAURANT BRND (QSR): Free Stock Analysis Report
SHAKE SHACK INC (SHAK): Free Stock Analysis Report
HABIT RESTRNTS (HABT): Free Stock Analysis Report
Original post
Zacks Investment Research