Tim Hortons, McDonald’s, Burger King facing stiff competition from Chipotle, Freshii
Published on Thursday August 09, 2012 Francine Kopun Business Reporter
@Technomic @Five_Guys @ChipotleTweets @Freshii @Williams_Fresh @npdgroup @TimHortons
New lighting and new menus seem to be paying off for fast-food restaurants like McDonald’s and Tim Hortons, according to data on who eats where in Canada.
Limited-service restaurants accounted for 72.7 per cent of 2011 sales among the Top 200 Canadian chains, according to a new report by Technomic, a food industry analytics firm.
Last year, the segment posted sales of $21.7-billion, accounting for about half of total restaurant and bar sales, despite lower cheque averages compared to full-service restaurants (FSRs).
Growth in the category is also being driven by a new kind of limited-service restaurant – the fast-casual dining experience.
Fast-casual restaurants offer made-to-order food using fresh ingredients instead of ready-made, one-size-fits-all fare. They also offer a slightly more upscale dining environment.
Fast-casual chains are more numerous and entrenched in the U.S., with restaurants like Chipotle Mexican Grill offering hand-crafted burritos made with naturally raised pork and chicken, and Five Guys Burgers selling hand-made patties and fresh-cut fries.
Founded in Toronto in 2005, Freshii has taken off by offering meals made with ingredients including spinach, brown rice, goat cheese and feta, and yogurt parfaits topped with fruit, sunflower seeds or if you want to go crazy, brown sugar. There are 19 locations in Canada and Freshii is expanding in the U.S. even as Five Guys Burgers and Chipotle expand in Canada.
Other Canadian players in the fast-casual segment include Williams Fresh Café, offering hot-pressed balsamic Portobello-and-tomato Paninis and artisan sandwiches like the turkey-apple-cheddar foccacia.
The popularity of fast-casual is what has driven fast-food restaurants to innovate, says Darren Tristano, executive vice-president at Technomic.
McDonald’s and Tim Hortons have added fireplaces and more comfortable seating to restaurants. Tim Hortons added free Wi-Fi.
They’re focusing on menu innovations like fruit smoothies, grilled Panini sandwiches at Tims and healthier Happy Meals at McDonald’s, with fewer French fries and kid-friendly yogurt included as a dessert.
“Consumers are looking for a better option between fast-food and full-service. Fast casual has filled that need,” says Tristano.
“What it has really done for the consumers is raise the bar. McDonald’s and Burger King have to contemporize to remain competitive.”
Burger King recently introduced ten new menu items in the U.S., including three new salads and said it would also be updating restaurants there. There are no plans for similar improvements to Canadian locations, according to a spokesperson.
Tristano says the trend is sweeping the globe, with fast casual restaurants popping up in Brazil, Australia, Europe, Asia and South America.
“I think this is a segment that will continue to grow and outpace the industry for years to come,” he said. “The younger generation has opened their arms and embraced this type of restaurant.”
Joel Gregoire, foodservice industry analyst at The NPD Group, said that over the past five years, quick-service restaurants (QSRs) have taken traffic share from (FSRs).
The QSR share of restaurant traffic increased to just over 72 per cent in the 12 months ending in May, 2012. In May 2007, it had a 69 per-cent share.
“Conversely, FSR traffic share has dropped to 28 per cent from 31 per cent over the same period,” according to Gregoire.
McDonald’s spokesperson Louis Payette says the new look at stores has increased customer traffic and sales and improved employee morale and as a result, customer service.
“Canadians increasingly want the best of both worlds: the convenience and speed of a QSR and the atmosphere and menu variety of fast casual restaurants,” said Tim Hortons spokesperson David Morelli.
“Tim Hortons has embraced this concept and customers are eating it up.”
Technomic analyst Kelly Weikel said the lines between QSRs and fast-casual are blurring in the minds of consumers, as QSRs improve menus and décor. She said that if QSRs continue to improve, they could even draw traffic from players like Boston Pizza, a full-service restaurant.