The US quick-service restaurant (QSR) category adapted at speed during COVID-19. It is now tackling the challenge of inflation, and continues to build engagement with a mix of celebrity and brand power, writes Cathy Taylor, WARC’s US commissioning editor.
This article is part of the March 2022 WARC Spotlight US series, “For QSR brands, a menu of disruption, digital, and dazzle”. Read more
When it comes to brand categories, there is probably none more American than quick-service restaurants (QSR), more commonly known as “fast food” to the hundreds of millions of hungry diners – that is, just about everyone – who frequent the country’s hundreds of national and regional chains, and who are gratefully returning to in-store dining after the pandemic, as well as frequently ordering food for delivery, too.
The category was US-born and is almost 100 years old. White Castle, serving sliders, opened in Wichita, Kansas in September 1921, and is generally seen as the founding member of the category.
But maybe at this juncture, it’s the category’s scale in the US, not its longevity, that should make marketers, no matter the category, pay notice. The top five brands in terms of ad expenditure – McDonald’s, Domino’s, Taco Bell, Burger King and Wendy’s – spent $1.8 billion in 2020, and Americans spent almost $300 billion in the sector in 2021, an amount just about equal to the Gross Domestic Product (GDP) of Colombia.
US QSR’s scope means the category intersects with just about every marketing trend and concern, from inflation to influencers, data ownership to digital commerce. There’s the glitz of its fondness for celebrity partnerships, and the grittiness of a category where “ghost kitchens”, used solely to prepare food for delivery, help drive incremental revenue.
Here, then, are some overarching trends – all taken from WARC’s new Spotlight on the category – about how US QSR brands are navigating a landscape of disintermediation, digital and dazzle.
The impact of inflation
One reason QSR is so popular is because it offers good food at a low cost. This both positions it well in an inflationary market but also means it has to drive value even harder for its customers, such as Gen Z, where some 65% of the working-age cohort lives paycheck-to-paycheck. And according to QSR Magazine, the trade title, menu pricing grew by 1.3% between September 2021 and January 2022 alone. (Visit this Spotlight's infographic for this data, and more.)
Greg Paull, of consultancy R3, notes in this article that one response to offsetting commodity pressures is to downsize portions; Domino's wing deal, for example, has gone from ten to eight items. Inflationary trends are why, Paull says, so many QSR brands are re-evaluating their agency partners – the current reality can require a different set of marketing skills.
Alice Crowder, chief marketing officer at Krystal, a QSR chain most active in the southeastern US, explains in this interview that some 25% of her meetings now involve supply chain issues, and there is constant pressure to remind finance teams that consumers may not be willing to absorb increased costs.
The chain’s approach: “I have a value version that goes on to my value menu, but I also have a premium version for people who can afford to pay more,” she explains. “All of my promotions are structured that way.”
Dancing with the disintermediators
The COVID-19 pandemic had myriad knock-on effects for the QSR industry, but none loomed quite as large as the role of third-party delivery services such as DoorDash and UberEats.
As noted in the infographic, with the exception of McDonald’s, in the US it’s these apps that dominate users’ smartphones. Put another way, for most operators, delivery services are now simply another cost of doing business. This is impacting the industry in three primary ways:
- Loss of first-party data: Third-party delivery companies don’t share the data they collect with QSR brands, meaning restaurant operators lose a crucial connection point to customers’ wants and needs.
- Increased need to build emotional connections: This ups the ante in terms of brands needing to drive preference. The stark reality, according to agency VMLY&R, is that “mobile devices, coupled with the accessibility enabled through disintermediation, mean there’s an immense risk of losing coveted headspace.” One solution, the agency says, is to build emotional connections to consumers that override the propensity to click on the nearest delivery app.
- Building menus and packaging around the reality of delivery: Historically, QSR food has been meant for immediate consumption, but delivery changes that. The agency and restaurant consultancy SRG emphasizes, “It’s critical for a virtual brand, which is only preparing food to be eaten off-premises, to sell food that holds and transports well.”
This is becoming a truism for all QSR brands. Krystal now tests new menu items with consumers by serving products to one group that tests and rates them right away, and another that tests the same item 20 minutes later, mimicking the delivery experience.
Despite this powerful trend, some customers have returned to their pre-pandemic habits, according to research in a working paper from the Marketing Science Institute (MSI), returning to in-restaurant dining. But a cohort that the research describes as “smaller but highly habituated” is expected to maintain their delivery habit.
Catering to customer experience
People have always flocked to QSR because of convenience, and in a competitive environment, this puts a premium on customer experience. According to research in this article by Nate Swift, chief strategy officer at agency O’Keefe, Reinhard & Paul, Gen Z, in particular, is most likely to choose a restaurant based on fast service.
In that domain, McDonald’s wins, says Swift: “We asked our Gen Z panel about disruptive brands in QSR and were surprised to hear McDonald’s was consistently perceived as among the most innovative,” partly because of their focus on multiple quick, easy and digital ways to order.
But customer experience in QSR expresses itself in many other ways, too. McDonald’s discovered this during the pandemic, when it simplified its menu, in part to streamline the experience around the “three Ds”: Digital, Drive Thru and Delivery. “We're all about meeting our customers and our fans where they are and what is going to be convenient for them as they come to us,” explains Jennifer Healan vp/US marketing, brand content and engagement at McDonald’s, in this interview.
And, trite as it may sound, customer experience is also about caring. As OKRP’s Swift says, this explains Gen Z’s fondness for Chick-fil-A. The hugely popular chicken-focused QSR, which has its roots in the South, has in the past donated to anti-LGBTQIA+ organizations, which should be a turnoff for that youthful customer demo in particular. But the brand’s focus, not just on quality food but superb customer service, seemingly makes up for it.
“The point is not to suggest that Gen Zs lack conviction in their values … [but] to highlight that making Gen Z consumers feel seen, respected and wanted is one of the most important things a QSR brand can do to connect to this generation that feels underestimated and undervalued,” says Swift.
In QSR marketing, celebrity sells
The Travis Scott meal at McDonald’s. Megan Thee Stallion’s Hottie Sauce at Popeyes. 2 Chainz being named Head of Creative Marketing at Krystal. All point to how QSR brands aren’t just hiring celebrities for endorsements, but are partnering with them in much deeper ways that not only draw attention to marketing efforts but move the sales needle.
Through its “Famous Meals” program, highlighting the favorite orders of the famous, McDonald’s has elevated the core insight of its fan truth strategy: “Everyone has a McDonald's order – it doesn't matter how big or famous you are.” This, in turn, not only presents the core menu in a new way, but has also introduces customers to long-time menu items, like the Big Mac, favored by celebrity super-fans.
In partnering with 2 Chainz, Krystal is tapping into the rapper’s fondness for the brand, and his ability to drive traffic. A pop-up event to promote his latest album in his hometown of Atlanta – at a 2 Chainz-themed Krystal where the brand’s sliders were wrapped in the new album’s art – saw sales jump, as they have at other Krystal’s in the Atlanta area.
“He really introduced his fan base to Krystal through his eyes,” Crowder, the chain’s CMO, says of the tie-up with 2 Chainz. “Now we're starting to talk about, ‘How do we keep the connection at this restaurant going? How do we amplify it for the rest of the system?’”
The brand’s expansion into New Jersey, for instance, will rely largely on Victor Cruz, a former player with the NFL’s New York Giants (a team which plays in New Jersey).
But it’s still all about the brand
For QSR marketers, there’s a constant need to adjust to an ever-changing consumer. Healan from McDonald’s cited an industry-wide trend towards “really leaning in more to consumers' wants and needs, and being more connected to them.” But, ultimately, despite all the change, it all ties back to brand, especially as the consumer experience with brands in the category is more arms-length, and often not a sit-down experience in a physical restaurant.
This may be especially true for virtual restaurants. As SRG notes, ”The brand’s website, app, and social media all have to be not only engaging, but also consistent, to express and reinforce the brand promise and message.”
Actually, that’s advice any QSR brand – or any brand – should follow.
Read more in this Spotlight series
Krystal’s Alice Crowder discusses QSR celebrity partnerships, delivery and how the brand is navigating inflation
McDonald’s Jennifer Healan on being where the brand’s fans are, literally and figuratively
As delivery services disintermediate, QSR brands should build emotional engagement
Mingthoy Sanjur, Jeremy Cline, and Bret Smith
Using branding, menu development and under-used equipment and staff to launch virtual restaurant concepts
Daniel Carpenter, Jennifer Jones, and Amy Shipley
How to please QSR's most demanding cohort: Gen Z
O'Keefe Reinhard & Paul
The shift to restaurant delivery inspired by COVID-19 is unlikely to stick for most consumers
WARC Infographic: US QSR by the data – Where people are eating, how brands are spending, and the chicken wars