The biggest fast food burger chains in the U.S. are eager to fight sluggish sales trends and the perception that they’re downscale shops serving nutritionally deficient or bland fare. But the battle for a better reputation isn’t just about the food.
Yes, a hefty part of the bid to counter the traditional view of fast food establishments can be seen on the menus, where offerings billed as healthier, more creative or both are finding space. McDonald’s (MCD) recently started selling a new chicken-based line called the McWrap, an egg white McMuffin and chicken wings as a special promotion. Burger King (BKW) put a turkey burger on sale at its stores for a limited time and tweaked its veggie burger. Wendy’s (WEN) went pub-style with a pretzel-dough bun. And salads, we all know, are frequently found options at the hamburger sellers.
But store remodels, while less publicized than menu changes, also play a critical role in the industry’s customer-acquisition plan. With an ever-growing number of updated exteriors and dining rooms under their banners, the burger giants are aiming to appeal to customers not just with what’s on the tray but with features such as wall-mounted TVs, Wifi and lounge seating. And they could use the boost: In the second quarter, McDonald’s had U.S. same-store sales growth of only 1%. For Wendy’s, second-quarter comp sales at North American corporate stores increased 0.4%, and at franchised locations it was 0.3%. Burger King’s U.S. and Canada same-store sales fell 0.5%.
John Gordon, principal at Pacific Management Consulting Group and a long-time analyst of the restaurant sector, says the new looks do matter to American diners.
“In the restaurant space, particularly in the United States, but really worldwide, customers judge the perceived price value of the restaurant not just about the food, but also the appearance of the store, the location of the store [and] how the employees act,” he says.
Throughout the industry, remodeling is a goal, although the financial resources might not always be there. This push toward fresh visuals, when it can be done, is driven by several factors, among them the nicer chains such as Chipotle (CMG) and the fact that the competition is doing it – no one wants to be left behind.
While the cost and extent of the remodels vary by chain, quite often the bulk of the expense falls on franchise owners, who run the vast majority of McDonald’s, Burger King and Wendy’s locations. Regardless of who pays, redoing one store is going to cost several hundred thousand dollars, generally speaking. There does appear to be a positive result, with Wendy’s saying sales at company-operated remodeled or new-style restaurants “have increased on average by more than 25 percent.”
Though not a guarantee, boosting the receipts is clearly at the top of a restaurant owner’s wish list when they undertake an expensive remodel. “In almost every case, not every case, though, but in many cases, there is incremental sales and profit flow-through that results from a remodel, and they wouldn’t do it if that kind of incremental gain wasn’t being realized,” Gordon says.
Below, we look at the largest U.S. burger chains by unit count and some of what they’re putting into their facelifts.