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 Table of contents

1. Franchising --- The Birth of a Fast-Food Item: How chains come up with new ideas; and how some of
them even
succeed................................................................................................................................................... 1

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Document 1 of 1

Franchising --- The Birth of a Fast-Food Item: How chains come up with new ideas; and how some of
them even succeed
Author: Passy, Charles

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Abstract:  
When Subway, the sandwich chain, wanted to hop on the sriracha bandwagon a couple of years ago, it didn't
just start buying bottles of the popular Asian hot sauce by the boatload. [...]Arby's turns the process into a
contest, rewarding cash prizes to franchisees, corporate employees and suppliers with the best menu
suggestions.

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When it comes to introducing new menu items, fast-food chains say it's important to keep one basic truth in
mind: For every Egg McMuffin, there are plenty of Pastrami Burgers.
That is, for every idea that works, there are hundreds that fail to hit the mark. The Egg McMuffin, an item
created by a McDonald's franchisee, is the quintessential success story: After its launch in 1972, it not only
became a big seller, it also helped establish McDonald's as a go-to place for breakfast. (And it eventually
spawned a whole breakfast-sandwich industry: Can you say Waffle Taco?)
By contrast, the Pastrami Burger, an item introduced last fall by the Back Yard Burgers chain, had a lifespan of
just eight weeks. "I enjoyed the product a lot, but it did not resonate well with our consumers," says company
CEO David McDougall.
Indeed, chains say it's very rare for a product to make it past the testing stage. Yet, the chains test -- or, at the
very least, consider -- scores of items in any given year. The reason they're willing to take such chances is
because of what's at stake: Americans spent $274 billion eating at the top 500 chain restaurants in 2014,
according to market researcher Technomic. And the industry has become highly competitive, with fast-casual
chains like Chipotle, Five Guys and Panera Bread increasingly vying for consumers' attention. Consider that
industry giant McDonald's saw its sales decline by 1.1% last year while such upstarts as BurgerFi and Habit
Burger Grill saw increases of 111% and 46%, respectively, according to Technomic.
"Chains have no choice but to invest heavily in research and development, so they can stay relevant to the
modern consumer," says Greg Wank, a partner at Anchin, Block &Anchin, a firm that provides accounting and
advisory services to the food and beverage industry.
Bringing a new menu item to market isn't as easy as adding a new spice or two to your burger recipe and then
gathering a few reactions, though. Most chains have a highly detailed R&D protocol that typically involves a staff
of culinary professionals, prominent franchisees and, of course, consumers.
Chains say their culinary teams typically take inspiration from what they see emerging in the broader food
marketplace -- food trucks are an especially good source for ideas -- be it a dietary trend (say, vegan fare) or an
ingredient or type of food that's suddenly becoming popular (say, pretzel rolls). But the corporate chefs have to
adapt their finds so they make sense within the chain's menu.
A prominent example: When Subway, the sandwich chain, wanted to hop on the sriracha bandwagon a couple
of years ago, it didn't just start buying bottles of the popular Asian hot sauce by the boatload. Rather, it created
its own creamy version of the sauce that it thought would particularly appeal to its customers' taste buds. The
sauce remains a popular condiment option at about 1,000 Subway franchises nationwide.
But as the example of the Egg McMuffin attests, ideas don't always have to come from the top down.

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Franchisees often do their own tinkering and make the case that one of their "experiments" should find its way
on the regular menu.
And managements are often more than happy to listen. In fact, Arby's turns the process into a contest,
rewarding cash prizes to franchisees, corporate employees and suppliers with the best menu suggestions. (One
winning example: house-made potato chips sprinkled with Arby's signature seasoning, an idea that went on to
become a limited-time menu offering.)
Customers can also play a role: Wing Zone, a chain that specializes in Buffalo wings, goes the contest route,
too, with an annual "Flavor Face-Off," where fans can submit their flavor ideas. A recent suggestion that made it
to the permanent menu: Mango Fire.
Regardless of where the idea emerges, the item must go through testing. Generally, a chain will begin the
process by gathering internal opinions, though it will often expand the circle by bringing in consumers for focus
groups. Sonic, the popular drive-in chain, has a 40-seat dining room at its headquarters in Oklahoma City,
Okla., for such internal and external sampling.
From there, the chain may test the item in a few select locations or an entire market or two. Chains often look to
locales that have a good cross-section of consumers (Orlando, Fla., is an oft-cited example by virtue of its mix
of locals and tourists) or that are especially in sync with the tastes of mainstream America (any number of
Midwestern cities often fit that bill).
What are the chains actually measuring in these tests? Certainly, sales count for something, but not necessarily
for everything. If an item proves popular but ends up cannibalizing other items, it may not add much to a chain's
bottom line (and may not be worth adding to the menu permanently). Operations are a factor as well. An item
could be a hit with customers, but if it poses problems for the kitchen crew, its popularity may be irrelevant.
When Subway introduced a crispy chicken sandwich that required heating the meat in a different way than
usual, it got a thumbs-down from franchisees, even though consumers were eating it up.
The testing phase can also become the tweaking phase. Often, a chain will find that a slight adjustment in the
recipe or product formulation will make all the difference. Planet Smoothie introduced a Lemon Cayenne Kick
smoothie earlier this year only to discover that, in the words of senior national marketing manager Julie
Hoefling, it "was a tad too spicy," so the amount of cayenne was reduced. Conversely, Wing Zone found that
the aforementioned Mango Fire flavor didn't have enough fire for its heat-crazed diners, so it was given a proper
blast of heat.
Ultimately, some new menu items are beyond tweaking. Captain D's, a seafood chain, has tried several
breaded vegetable items -- think fried mushrooms -- that were a hit in initial testing phases, but never quite
worked at the retail level. Jason Henderson, the chain's vice president of product innovation, can only guess
that it's because other appetizers on the menu -- think clam strips -- proved "more compelling."
And when McDonald's rolled out Mighty Wings (its version of Buffalo wings) starting in 2013, it found some
markets responded favorably, but other just didn't bite. The lesson learned? As a McDonald's spokesperson
says, in the restaurant business "one size doesn't fit all."
---
Mr. Passy is a reporter for MarketWatch in New York. He can be reached at charles.passy@dowjones.com.
Credit: By Charles Passy

Subject: Restaurants; Franchisees; Product development; Fast food industry;

Company / organization: Name: Anchin Block & Anchin; NAICS: 541211; Name: Wing Zone; NAICS: 722513;
Name: Panera Bread Co; NAICS: 533110, 722513; Name: Arbys Restaurant Group Inc; NAICS: 722511;

Publication title: Wall Street Journal, Eastern edition ; New York, N.Y.

Pages: R.5

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Publication year: 2015

Publication date: Aug 24, 2015

Year: 2015

Section: Small Business (A Special Report)

Publisher: Dow Jones & Company Inc

Place of publication: New York, N.Y.

Country of publication: United States

Publication subject: Business And Economics--Banking And Finance

ISSN: 00999660

Source type: Newspapers

Language of publication: English

Document type: Feature

ProQuest document ID: 1706155715

Document URL: https://search.proquest.com/docview/1706155715?accountid=13921

Copyright: (c) 2015 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further
reproduction or distribution is prohibited without permission.

Last updated: 2015-10-13

Database: Global Newsstream

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