Fast Food and Fast Casual Restaurants Are Future-Proofing Their Businesses

When you step through the door of a McDonald’s or Denny’s (or order delivery to your own doorstep), you might not be thinking about the globe-spanning systems that connect you to your combo meal. But for the people in charge of America’s largest restaurant chains, it’s a constant consideration — and industry leaders gathered in Chicago on Wednesday at the WSJ Global Food Forum to discuss where the world of fast food and fast casual is headed.

The forum featured a number of panels in which WSJ journalists interviewed various industry experts, allowing them to weigh in on issues of menu development, sustainability, automation, and of course, food prices. 

Rising food costs

Panelists universally acknowledged the urgency of rising food costs. The industry’s most high-profile response to that issue has been McDonald’s much-hyped $5 value meal, which debuted June 25. The meal comes with a McChicken or McDouble, four-piece chicken nuggets, fries, and a drink — and the company is encouraged by the initial consumer response to the promotion.

“It’s a great excitement and energy in our restaurants,” said McDonald’s USA president Joe Erlinger of the $5 meal. “It’s a way to really bring value and affordability to our customers at a time when the consumer is really stretched, feeling the stress of several years of inflation.” (Erlinger proceeded to use the phrase “value and affordability” three more times throughout the discussion.)

But McDonald’s is far from the only player looking to hype up reasonably priced food. Denny’s, one of the nation’s leading diner chains, is turning consumers’ inflation fatigue into an opportunity to hype up its everyday value.

“We do call ourselves ‘America’s diner for today’s America,’” said Kelli F. Valade, CEO and president of Denny’s. “For us, ‘today’s America’ is meeting consumers where they are.”

Valade pointed out that just as McDonald’s new $5 meal seeks to recapture bargain-seeking customers, Denny’s continues to offer its All-Day Diner Deals starting at $5.99 in order to showcase its affordability. “Denny’s has always been a place known for great value, and we have to continue to evolve, continue to innovate around that,” Valade said.

Automation

With fast food and fast casual chains increasingly adopting robotic kitchen assistants like Flippy 2, the question of how automation will be applied to restaurants going forward is one that looms large across the industry. Steve Ells, founder and former CEO of Chipotle, explained how automation was a core feature of Kernel, his new vegan fast casual restaurant in Manhattan, which he hopes to scale up over time. 

“I think many [businesses] are going to dabble in different kinds of automation and robotics that might work for them,” said Ells, describing Kernel as “a platform that’s built for the technology that we know is coming.” The menu, and every task fulfilled by a non-human assistant, is modular, allowing the company to “plug new technology into the platform” as it becomes available. 

“And then the folks who are working there will probably move more toward the customer-facing positions, focusing on hospitality, maybe monitoring a dashboard, just to make sure the systems are working. We’re really reinventing the fast food work.”

Former Chairman and CEO of Panera Bread Ron Shaich had a slightly different view on how technology will shift the nature of restaurants — namely, that technology for its own sake isn’t necessarily sufficient.

“We make a mistake if we believe anybody, any customer, cares about automation,” Shaich told WSJ’s Bowdeya Tweh. “I think that what they care about is the totality of their experience when they walk into their restaurant.” If a customer deals exclusively with machines when they place an order, they might inadvertently be made to wonder why they’re visiting the restaurant in the first place.

“I would argue automation in support of my people, of humanity, of my experience, is good,” said Shaich. “If I’m selling myself as a tech company or automation, then I’m going to fail.”

Future-proofing

The question of how to continue feeding a growing population (with increasingly pressing financial constraints) is one with no easy answers, but speakers at the WSJ Global Food Forum pointed to a number of focus areas for the future: scale, sustainability, and carving out new niches in which to serve a hungry public. 

For Denny’s, that means a two-pronged approach: continuing to serve the growing crowd of breakfast and brunch consumers (the rising “a.m. eatery” segment), while also maintaining multiple virtual restaurants to serve the late-night delivery crowd. By using Denny’s kitchen to produce the menu for Banda Burrito and other digital-only brands, the business can generate greater sales for franchise locations using the same employees and equipment. 

On the sustainability front, Ells offered an optimist’s view of scaling Kernel or any restaurant chain of its ilk. 

“Most of us eat fast food, or fast casual food, or convenient food, and there’s nothing preventing us from making that food really wholesome, really delicious,” he said. It requires thinking about which offerings can be made from ingredients that are available year-round, so as not to rely on expensive or exotic components when they’re out of season. But even by partnering with local farms instead of national ones for the core menu offerings, transportation costs and greenhouse gas emissions can be reduced. 

“Just because it’s fast doesn’t mean it has to be a typical fast food experience,” Ells said.