Blogs & Comment

Fast food joints looking to escape the ghetto

Fast food chains are upping the ante with much-needed renovations.

QSR magazine, the Time or Newsweek of the fast-food industry, recently released its top 100 news stories of the year. Most were ho-hum, but one that struck me was #4: “Wendy’s Tests New Prototype.” As the entry goes:

After hearing feedback from customers that its brand was tired and dated, Wendy’s unveiled a new store prototype in Columbus, Ohio, that allows diners to see the fresh preparation of food and offers more comfortable dining areas for customers to lounge in. The new store is one of four the company is launching. The new prototype in Columbus includes a WiFi lounge area, a new premium coffee program, updated interiors, and an exterior design inspired by Frank Lloyd Wright.

No kidding. Given that I sometimes write about fast food, I do on occasion pop into such establishmentsfor research, of courseand I haven’t been able to help but notice that many of them are, simply put, ghetto dumps. With looks that haven’t changed in 20 to 30 years and the onset of grimy decay, a lot of fast-food joints look like what many people say they are: decidedly low class.

The smarter chains know this and are taking action. McDonalds, the industry king, recently announced it was spending $1 billion on renovations in Canadaand it shows. Say what you will about the food, but most recently renovated McDonalds restaurants feel very different than their competitors. You don’t feel dirty just by sitting in one.

The other night, I was at a Christmas party for media hosted by new wireless operator Mobilicity. The man behind the cellphone company is John Bitove, who also runs a number of other businesses including a whack of KFC and Taco Bell franchises. I remembered reading something a while back about how his company Priszm was looking to unload the franchises because the parent company, Yum Brands, wanted expensive renovations.

It turns out Priszm sold about half its KFC and Taco Bell franchises this past year to Soul Restaurants Canada, an arm of the British KFC franchisee, with the deal closing June 1. Bitove told me he’s still looking to sell off the rest of the franchises because the fast-food business in Canada has basically become a two-horse race: it’s all McDonald’s and Tim Hortons.

The market may indeed be moving further away from the likes of KFC and Taco Bell with the continuing boom in gourmet burger restaurants. Analysts are split on whether this trend is hitting its saturation point or whether there’s still lots of room to grow, although anecdotally it sure looks like there’s no end in sight, what with these places opening up on almost every corner. Coincidentally, I recently interviewed Jay Gould, who runs both New York Fries and South Street Burger Co., and he said that while gourmet burgers are the fastest-growing food segment right now, the concept is heading for consolidation – as in some operations are going to close down or merge.

Nevertheless, the new owner of half of Canada’s KFC and Taco Bell outlets is promising to spend on those much-needed renovations. That’s a good thing, since it’s plainly obvious that the marketin Canada at leastis moving out of the ghetto. The U.S.? That’s another story…