5. Chicken/Asian
Chicken and Asian concepts, however, are most often associated with dinner. As a result, the segment “is suffering the steepest declines,” Riggs says. Chicken quick-service restaurants, which make up 4 percent of the market, have seen 83 million fewer visits, a 5 percent dropoff in two years.
At the same time, a new report says that the ready-to-eat retail category has grown by 5 percent at dinner and that one of the top items ordered from these establishments is prepared chicken.
Price perception might be what is turning these consumers to supermarkets rather than quick-serves. Many consumers perceive the total out-of-pocket cost of quick-service chicken as relatively high instead of recognizing that they can feed a family of four for about $2.50 per person, Davis says.
However, recent efforts to court consumers interested in cheaper items like sandwiches, nuggets, strips, and snacks might help these chains transcend the perceived price and daypart obstacles. As an example, Forte points to KFC’s “Ultimate Value Menu” introduced in March featuring a limited number of items at prices beginning at 99 cents.
6. Pizza
Pizza is suffering from many of the same problems as chicken. Daypart identity, price, and the availability of constantly improving, more affordable fresh and frozen options at the supermarket all have resulted in lower sales for the segment. Instead of paying $20 (including delivery tip) for a pie for four, consumers can get the same meal for $8 or less. In the past, pizza has been among the strongest segments during recessionary periods. But not this time. Visits to pizza chains, which make up 11 percent of the quick-service market, have decreased by 97 million, down 2 percent. But that doesn’t mean consumers have stopped craving pizza. Value chains such as Little Caesars and Papa Murphy’s Take ‘N’ Bake are the strongest competitors in this segment. And the big boys have noticed. Domino’s is adding oven-baked sandwiches to its menu and requiring all locations to be open for lunch.
7. Deli
Unlike the thriving sandwich segment, deli traffic is down 2 percent, most likely because of higher price points, Riggs says. However, Tristano says, delis have the advantage of being able to offer a wide-ranging menu and off-premise catering as well as dine-in and carry-out options. Those saving graces could help the segment weather the storm.
8. Snacks
As far as snacks, it isn’t only weight and health concerns that have consumers increasingly cutting down or, at least, becoming more cost-conscious about discretionary indulgences. Premium coffee competition, for example, has put a major dent in the dominance of the $4- to $5-a-cup companies as consumers increasingly choose $2 java as a more economical treat. Davis explains that this is particularly true among young consumers, traditionally the heaviest users of the high-end coffee chains, who are really feeling the financial squeeze.
As a result, quick-service high-end coffee sales grew only 4.4 percent last year, compared with double digit growth in prior years, Tristano says. To dunk in their economy-priced coffee, consumers are still buying doughnuts, an inexpensive feel-good treat that is pretty much ingrained in the American culture, Davis says. So is ice cream and, in this sub-segment, it’s the moderately priced players such as Pinkberry and Red Mango Frozen Yogurt that are licking the pricier competition.
Overall, Davis says, the limited-service situation is more than just a cut-and-dry segment story. There are winners and losers in every segment, with some chains going strong within lower-performing categories. And while deep discounting might go against traditional marketing wisdom, “We’ve been in this kind of economy before and have seen what happens when the economic situation turns around,” Riggs says.
“Operators may be concerned that today’s deals will decrease the value of a concept or brand for the future and that customers may not be willing to pay full price again. But the truth is that the only way to survive right now is to offer a strong value proposition and, based on the results of a report prepared right after the 1991 recession, consumers will eventually start spending more freely again.”