QSR Shift Focus to Premium Burgers

By: Valerie Killifer, Fast Casual

When Denver-based Smashburger exploded onto the scene in 2007, the concept had a steady executive team consisting of quick-service industry veterans.

“Aggregately, we all had worked in the QSR burger segment at some point in our career,” said Smashburger’s founder Tom Ryan. “Being industry veterans, across all of those years, you just get a sense of everybody else and all of those players.”

A big boost to fast casual burger concepts such as Smashburger, The Counter and Mooyah, is their focus on premium-quality ingredients. But with big-name QSR brands such as McDonald’s and Burger King launching their own varieties of premium patties, industry competition is beefing up.

Burger King introduced its Steakhouse burger topped with steak sauce, creamy baked potato topping and crispy onions in March. Meanwhile, McDonald’s rolled out its $3.99 Angus burger, made from a better quality of beef than its other hamburgers, in August. And industry player Wendy’s also is preparing to launch a new cheeseburger, with bacon cooked from scratch and a better bun, later this year.

With the success of the premium burger in the fast casual space, experts say it is inevitable that those offered by large QSR chains will take away some burger sales from fast casual concepts.  

“There’s no question it will erode some sales just because of the numbers of locations (of fast food chains), said Ron Paul, president of the Chicago-based restaurant consulting firm Technomic.

And as fast casuals continue to keep an eye on the impact, Paul and Ryan agree that these operators will thrive by focusing on what makes them different.

“The true fast casuals can do things that the big chains can’t,” says Paul.

Innovation and customization

While McDonald’s, Burger King and Wendy’s look for ways to standardize their premium burger offerings, fast casual brands differentiate themselves through more customization capabilities.

Ryan cited Smashburger’s ability to customize a burger to a restaurant’s location. For instance, in Houston, it offers The Texas Smashburger, which is topped with American cheese, lettuce, mustard, onion, tomato and a pickle served on an egg bun.

“When we went to Houston, we tried to figure out what people in Houston wanted on their burger,” said David Prokupek, Smashburger’s chairman. “You need to standardize for efficiency, but too much efficiency at the stake of what consumers want is not a good thing.”

However, competing against large chains, particularly when it comes to their marketing muscle, will not be easy for smaller or more regionalized burger concepts that will have to rely more on customer loyalty and innovative marketing solutions for their continued success.

“McDonald’s has more money than God,” said Dawn Boulanger, vice president of marketing for Nashville-based Back Yard Burgers. “They can reach a lot of people and they’re doing a lot of couponing.”

Jeff Sinelli, founder of Which Wich and of the newly launched Burguesa Burger in Dallas, notes that the marketing done by chains such as Burger King is designed to be provocative, such as ads on the company’s Web site that allow consumers to send an angry gram to people who bother them. The marketing promotes the Angry Whopper, which features a burger patty, jalapeno chilli peppers, hot sauce, onions, cheese and bacon.

“You’re seeing a lot more color in the photos (of products) and in the verbiage,” Sinelli said.

And just as Sinelli believes the unique flavors of Burguesa Burger will make it stand out, Boulanger says Back Yard Burgers will thrive by focusing on what makes it unique — their domestic beef burgers cooked over charcoal and an open flame.

“That’s a distinct flavor difference,” she said.

Marketing muscle

Though McDonald’s is widely acknowledged as a marketing power house, Marta Fearon, director of U.S. marketing for McDonald’s, believes the angus burger will succeed because it is a product customer want.

“It (the Angus burger) has been well-received by customers,” Fearon said, noting that the Angus burger’s introduction led to increased comparative sales over July. “We listen to our customers. We talk to them. They’re getting a great-tasting premium burger at a great price and convenience.”

But Paul says it’s too early to know the sales impact of the Angus burger.

“Maybe there will be some push back,” he said. “Maybe $3.99 is too much for a burger. When you add in fries and a coke, it’s up to $7.”

While some QSR customers may be reluctant to pay more for the Angus burger, fast casual diners have proven they are more than willing to pay more for quality, atmosphere and service, causing little concern among fast casual execs about the increased competition.

“I think we operate in two different worlds,” Ryan said.