1. We have healthy options but they'll cost you more.
After years of serving 1,000-calorie meals, most fast-food chains have started to offer healthier options salads, fruit cups and other un-fried options. But if you reach for the lower-cal options, be prepared for some sticker shock. On average, the salad with chicken at a fast-food restaurant tends to be the most expensive option on the menu ($4.85 on average) and costs $1.90 more than a large burger, according to a study published in December 2010 by the Yale Rudd Center for Food Policy & Obesity. And the healthy chicken sandwich costs $3.73 on average, about 26% more than a large "red-meat sandwich."
This pricing, in addition to the heavy marketing of unhealthy food options, undercuts what the fast food industry says is its commitment to healthy options, says Jennifer Harris, a spokesperson for the center. People typically look to get as much food for the price, which makes the healthy options look less appealing, she adds. But Sue Hensley, a spokesperson for the National Restaurant Association, says that the industry has plenty of affordable healthy options and that fast-food restaurants are "offering more nutritious children's options" and have "an increased focus on produce."
2. Don't expect much from our school fundraisers.
To raise money for the Eldersburg Elementary School in Sykesville, Md., the parent-teacher association enlists the help of local fast food restaurants. Some of the restaurants make it easy, says Meghan Lyons, a Sykesville parent who coordinates the restaurant fundraisers: The school may simply get a percentage of sales during certain hours, typically about 15%. Others require a coupon and at least one hasn't paid up, she says, despite several events. For the effort, the PTA nets about $1,000 to $1,500 for participating in several of these events each year, says Lyons; some of the events earn as little as $100 per.
Those small gains aren't surprising, researchers say. Cash-strapped schools are increasingly turning to fast-food restaurants as benefactors, asking them to sponsor sports teams and scholarships, donate free food and other treats as academic incentives, and help raise money in other ways. But these programs aren't as lucrative as schools might hope, according to a 2006 report by Arizona State University's Commercialism in Education Unit. The report found that almost three out of four schools participating in these so-called income-generating advertising activities didn't receive any income in the 2003-2004 academic year. In addition, 12.6% of schools received $2,500 or less and less than 1% of schools received more than $50,000.
3. Those value meals can be awfully expensive.
Ah, the combo meal a delicious combination of food and soda at a discount. Call it genius, call it lunch, but don't call it cheap: That bundled meal option may encourage customers to spend more than they would otherwise. It's true that the value meal is typically cheaper than the sum of its parts, but research suggests some people don't actually want all the parts, or not in such large sizes. Some 15% of customers who wouldn't have bought fries in an a la carte-only offering do purchase them when there's a value-or-combo meal option, and even among customers who bought fries in the ala-carte-only offering, more than one in four of them increased their portion size when combo or value meals were offered, according to a study published in the Journal of Public Policy & Marketing in 2010. In effect: They chose a bigger, more expensive size over a smaller, sometimes cheaper option.
As a result, customers may spend more money than they would otherwise. Consider the person who wouldn't have ordered fries if it weren't for the combo meal option at McDonald's, she could spend $6.39 on a Big Mac Medium Value Meal, about $1.30 more than if she'd just bought a Big Mac and a drink. But Hensley says that these combo meals aren't the wallet busters critics claim. Not only do the meals provide good value, "many national chains offer a wide variety of sides to accompany 'combo meals,' which in most cases includes side salads and/or sides of fruit. Most also offer the option of choosing water or milk as a beverage option," she says.
4. Our smiling faces make you spend.
While good customer service is a goal across the restaurant industry, the fast-food chains seem to have it down to a science. McDonald's, for example, trains employees on how to greet customers -- one suggested greeting: "Welcome to McDonald's. May I take your order?" and how long they should take to serve them, says Paul Facella, a former VP at McDonald's and the CEO of Inside Management, a business consulting firm. Experts say the focus on customer service is shared by others in the fast-food industry. Hardees' employment ads, for example, say "our people are the key ingredient" and on the Wendy's career site, the first job duty listed for restaurant operations staff is overseeing a team "to ensure exceptional customer service." "The quest for improvement in the area of service is never ending," Facella says.
McDonald's, Wendy's and Hardees declined to comment, but industry insiders say a good customer-service experience is important to retaining customers. It's also true that smiling faces actually can get you to spend more. According to Gallup research from 2011 an "engaged fast-food customer spend 16% more than a customer who is not engaged" and "the most powerful driver of engagement in a fast-food restaurant is 'being treated as a valued customer,' followed by 'the warmth of the greeting' and 'taste of food.'" And, on average, a fully engaged consumer will spend $33.90 on fast food per month 16% more than the $29.24 a "non-engaged consumer will spend.
5. Good luck opening a franchise.
The biggest fast-food franchises are also some of the most successful, from the business-owner's standpoint. The average McDonald's restaurant earned on average $2,313,000 in revenue 2010, according to Technomic's Top 500 Chain Restaurant Report. In contrast, Scoop's Hamburgers earned only $750,000. But the only piece of the pie you're likely to get is at the drive through. Small-business experts say it's currently very difficult to open a large fast-food franchise unless you're already an owner, related to one or are a long-time manager or employee at the company, says Dick Adams, a former McDonald's owner, who now is president of Franchise Equity Group, a consulting firm.
Thanks to the slow economy and intense competition, many fast-food businesses are sticking established owners, who are better able to withstand short-term challenges with a new franchise than a rookie owner. At Subway, for example, about 75% of new franchises are purchased by owners already in the Subway system, says Les Winograd, a company spokesman. And with lending still tight at many banks, would-be owners also need sterling credit or a whole lot of cash, they say. "The trend is to go with the large franchisee," says Adams. "It's a handful of people who can open a new franchise." Becoming a franchisee "is a highly competitive process," says a McDonald's spokeswoman.
6. Food isn't the only thing we serve fast.
Because fast-food and other high-volume restaurants serve so many customers, any outbreak of food-borne bacteria can spread before you can say "Medium #5 with a large soda." As careful as many fast-food restaurants are, there have been Salmonella, E. coli and other food-poisoning bacteria outbreaks in recent years, including a rare but serious 2006 outbreak of E. coli linked to Taco Bell by the Centers for Disease Control and Prevention that sickened hundreds in the northeast. The very business model serve as many people, as quickly as possible means if the food is contaminated, it "puts more people at risk," says Georges Benjamin, the executive director of the American Public Health Association.
Yum! Brands, the parent company of Taco Bell, declined to comment. But a spokeswoman for the National Restaurant Association says outbreaks at fast-food restaurants have been declining in recent years. "There's no greater priority for the restaurant industry than food safety," she says. "As standard practice, employees who are sick are always strongly advised to let their employer know and discuss options on scheduling."
7. Don't like our building? We'll change it.
When a businessman wanted to open a McDonald's franchise in the tony Chicago suburb of Lake Forest, Ill., the residents argued, sued, and later changed their building code, fearing a cookie-cutter building would diminish their property values town-wide. Ultimately, the owner capitulated, and built a store that looks like a barn instead of a traditional McDonald's building.
This is more common than the landscape of similar restaurant buildings might imply. Real estate experts say neighborhoods can influence a new restaurant's look by meeting with the business owners and offering specific requests for signage and building materials. "All of them [fast-food chains] will build site-specific buildings if they're made to do that," says Ed McMahon, a senior resident fellow at the Urban Land Institute, who says hundreds of communities across the country have successfully lobbied fast-food shops to design buildings that fit their neighborhoods' styles.
8. Our food may be cheap. Our stocks, not so much.
Some fast-food stocks have been on a tear over the last 12 months, driven by an improving economy. So far this year, Yum! Brands (YUM),
Analysts are worried rising food prices, gas prices and still high unemployment will crimp fast-food companies' profits. "Food prices are a big question mark, and if those rise that could stunt traffic," says R. J. Hottovy, director of consumer research at Morningstar. "We think valuations have gotten ahead of themselves." And Steve West, senior restaurant analyst at Stifel Nicolaus & Company in St. Louis, notes that most fast food restaurants cater to young adult males, who've been hit particularly hard by the economy. While West rates McDonald's (MCD)
9. We're keeping soft drink prices low.
In recent years, governments at all levels have been flirting with the idea of a tax on soda, condemning the sugary, carbonated beverages for their high-calorie, low-nutrient value. But so far, they've had no luck raising the price of pop, thanks in part to aggressive lobbying on the part of the fast-food industry. In 2010, restaurants spent $9.3 million lobbying Washington, almost three times as much as it did in 2005, according to the Center for Responsive Politics, which tracks lobbying efforts. And that's only in Washington. More was spent in individual states.
"They've had a much bigger profile than in the past couple of years than they ever had before," says Dave Levinthal, a spokesman for the Center, who said much of the increase was to fight proposals that were part of the new health care bill, including the proposed tax on soft drinks (it didn't make it into the legislation). The industry has also been spending lobbying dollars to keep toys free, battling so-called "Happy Meal" ordinances, such as the one recently passed in San Francisco that required kids meals to meet certain nutritional standards to be sold with toys. McDonald's, Yum!, and Hardees declined to comment on their lobbying efforts.
10. Those toys aren't free.
Disposable as they may seem, kids meal toys which are often based on characters from recent movies or TV shows help drive a lot fast-food sales, experts say. In 2006, fast-food joints spent an estimated $360 million on the toys, according to a Federal Trade Commission report. But the industry more than made up for that investment with some $348.5 billion in kids meals sales, according to the report. "The toys are a very powerful enticement," says Michael Jacobson, executive director of the Center for Science in the Public Interest.
Some communities have banned toys from kids meals: San Francisco recently prohibited restaurants from offering toys in any children's meals that are high in calories, fat or sugar, while a New York City councilman introduced in April a bill that would ban toys in kids meals that have more than 500 calories or 600 milligrams of sodium. But there are also those out to save the toys: Legislators in Florida and Arizona are seeking to pass new laws that would prohibit cities and counties from banning the toys. The National Restaurant Association's Hensley says, "It's the responsibility of parents to decide where they will eat, but there are healthful choices at quick-serve restaurants and these choices are growing."