Which comes first — the grilled chicken or the egg white?
The answer is both, according to McDonald’s, which is now developing several healthful menu items designed around the two. The items, some of which will also be rich in whole grains, fruits and vegetables, will boast fewer than 400 calories.
This is from a company that 10 years ago was targeted in lawsuits by activists as responsible for making its customers obese with its burgers, fries and milk shakes. Even as the lawsuits were dismissed, healthful menu items began cropping up on restaurant menus nationwide — a tactic that operators said gave customers the options they claimed to want, even though those items didn’t necessarily sell.
Until now.
Today, significant sales at McDonald’s are coming from a lengthening list of lower-calorie menu items, the chain said, and the quick-service behemoth is not alone.
Healthful items are boosting sales and traffic at many restaurant brands, according to research released in February by the Hudson Institute, a nonpartisan think tank based in Washington.
The study, titled, “Lower-Calorie Foods: It’s Just Good Business,” found that between 2006 and 2011, 17 of 21 casual-dining and quick-service chains that offered lower-calorie foods and beverages saw sales of those products outpace those of traditional menu items.
“This report shows that companies can serve both their interest in healthy profits and their customers’ interest in healthier eating,” said Dr. James S. Marks, a senior vice president and director of the Health Group at the Robert Wood Johnson Foundation, which funded the survey. “We need more companies to make this shift, and now they have even more reasons to do so.”
Adding up the evidence
According to the research, the chains surveyed also enjoyed an average 5.5-percent increase in same-store sales, while chains that did not offer more healthful items over the time period saw a 5.5-percent comps decline; a 10.9-percent surge in customer traffic, which compares to a 14.7-percent decline at counterparts that did not increase healthful offerings; and an 8.9-percent increase in total food and beverage servings, where competitors offering fewer healthful items saw a 16.3-percent decrease.
To reach their conclusions, Hudson researchers examined data on restaurant servings and traffic compiled by The NPD Group and combined that with sales data from Nation’s Restaurant News, Trinity Capital and information drawn from the chains’ annual reports.
The survey monitored Applebee’s, Burger King, Carrabba’s Italian Grill, Chili’s Grill & Bar, Cracker Barrel Old Country Store, Denny’s, IHOP, Arby’s, Wendy’s, LongHorn Steakhouse, Romano’s Macaroni Grill, Outback Steakhouse, On the Border, Panera Bread, Taco Bell, Olive Garden, McDonald’s, Red Lobster, KFC, Chick-fil-A and Sonic.
The sample group represents a significant slice of the industry pie, accounting for $102 billion in annual U.S. sales and 49 percent of total revenue earned by the top 100 U.S. restaurant chains.
That such powerhouses are seeing positive results from serving more healthful food makes a strong statement, said Hank Cardello, senior fellow at Hudson Institute and director of the institute’s Obesity Solutions Initiative.
“This shows that consumers want restaurant meals that are better for them and that their preferences are changing,” said Cardello, the report’s lead author. “It also shows that restaurant chains that are serving these foods that are better for you are outperforming those that don’t.”
During the five years the 21 chains were monitored, they reported a collective increase of roughly 472 million servings of lower-calorie foods and beverages, which compares to a collective decrease of about 1.3 billion servings of traditional items.
That decline during a period in which low-calorie items rose nearly a half billion servings illustrates that the industry is changing its views on “the old model that says bigger is better when it comes to portions,” Cardello said. “We’re now seeing that rubric changing.”
Changing consumers
NPD restaurant industry analyst Bonnie Riggs noted that consumers also are changing. According to NPD data, about 8 percent of people who regularly dine out seek more healthful options. That number, however, hasn’t grown since the recession began taking healthy bites out of consumers’ budgets.
“That number was increasing prior to the recession,” Riggs said. “But because of the recession, a lot of younger folks, especially, have had to scale back on what they order.”
Still, she added, 8 percent is a significant number of diners.
Both Riggs and Cardello agreed that current research signals a substantial, albeit slow, swing in consumer preferences toward better-for-you choices on restaurant menus. However, the two interpreted the shift differently.
“I do think the times are changing, especially as the population ages,” Riggs said. “Baby boomers are a huge group … that is driving this change. They’re different from their predecessors in that they want to live forever. So they stay active, exercise and want lighter, healthier options at restaurants.”
Cardello said he sees the Hudson Institute report’s results as proof of a viable business case for offering healthful options.
“This isn’t some moral argument saying you should serve healthier food because it’s right,” he said. “When you can point to this data and say, ‘OK guys, here’s where your growth engine is, and if you don’t do this, you’ll sacrifice some growth and traffic,’ people pay attention.”
Cardello’s team worked with the Nutrition Coordinating Center at the University of Minnesota to develop the calorie criteria used to assess menu items. Main-course items, such as sandwiches or entrées, with 500 or fewer calories, and beverages with 50 or fewer calories per 8-ounce serving, were considered “lower calorie.” Side dishes, appetizers and desserts with 150 or fewer calories were categorized similarly. Items exceeding those calorie criteria were dubbed “traditional.”
Subtle marketing
While most restaurants surveyed use similar criteria to evaluate whether items they serve are healthful, they differ in how they market them. Most chains, such as McDonald’s, provide caloric content alongside each menu item, while marketing healthful ones under banners such as, “Favorites Under 400.”
At Applebee’s, several meals that include a protein and two sides are promoted on the “Under 550 Calories” page of its menu.
According to Becky Johnson, Applebee’s senior vice president of marketing and culinary, since 2004 the chain has served a line of Weight Watchers-endorsed entrées. But while such endorsements can help guests make dietary decisions, she said such obvious promotion of “diet items” could carry a subtle negative stigma.
“People don’t really feel good about ordering off ‘the diet page,’” Johnson said. “The point you have to make is the customer is going to have great-tasting food and feel good about it.”
In addition to knowing they’re eating 550 or fewer calories in one meal, she said, “customers just like knowing they can have our Signature Sirloin with Garlic Herb Shrimp and be eating right.”
When that dish was introduced in 2011, it was not only the chain’s most popular for the first two months of that year, but it marked the first time in Applebee’s history that sales of a lower-calorie item exceeded sales of traditional menu items, Johnson said.
At IHOP, the menu’s “Simple & Fit” section contains 30 options, most of which are combination platters that deliver 600 calories or fewer. The items are promoted as, “Under 600 calories, but they taste like a million.”
Natalia Franco, senior vice president of marketing at the breakfast-centered family-dining chain, said restaurants’ healthful offerings must strike a balance between great taste, portion control and fresh ingredients. IHOP’s Simple & Fit Spinach, Mushroom & Tomato Omelette clocks in at 330 calories by using egg whites, being smaller than the chain’s standard omelets and featuring a side of seasonal fruit rather than bacon or hash browns.
But while that high-protein, low-calorie dish appeals to nutrition-conscious customers, Franco insisted the chain doesn’t overtly promote that dish or others as “healthful” since customer perceptions of the term vary widely.
“Clearly, that word can have different codes with different people,” Franco said.
What IHOP does know is its customers are looking for “fresh ingredients, reasonable portions and food made to order,” she added. “So we give them lots of choices that happen to be under 600 calories.”
When it comes to healthful items, too much promotion can be a bad thing, according to industry watchers.
“If you use too many words like ‘organic’ and ‘all natural,’ people are thinking back to the days of the low-fat craze, when that food didn’t taste good and wasn’t filling,” Riggs said.
Arby’s uses a subtler approach of informing customers that some items that may not seem healthful actually have 500 calories or fewer, said chief marketing officer Russ Klein.
“People know that fried items aren’t the best choices, but they don’t always know that our Beef ‘n Cheddar, French Dip and Grand Turkey Club are all under 500 calories,” Klein said. “People like to have a heads up on things like: If you hold the mayo, it’ll save you 100 calories or so.”
Walking the talk
National Restaurant Association research supports the premise that customer awareness of healthful items has grown. In its “Forecast 2013” the NRA reported that 86 percent of adults say there are more healthful options at restaurants than there were two years ago.
But does that mean they’re acting on that awareness and buying more healthful items? Applebee’s Johnson believes so.
“I’ve been in this business a long time, and I’m seeing for the first time in my career that reported behaviors are starting to match actual behavior,” she said. “Consumers will tell you all day that they eat right every day, but for the most part we know that doesn’t happen. Now, however, is a point in time in history where consumers across the country are starting to say the same thing: ‘I want to eat healthier, and I’m making myself do it.’”
Riggs said she sees a multitude of customers moving toward eating more healthfully for varied reasons.
Millennials, she said, are better educated on healthful choices, and since many grew up eating more often in restaurants than at home, they’re programmed to view restaurants as places where they can get high-quality, healthful food.
Boomers, on the other hand, are not only tired of cooking, they — like most people — tire easily of the planning required to eat healthfully at home.
“We did a survey of 5,000 people that showed they want quality food, well-balanced food groups, right portion sizes and grilled options, regardless of whether they get it at a fast-food restaurant or in casual dining,” she said.
Arby’s Klein agreed that a shift in preferences is underway, but he’s dubious about whether that evolution is significant.
“The customer mind-set change has been more fast-acting, for sure, but their behavioral changes are more glacial,” he said.
And NPD research shows the burgeoning healthful trend sailing into some headwinds: 70 percent of adults age 50 or older believe they shouldn’t have to pay more for healthful options, especially at quick-service restaurants or casual-dining spots.
And while 56 percent of younger patrons aged 18 to 24 say they expect to pay more for healthful foods, they currently lack the expendable income to buy them regularly, NPD found.
Operators also can wind up paying more for healthful ingredients that aren’t part of their current menu mixes, and sourcing new items often poses supply-chain challenges.
When Klein worked as chief marketing officer for Burger King, he said the addition of Apple Fries to the chain’s menu “instantly made us one of the world’s largest customers for apples. You commit to doing those new items, but now you’ve got to build the supply chain to support them.”
Klein added that while the turkey used on Arby’s sandwiches costs more than roast beef, and its chopped salads have a higher food cost as a percentage of sales, the chain focuses on its blended food cost for the entire menu.
“Costs for various products are always going to be more or less than the average, and that’s no different for healthful options,” Klein said. “You can’t be a slave to food cost and margin on every item. You have to look at the whole.”
Regardless of those concerns, McDonald’s spokeswoman Ofelia Casillas said the chain’s success with healthful items has it considering a number of sub-400-calorie dishes for its development pipeline.
In an e-mail Casillas said more produce-centered sides are in test, as well as grilled-chicken choices for Happy Meals. McDonald’s also is exploring variations of its Chicken McWrap and more low-calorie breakfast choices, like an egg-white Egg McMuffin, to complement its popular oatmeal offering, which has sold 214 million portions since its 2011 introduction.
Not only should such results make operators take notice, Hudson Institute’s Cardello said, they should help remove the stigma attached to healthful foods as threatening to the way chains currently do business.
“This isn’t a call for restaurants to get rid of their tried-and-true items; it suggests they broaden their portfolios and promote better-for-you items a little more aggressively,” Cardello said. “This helps fix the problem [of unhealthful eating] in a way that doesn’t mess up the business model of a successful restaurant.”
