On Tuesday, McDonald’s announced the creation of a Restaurant Experience Team, which includes groups that work across departments and is designed to bring technology and other changes to restaurants more quickly.
Maybe more notable to us, however, was the company’s creation of teams around beef, chicken and beverages. McDonald’s is increasingly competing with “specialist” concepts that focus on one of those things, and not all three of them.
“We’re competing against somebody like KFC, which is single-mindedly devoted to winning in chicken,” CEO Chris Kempczinski said in a video.
I raised an eyebrow at the KFC suggestion, given that chain’s rather weak sales of late.
But Kempczinski is not wrong. The restaurant universe is increasingly specialized.
The U.S. consumer does not want its restaurants, particularly limited-service chain restaurants, to do everything. And they are increasingly demanding the same out of their full-service concepts, too.
One needs only look at the 10 largest chains for an example of this. Seven of the 10 largest chains could probably fall under Kempczinski’s term as a specialist: Starbucks, Chick-fil-A, Taco Bell, Dunkin’, Subway and Chipotle. Some of them have bigger menus than others, but on balance they focus on one general area.
But the fastest-growing chains in the U.S. right now are even more specialized. The best one—and, frankly, the example that Kempczinski should have used—is Raising Cane’s, which generates $6 million per store by selling one thing, chicken fingers, and a few sides. It does that one thing exceptionally well and is probably going to be a Top 10 concept sometime in the next decade. If not sooner.
Then there is Dave’s Hot Chicken, which is about to get a $1 billion valuation less than a decade after it was founded in a Los Angeles parking lot. That concept sells spicy chicken and a few other items.
Chicken is where McDonald’s—and Taco Bell, for that matter—wants to compete more directly. So it makes sense that the company would create a team around chicken.
Another area in which McDonald’s wants to compete is beverages, and that too is loaded with specialty concepts, including the aforementioned Starbucks. While Starbucks sells a selection of food, those menu items are largely designed so the chain can sell more beverages.
But again, the level of specialization grows the deeper into the industry you get. We have rapidly growing chains that only sell boba tea, or dirty soda. And there is a generation of drive-thru-only concepts like Dutch Bros, 7 Brew and Scooters that are focusing purely on beverages.
To be sure, just specializing doesn’t guarantee success, as the KFC example illustrates. But consumers want their restaurant chains to focus on a few things and do them very well and not do things like sushi at a bar-and-grill chain. The brands that are specializing in what they do best are winning.
That does make it a challenge for a chain like McDonald’s, which has long had its hand in multiple cookie jars, to compete for customers. And thus the chain is creating those global category teams. We’ll see if it works. But the days of specialization are here.