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Forbes Online

Don't Supersize Me

Chain Restaurants Must Cut Calories for Their Own Business Good

Former Senior Fellow and Director, Food Policy Center

For the restaurant industry, like most others, moral arguments have little or no place in financial decisions. As a result, despite a decade of activists railing against half-pound cheeseburgers, accordion-size racks of ribs, haystacks of fries, and supersized Big Gulps that fuel obesity, restaurants haven't changed much. Menus tout highly caloric food and plenty of it because restaurant chains feel that's how they'll lure customers. But a new study I led shows that that's no longer true, and restaurants will miss out on a huge growth opportunity if they don't rethink their strategy.

Hudson Institute study released earlier this month on the performance of 21 U.S. restaurant chains that collectively generate $102 billion in revenue found a pocket of prosperity in a shrinking industry coming from an unlikely place, lower-calorie meals. Our research, funded by the Robert Wood Johnson Foundation, found that although the total number of meals served fell 1.6% from 2006 to 2011, servings of lower-calorie items grew 2.5%, while the number of higher-calorie servings fell 4.2%. To put that in a bite-sized sentence, supersizing is out; health is in.

Chains that dished out a greater number of lower-calorie servings grew their same-store sales much faster from 2006 to 2011. Per-restaurant sales went down at chains whose servings of lower-calorie foods declined during that period. Another new study confirms our findings from the consumer end. The Centers for Disease Control and Prevention released a study this week that found that U.S. adults consumed 11.3% fewer calories in food from fast food restaurants in 2010 than in 2006. In other words, consumers want fewer calories on their plate, not more.

Both reports should convince the restaurant industry that bedazzling customers with calorie-laden fare no longer makes economic sense. It's time for restaurateurs who have been timid about offering healthier fare or smaller portions to wake up to this fact.

In the past, menu changes have typically been forced from the outside, by local laws requiring that restaurants post calorie counts; embarrassing documentaries such as Supersize Me; activists who targeted partially hydrogenated frying oils (for French fries and other fried foods); trans fat bans in places like New YorkBoston, and California. The restaurant industry's typical reaction to such assaults has been to counterpunch. Consider its legal challenge to New York Mayor Michael Bloomberg's Big Gulp ban.

But the Hudson study indicates that restaurants need to put down the gloves. Their top lines depend on it. Cutting calories in their menus is better for their business. Our research examined 21 of the nation's largest restaurant chains, which together account for about half of the total sales of the top 100 chains. We looked at quick-service chains such as McDonald's, Wendy's, Burger King, Chick-Fil-A, and Taco Bell, as well as sit-down restaurants such as Applebee's, Outback Steakhouse, IHOP, and Olive Garden.

The nine chains that increased their servings of lower-calorie items not only had a 5.5% increase in same-store sales, they also increased their customer traffic 10.9%. Sales at the 12 chains with declining numbers of servings of lower-calorie offerings fell 5.5%, and traffic shrank 14.7%.

The findings weren't a total surprise to us. A year ago Hudson conducted a similar study of 15 of the largest retail food and beverage companies, including Nestle, Kraft, General Mills, and Coca-Cola. Products they marketed with reduced calories, smaller portion sizes, or whole grains or other ingredients generally recognized as more wholesome accounted for more than 70% of their U.S. dollar sales growth from 2006 to 2011. And yet these offerings constituted less than 40% of the companies' product sales.

Natural Marketing Institute research has shown that 66% of American adults are choosing smaller portions at mealtime to help maintain or manage their weight. Restaurants that emphasize their high-calorie offerings or offer only a few uninspired lower-calorie choices will turn away those people.

So what can chains with years of high calorie-menu habits do? Before they do anything else, they must realize that their business will be at risk if they don't act. The Hudson and CDC studies should be regarded as a health warning to the economic vitality of the restaurant industry.

This doesn't mean chains should eliminate their popular high-calorie dishes. That, of course, would chase away the considerable percentage of customers who still enjoy those profitable items. Instead, they need to begin shifting their food portfolios toward the lower-calorie offerings that a growing number of customers now demand.

There are four ways to do this:

  • Offer popular high-calorie items in smaller portion sizes, and price them to generate a comparable margin. The Cheesecake Factory's "Skinnylicious" menu is a good example of this.
  • Accelerate servings of lower-calorie beverages, like Diet Coke, that a growing number of consumers prefer and that provide the same profit margins as higher-calorie ones.
  • Adopt healthier cooking oils like omega-9 sunflower blends that still yield tasty fried foods.
  • Promote the lower-calorie items more prominently, but don't make them look like diet fare. Subway has taken such a stealth-health approach with its combo meals, which offer, for example, a sandwich, Coke Zero, and baked Lays potato chips.

For the first time, restaurants have a compelling business reason to change their dietary ways. The industry has plenty of room for revenue and profit growth, but only if it plays a role in keeping its patrons' waistlines in check. Rather than "Supersize Me," the new restaurant mantra needs to be "Downsize Me."