Marketing is a vital ingredient in the restaurant business. The industry is entirely too competitive for brands to dismiss it as a secondary element.
A good product and marketing campaign can rescue a chain from near bankruptcy and it can open the doors to new groups of customers.
But campaigns can also have the opposite effect. When a marketing effort goes bad, it can cost companies hundreds of millions and even lead to bankruptcy filings and store closures. This is about some of the worst marketing efforts in recent industry history, starting with the story that got us thinking about this in the first place.
Red Lobster’s All-You-Can-Eat Shrimp
Last week, we learned that the venerable casual dining seafood chain hired a restructuring advisor to be its new CEO. Doing so generally means a brand is in some sort of financial trouble, and for that we can thank this deal.
Last year, the company offered customers an unlimited amount of shrimp for $20 in a bid to combat traffic declines. The price was apparently so low that it was too successful, resulting in an $11 million operating loss and ultimately leading owner Thai Union to take a massive writeoff and put the brand up for sale.
Oh, and the CEO has now sworn off lobster.
Burger King’s Ch’King
This is what happens when a brand tries to one-up everyone else. Burger King in 2021 unveiled its own answer to the Chicken Sandwich Wars, the Ch’King. Absolutely nothing was wrong with the product, except that it was difficult for franchisees to make. And the name was weird.
Sales tanked when the product was introduced. It was pulled less than a year later. Meanwhile, franchisees filed for bankruptcy, executives were ousted and parent company Restaurant Brands International pumped $400 million to turn the brand around. It was pretty much the opposite of what happened when sister chain Popeyes unveiled its landmark chicken sandwich in 2019.
McDonald’s Mighty Wings
In 2013, McDonald’s was slumping, working to evolve past its Dollar Menu days, when it released Mighty Wings. Its effort to jump into the growing chicken wing market was so feared that it led to record high prices for wings that year because suppliers hoarded wings, fearing the impact of the move.
Uh, it didn’t work. Customers just didn’t jump at the chance to get high-priced wings from McDonald’s when they could go to Buffalo Wild Wings for about the same price. McDonald’s was left with an unreal amount of unsold wings, forcing later discounts. All those wing makers released their supplies and prices plummeted. CEO Don Thompson was replaced by Steve Easterbrook just more than a year later.
Applebee’s hand-cut steaks
In 2016, Applebee’s decided to go upscale. It unveiled the “biggest marketing outreach” in its history with hand-cut steaks on wood-fired grills. Franchisees spent millions on the new grills and on training employees to cut and grill the steaks. It then unleashed a massive campaign to get customers to try its new menu.
It was a massive flop. Same-store sales declined 4.2% the quarter it came out (hint: If you spend tens of millions on a new product, that number should be a lot different). Customers were apparently confused about whether the steaks were higher priced or not. One year later, CEO Julia Stewart, the architect of IHOP’s comeback and later acquisition of Applebee’s, was ousted as CEO of the two chains’ parent company.
Panera Bread’s pizza efforts
In 2006, the fast-casual bakery/café chain decided to give pizza a try. It released Crispani, made-to-order pizza with a bunch of fresh toppings, all designed to give the company a dinner business it craved.
It was a massive flop. How much? The company later agreed to pay shareholders $5.75 million a few years later after allegedly misleading them about the state of sales.
Meanwhile, the chain gave it another shot in 2020 with Flatbread Pizzas. Though we cannot state for certain whether that created some of the challenges Panera has seen recently, it’s worth noting that it’s the one thing we know won’t be on the new menu that launches next month.
Pizza Hut’s fast-casual overreaction
In 2014, fast-casual pizza was all the rage. And Pizza Hut wanted in on the action. The chain created a new menu with new varieties of crust, “drizzle” sauces and artisan ingredients like salami. It also spent countless hours training staff on the new menu, which was all designed to compete with the emerging MOD Pizzas of the world. It even earned a few headlines calling Pizza Hut “the next Chipotle.”
It wasn’t. Sales did nothing, actually falling in the first full quarter the menu was allowed. As it turns out, fast-casual pizza wasn’t quite the rage that regular-old pizza delivery was. The chain has since lost its status as the country’s, and the world’s, largest pizza chain to Domino’s.
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