The changes facing fast food

Analysts expect the fast-food industry to grow modestly this year. But the downturn is making them rethink their strategies. After a strong focus on value - sometimes to the detriment of profits - many companies are now introducing higher-priced items to entice consumers away from $1 specials. KFC, a division of Yum! Brands, which also owns Taco Bell and Pizza Hut, has launched a chicken sandwich that costs around $5. And in May Burger King introduced barbecue pork ribs at a hefty $7 for eight.

Yet growth opportunities in America are limited because the market is considered to be “saturated”, not so much in fats but outlets. China is the place where most fast-food chains, like so many industries, see big expansion.

But what about those growing waistlines? So far, fast-food firms have nimbly avoided government regulation. By providing healthy options, like salads and low-calorie sandwiches, they have at least given the impression of doing something about helping to fight obesity. These offerings are not necessarily loss-leaders, as they broaden the appeal of outlets to groups of diners that include some people who don’t want to eat a burger. But customers cannot be forced to order salads instead of fries.

In the future, simply offering a healthy option may not be good enough. “Every packaged-food and restaurant company I know is concerned about regulation right now,” says Mr Palmer of UBS.

In order to avoid more legislation on top of the just approved calorie posting in the US, fast-food companies will have to continue innovating.