Originally published in Nation Restaurant News on February 7, 2013 by Erin Dostal.

Study from Hudson Institute links more healthful offerings to better sales and traffic performance at 21 major chains
Restaurants that have increased their lower-calorie menu offerings have also seen upticks in sales and traffic, according to a study by research organization Hudson Institute.

The study, released Thursday, analyzed 21 restaurant chains between 2006-2011, measuring the amount of “lower-calorie” offerings against the brands’ reported same-store sales and traffic. The study was conducted with support from the Robert Wood Johnson Foundation and included large chains such as McDonald’s, Burger King, Applebee’s, Denny’s, Olive Garden and Outback Steakhouse.

The study defined “lower calorie” as fewer than 500 calories for center-of-the-plate items like sandwiches or entrées; fewer than 150 calories for side dishes, appetizers and desserts; and fewer than 50 calories per eight-ounce serving for beverages.

Overall, restaurants that increased their lower-calorie offerings saw an increase in total traffic of 10.9 percent and a same-store sales boost of 5.5 percent between 2006-2011. Brands that didn’t increase their lower-calorie offerings, or decreased them, saw foot traffic drop 14.7 percent and same-store sales dip 5.5 percent during the five-year period.

“We found that those restaurant chains that were growing their lower-calorie time on the menu…demonstrate business advantages,” said Henry J. Cardello, a senior fellow and director at the Washington, D.C.-based Hudson Institute Obesity Solutions Initiative. “They’re seeing their same-store sales grow. They’re seeing customer traffic increase.”

The study’s conclusion is that a shift to lower-calorie and better-for-you foods will be necessary for growth within the restaurant industry. “This is strictly business,” Cardello said. “There’s a good moral argument, but just do it for business. It just makes sense for you.”

He continued, “Consumers are voting with their feet. Nobody’s selling these items very hard. Demand is showing up here. You can’t ignore the consumer.”

Increased menu labeling this year will also add to customer awareness of calorie counts and nutrition, noted Dr. James Marks, senior vice president and director of the health group at Robert Wood Johnson Foundation, during a press conference discussing the findings. “We could see the growth in lower-calorie items accelerate even faster,” he said.

Menus are already beginning to reflect this trend, the study found. Lower-calorie items accounted for 37.5 percent of all servings sold at the surveyed restaurants in 2011 — a 1.3-percent increase from 2006.

Marks also noted that doing “the right thing” and “the profitable thing” for businesses are not mutually exclusive when looking at increasing healthful offerings. “We know that most companies can’t and don’t base their core business model on doing the right thing,” he said. “Rather, they have to make a profit to continue to employ their workers and provide a return for their investors.”

Quick-service restaurants are leading the charge when it comes to lower-calorie food offerings, making up 41.4 percent of all servings in 2011. At full-service restaurants in 2011, 28 percent of servings were lower calorie.

Full-service restaurants, however, offer more lower-calorie beverage options than their quick-service counterparts, Cardello said. 61.6 percent of beverage servings at full-service restaurants in 2011 were lower calorie, compared with 34.1 percent of beverage servings at quick-service chains.

The findings were consistent with the Hudson Institute’s previous study on consumer packaged goods, which found that those companies that focused on offering lower-calorie items performed better.

“If you’re not pushing these items, you’re running the risk of seeing declines,” Cardello said. “It doesn’t mean you walk away from burgers, it just means you restructure the kinds of items you sell.”

Originally published in The Huffington Post on February 7, 2013 by Joe Satran.

The conventional wisdom on restaurants and health is that eateries intentionally serve up high-calorie, low-nutrition dishes because they think they’re the best way to draw customers in and maximize profit. This theory of menu design certainly provides a convincing explanation for the success of unhealthy fast-food chains like McDonald’s and Taco Bell.

But a new study released Thursday by the Hudson Institute suggests that, if this theory was ever really valid, its power has waned in recent years.

The researchers examined sales figures from 21 major chain restaurants, some of which had recently introduced more lower-calorie options to their menu, and some of which had cut such items. (For a nice primer on some of the healthy dishes that chains have introduced, by the way, check out Stephanie Strom’s story on the trend in today’s New York Times.) They discovered that the chains that had added more low-cal items had performed strikingly better than the ones that hadn’t. Between 2006 and 2011, visits went up 10.9 percent at the chains that had beefed up their healthy offerings, while they dropped by 14.7 percent at the restaurants that had decreased their low-cal offeries.

We know, we know: correlation, not causation. Maybe, you might posit, the restaurants that had the means to develop healthy recipes were already doing better than those that didn’t? Or maybe they all did a bunch of marketing using their healthy items, but people actually ordered the unhealthy ones anyway!

Nope. At least not mostly. The study also found that sales of the actual healthy items went up by over 470,000 units in the five-year time span studied, while sales of unhealthy items plummeted by about 1.3 million units. The study found that sales of French fries and high-calorie drinks (like sugary, as opposed to diet, sodas) had gone down particularly fast.

There may certainly be other factors lurking in the background. It possible, for example, that a few people are buying two of the “low-calorie’ main dishes, defined in the study as those under 500 calories, and eating them both at once, boosting sales without cutting caloric intake. But this study does, at least, provide fodder for restaurant R&D workers who are pushing their bosses to agree to add more healthy items to their menus. Which may be good news for diners’ health down the road.

Originally published in Forbes Magazine on March 18, 2013.

New York Mayor Michael Bloomberg’s attempt to ban big sugary drinks fell flat last week when a judge blocked it, and Bloomberg has vowed to appeal. That’s the last thing he should be doing.

Critics said the proposed ban had too many loopholes, for example covering sodas but not milkshakes. They decried yet another case of overwrought nannyism. The judge called the ban “arbitrary and capricious.” Businesses called it unfair and unworkable. All true—but all beside the point.

The point, one Bloomberg should respect as a business leader, is that solving vexing societal problems in which business plays a role is a slower and bloodier process when business’ needs are ignored, whether the problem be obesity, smoking, guns, automobile safety, or whatever. Time and again, progress has come faster when an industry saw that what was in the public’s best interest was in its own best interest, too. The U.S. auto industry for years fought off activists like Ralph Nader who wanted safer cars. Only when Detroit figured out that paying attention to safety conferred competitive advantages already enjoyed by Volvo, Mercedes, and other European automakers did it willingly embrace safety beyond what the government mandated.

Bloomberg’s accomplishments in business have given him powerful currency, both in money and influence. As mayor he has used that currency to make changes that have benefited a majority of New Yorkers, such as banning smoking in public places, reducing crime, and helping residents find affordable health care. He also has encouraged the private sector to invest in affordable housing. This initiative will help 165,000 more New York City families find affordable housing by some time this year.

His social activism hasn’t stopped with food and housing. He has demonstrated leadership on the national stage as co-founder of Mayors Against Illegal Guns, a 900-member group that aims not to ban guns but to keep criminals from illegally obtaining them. And he has used his personal fortune to bankroll national and international causes that he is passionate about, fighting crime, improving education, and helping local governments run better.

But in his anti-obesity campaign’s focus on Big Gulps, Bloomberg’s currency is being spent in the wrong place. In his evolution from business titan to social activist, he has forgotten what made him so successful as a businessman. He is approaching the obesity crisis with an activist’s fire-throwing fervor, attempting to solve it by making a scene, micromanaging business, and busting chops. Instead, he should bring his well-honed, considerable business skills to his crusade, focusing on finding ways to help both sides get what they want.

Here’s what he should do.

  • Align with food and beverage companies’ self-interest. Fortunately he has plenty of talking points that can win industry support. New studies from my organization, the Hudson Institute, demonstrate that food companies and restaurant chains that offer lower-calorie and better-for-you foods are delivering superior sales performance. That is a far more compelling incentive to change than the threat that you’ll be breaking the law if you serve a 17-ounces cola. Bloomberg should also work his considerable connections on Wall Street, highlighting to security analysts the positive effect that healthier foods and beverages can have on key financial measures. Increased Wall Street scrutiny will do more than the moral argument to put pressure on food companies to reduce calories.
  • Focus on the core problem, but don’t tell business how to solve it. The best business leaders achieve buy-in for an initiative and then get out of their employees’ way and let them execute. When the U.S. mandated new fuel consumption standards for automobiles, the government didn’t tell automakers what technologies to use or what cars to build; as a result, the new standards were embraced by most auto manufacturers and their unions, as a way to get people to buy more cars. In the case of obesity the core problem is not large sodas but excess consumption of calories from multiple sources. Our research demonstrates that restaurant chains that reduce beverage calories have a healthier business, not just a healthier customer base. Bloomberg can tell New York restaurants and other food outlets that they’re leaving money on the table by sticking to their bigger-is-better approach. But he should let them figure out how to change, whether by reducing drink sizes, promoting bottled water more vigorously, or pricing diet sodas more attractively. If he tries to jigger product lineups and mess with profit models, he’ll only guarantee resistance.
  • Track progress. Both the Coca-Cola Company and PepsiCo have reduced their “calorie footprints” (the average calories sold per capita) in the U.S., by 24% and 28% respectively during the last decade. Bloomberg should urge New York restaurants to adopt similarly measured goals, just as the automotive industry adopted standard measures for fuel efficiency. A recognition system that tracks food company calorie footprints, similar to the J.D. Power and Associates surveys of automobile model quality, could assess whether food companies, restaurants, and other food outlets make real progress in reducing the calories they sell to consumers. Only when this system is in place will the mayor have a means to determine who is moving in the right direction.

Bloomberg deserves credit for taking on this deadly and costly public health crisis. I hope that even when he is no longer mayor he will continue the fight on the national stage, as passionately as Bill and Melinda Gates have adopted education and the Pew family has advanced arts and culture. But he needs more than just passion and fervor. He needs to be persuasive, practical and business-savvy, drawing on the very qualities that built his fortune and reputation.

Originally published in NPR on February 7, 2013 by Nancy Shute.

Lower-calorie foods are driving growth and profits for chain restaurants, according to fresh research, suggesting that people are making smarter choices when it comes to burgers and fries.

We’re still ordering the burger and fries, mind you. But we’re going for smaller portions and shunning sugary drinks. French fry sales dropped about 2 percent from 2006 to 2011, while sales of lower-calorie beverages rose 10 percent, the study found.

That should make for happy restaurant chains, which have argued that Americans really don’t want salads and other healthy offerings pushed by public health officials.

The report, from the Hudson Institute, analyzed sales at 21 restaurant chains, including McDonald’s, Applebee’s, Burger King, Cracker Barrel, IHOP, Panera Bread and KFC.

Restaurants that offered more lower-calorie services saw a 9 percent increase in food and beverage sales from 2006 to 2011, while restaurants that didn’t saw sales drop by 16 percent.

The researchers defined lower calorie as a main item with fewer than 500 calories, a side dish with fewer than 150 calories, and a beverage below 50 calories for an eight-ounce serving.

“You go to McDonald’s and get a plain old burger, and you don’t get many calories,” says Hank Cardello, a senior fellow at the Hudson Institute and author of the report. It was funded by the Robert Wood Johnson Foundation.

A former food industry executive at companies like Coca-Cola and General Mills, Cardello is of the belief that badgering people about eating healthy isn’t necessarily the only way — or the best way — to solve the nation’s obesity crisis.

“We found some good performance in restaurants that were selling smaller-portion chicken sandwiches,” Cardello says. Even if that’s a fried chicken sandwich, he notes, smaller means fewer calories. And for the restaurants, “You don’t give up profits by doing that.”

New federal regulations requiring chain restaurants to post calorie counts will take effect next year, but some, including McDonald’s, already provide that information. Earlier studies have found that posted calorie counts don’t drive people to make better choices, and that they can actually be so confusing as to be useless. But this study suggests that people are starting to pay attention.

Cardello hopes the dollar figures will get restaurateurs to pay attention, too.

“The restaurant industry as a whole is a very show-me industry; show me why I should change.” He knows he’s not going to convert the chains to being public-health advocates. But now, the chains will know that they should “get with the program, or you leave money on the table.”

Editor’s Note: The Robert Wood Johnson Foundation also funds coverage of health care on NPR.

Originally published in U.S. News on February 7, 2013 by Seth Cline.

In the midst of an obesity epidemic, low calorie items are fueling the growth of America’s biggest and baddest restaurant chains.

Lower calorie foods and beverages, and the major restaurant chains that sell more of them, outperformed less healthy alternatives in the U.S. over the past five years, according to a report released Thursday by the Hudson Institute.

The study, called “Lower-Calorie Foods: It’s Just Good Business,” looked at 21 of the nation’s largest restaurant chains, from fast food giants like Burger King and McDonald’s to full-service chains like Olive Garden and Applebee’s, and separated their menu items into two categories: lower calorie items and traditional items. It then tracked the performances of the two food types from 2006 to 2011, and found that lower calorie menu items outperformed traditional ones at 17 of the 21 restaurant chains studied.

Henry Cardello, director of the Hudson Institute’s obesity initiative, emphasized that the menu options classified as low calorie weren’t always marketed as such, but sold better anyway.

“When it comes to more indulgent foods, the minute you tell someone ‘Oh by the way, you’re going to a fast food restaurant, and there’s a healthier item on the menu,’ everyone runs the other way,” Cardello says. “Nobody’s really selling these items very hard, demand is showing up here anyway.”

The restaurants which tapped into that demand increased their sales, increased their total food and beverage servings, and increased the number of customers walking through the door from 2006 to 2011, the study found. Sales revenue, total customers, and total servings all declined in restaurants that reduced the number of low calorie options on their menu in that time period.

Customers of the restaurants ate fewer french fries, drank fewer non-diet sodas over that time, and sales of 11 of the 12 most popular hamburgers also declined.

“Consumers are telling you they want more and more of these products,” says Cardello, who formerly worked for Coca-Cola and General Mills . “This is business, it’s strictly business — the moral argument, God-bless, there’s a good moral argument — but just do it for business because it just makes sense for you.”

Lower calorie items were defined as 500 calories or less for entrees, 50 calories or less for beverages, and 150 calories or less for sides and desserts. The study found about 38 percent of menu items offered by the 21 restaurants in 2011 were lower calorie, up from about 36 percent in 2006.

That modest increase is more impressive when the scale is considered: the 21 restaurants studied accounted for $102 billion in sales and more than 50 billion servings during the survey.

“The report shows that the right thing and the profitable thing are not mutually exclusive,” says James Marks, senior vice president at the Robert Wood Johnson Foundation, which sponsored the study. “Companies can do good while doing well.”

Originally published in Time Magazine on February 8, 2013 by Alexandra Sifferlin.

Offering lower-calorie options may mean more revenues for fast food restaurants.

A recent study from the Hudson Institute, a nonpartisan policy research organization, looked at the relationship between menu items and revenues of 21 fast food chains and quick-service restaurants including McDonald’s, Wendy’s, Burger King, and Taco Bell, as well as sit-down spots such as Applebee’s, Olive Garden, Chili’s, and Outback Steakhouse.

Lower calorie food was defined as a sandwich or entrée containing less than 500 calories; side dishes, appetizers and desserts with less than 150 calories, and beverages with fewer than 50 calories per 8 oz. Over a period of five years, chains that expanded their lower-calorie options had better sales growth, greater increases in customer traffic, and stronger gains in total food and beverage servings than chains who cut back on lower-calorie fare.

The researchers used the companies’ annual reports and data from market research firms to assess same-store sales, total store sales, total food and beverage servings (number of times a specific menu item was ordered), and customer traffic. Using the data, they analyzed the businesses’ overall performance related to sales of lower-calorie items.

The findings were pretty surprising — and, from a health perspective, potentially encouraging. Among all the chains, the lower-calorie items were driving growth for both food and drinks. For a group of restaurants that pulls in $102 billion in annual U.S. sales, that’s saying something. Chains that increased their servings of lower-calorie food experienced 10.9% growth in customer traffic compared to a 14.7% decline among chains that didn’t. Overall, they served 472 billion lower-calorie foods and beverages over the five year period, and 13 billion fewer servings of traditional items such as French fries.

To get a better idea of how real the shift toward lower-calorie items is, the researchers took a closer look at the largest chains that have more than $3 billion in sales, in which French fries make up 20% of their total food servings. Among this group, the percentage of French fry servings fell by one percentage point. “You may look at that and think, what’s the big deal? It’s just one percentage point, but when you realize that these five chains sell over 5 billion servings of French fries per year, to come down 1%, that’s a loss of 50 million servings,” says Hank Cardello, lead author of the report.

Perhaps due to their continued reputation as purveyors of unhealthy food, however, from 2006 to 2011, the industry overall experienced a 832 million drop in total servings. But there are hints that people are heeding messages for healthier eating, since sales of lower-calorie offerings rose during the same time period while the higher-calorie food items fell by 1.3 billion servings. “That to me is the ‘ah ha!’ moment, where you say, ‘Okay, I get it. If I’m not [bringing] in these lower-calorie items, I’d be worse off than I am right now.’”

“This is clear evidence that restaurants need to be more aggressive in carrying more low-calorie options. I don’t necessarily mean calling everything healthy or low-cal, it’s just shifting attention toward the lower-calorie diet brands,” says Cardello. “I expect to see more and more of those because that’s what the consumer is starting to demand, and those who lag on that and rely on their more traditional items will clearly see buy-in declines to their chains. It is just not good business to be doing that.”

According to the researchers, these findings may provide a practical, bottom-line reason for the restaurant industry to take lower-calorie, healthy food options seriously. The moral strategy of shaming the restaurants into changing their menus for the good of public health was never effective, nor sufficient. But if healthier fare can bring in more dollars, perhaps both consumers and the industry can benefit. “Bring the business into it and persuade them to act in their own enlightened self-interest,” says Cardello.

Originally published in Bloomberg Business Week on February 8, 2013 by Venessa Wong.

America’s romance with triple-decker, gooey cheese- and bacon-laden burgers is officially cooling. Not that we’re all noshing on baby carrots.

A new study by the Hudson Institute finds that demand for traditional items at restaurants is falling, with what the think tank calls “low-calorie” items rising to take their place. (At our favorite chains, “low-calorie” is a pretty inclusive category.) In this study, it meant no more than 500 calories for entrées, 50 calories per 8 oz. beverage, and 150 calories for side dishes, appetizers, and desserts. So while apple slices and grilled chicken make the cut, so do McRib sandwiches at 500 calories and and Egg McMuffins at 300 calories.

Not exactly health food, but marginally better than such burgers as Whoppers (630 calories) and Sonic Burgers (640 calories). Sales of signature beef burgers at Burger King (BWK), McDonald’s (MCD), Sonic (SONC), and Wendy’s (WEN) dropped 28 percent from 2006 to 2011, says the report’s author Hank Cardello, a senior fellow at the Hudson Institute, citing NPD data. This was despite a 3.7 percent increase in traffic at these chains.

“Eleven of 12 iconic burgers declined in this period. That’s a big deal,” he says.

The report examines U.S. sales at 21 large restaurant companies, from McDonald’s and Burger King to Applebee’s (DIN) and Olive Garden (DRI). Sales of all “low-calorie” items increased by 472.4 million servings from 2006 to 2011. In addition to low-cal foods, beverages such as diet soda and coffee are also growing categories.

Patrick Lenow, a spokesman for Sonic, says the chain has been helped by “products that are considered better for you, such as our new chicken sandwich and over 20,000 [options for] lower-calorie drinks.” (That’s not a mistake: Sonic takes great pride in its customizable beverages. Lenow swears there are actually 400,000 drink options at the chain, but most are full-sugar varieties.)

Fatty burgers were not the only food affected. Sales of all higher-calorie foods fell by 1.3 billion orders from 2006 to 2011, according to the report. Orders of fries dipped by 1.9 percent at the largest fast food chains.

Calorie consciousness will likely rise as restaurants with more than 20 locations will be required to post calorie counts, probably as of 2014, under the Affordable Care Act, reports the New York Times.

“You won’t see sales growth if you don’t start transitioning,” says Cardello. “You better be pushing smaller portions of these items, better-for-you items.” Or at least 20,000 lower-calorie drinks.

Originally published in Forbes Magazine on February 26, 2013.

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.

A 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 York, Boston, 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.”