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Fast-food chains like Subway and Burger King have been hit hard by the coronavirus, with some slashing ad spend by as much as 50%. Here's how they've adapted their marketing.

Subway restaurant
  • Restaurant advertising has been one of the categories hit hardest by the coronavirus as consumers stay home and many locations remain closed.
  • Chains like Domino's, which already made much of its money through delivery, have been less affected than in-person chains like Subway, which sources said cut its ad budget by about 50%.
  • Fast-food marketers said the pandemic would accelerate trends toward digital advertising and pickup and delivery.
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The restaurant industry has been walloped by the coronavirus. Three million jobs and $25 billion in revenue were lost during the first three weeks of March, and a UBS analyst predicted that at least one in five American restaurants could close because of the pandemic.
Accordingly, advertising has also dropped. Year-over-year TV-advertising spending by all restaurants dropped 17% in the third week of March, according to the media-research firm Kantar. And sources told Business Insider that Subway has slashed its ad budget by about 50% since the pandemic hit.
But some fast-food brands appear better-positioned than others, especially chains that have moved into contact-free service options like delivery and pickup and changed their ads to promote these options.
Chipotle, for example, invested in its app in recent years and made delivery free starting March 15. It also reported that digital sales more than doubled in March and grew 81% year over year during the first quarter, insulating it from a 16% drop in March same-store sales.

Drive-thru, delivery, and online sales have been key as foot traffic slows to a standstill

According to the geographic-data startup Placer.ai, year-over-year foot traffic to Burger King, McDonald's, and Chipotle is down by 52%, 58%, and 72%, respectively.
All except Chipotle operate on the franchise model, meaning that each franchisee pays a portion of their revenue into a larger pool that helps fund the company's marketing efforts. So when sales drop, so do marketing budgets.
McDonald's reported US sales declined 13.4% in March. Fernando Machado, the chief marketing officer at Burger King parent company Restaurant Brands International, declined to give numbers but said in an interview that the chain's ad budget would also drop.
RBI and McDonald's have shifted their messaging strategies. RBI's Popeyes ran campaigns that focused on alternate delivery options while McDonald's ran ads about social distancing, drive-thru orders, and free "thank-you meals" for first responders.
These changes came in response to consumer behavior.
"We saw people migrate to drive-thru to delivery to mobile order and payment, which is a contactless way to pay," Machado said. The Wall Street Journal also said chains like McDonald's and Burger King, where drive-thru orders already accounted for about 70% of sales before the pandemic, could be less affected.

Burger King and Chipotle CMOs see more digital spending and delivery promotions long term

Machado and Chipotle Chief Marketing Officer Chris Brandt told Business Insider the pandemic has accelerated a trend toward digital marketing, which Machado said could give marketers more flexibility and visibility into the value of their spending.
Chipotle moved much of its advertising tied to live sporting events on TV to digital and online channels and streaming services like Hulu and Roku, Brandt said.
"A lot of it went to streaming services, and then we tripled our spend in digital and social, which was already pretty good to begin with," Brandt said, referring to the restaurant's advertising budget. "It was a big shift, and it was right away."
Brandt also said Chipotle used its customer-relationship management (CRM) program to turn regular store visitors into delivery customers using targeted social-media ads and direct-marketing emails.
Machado said he saw the consumer shift toward delivery and pickup as the biggest long-term change, calling it a "safe haven" for fast food.
"I'm not sure [eating out is] going to be a great experience again, to be honest with you," he said.

Domino's and Subway make for a stark study in contrasts as pizza deliveries rise and the sandwich chain struggles

Domino's Pizza has been a rare growth story during lockdowns, reporting a 1.6% increase in year-over-year same-store US sales for the first quarter after announcing it would hire 10,000 new employees.
A Domino's spokesperson pointed to an April 23 earnings report, which saw a 7% bump in franchise advertising fees.
During the earnings call, CEO Richard Allison said Domino's was "not pulling back one bit on advertising" during the pandemic, with the chain producing a new campaign each week on average.
But Subway cut its ad budget by about 50% since the outbreak, according to two people with knowledge of the matter who are known to Business Insider but requested anonymity because they are not authorized to discuss it. One said a key reason for the dramatic cut is the absence of live sports.
Subway's latest press releases have focused on contact-free pickup options. A third person who recently advised Subway and also requested anonymity said the chain took too long to shift to delivery, though.
"They're behind the competition," this person said. "Domino's had already leaned into technology, delivery, and CRM, and it's paying dividends."
Kantar said Subway spent $250 million on paid advertising in the US in 2019, a 20% drop from 2018's $310 million total. Kantar does not measure social-media spend.
Subway's public-relations firm didn't respond to requests for comment, and the holding company Dentsu Aegis Network, which has handled Subway's North American ad business since late 2017, declined to comment.
SEE ALSO: Huge companies scored millions in stimulus loans, but small ad agencies say they've struggled to get help as jobs hang in the balance
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https://www.businessinsider.com/how-burger-king-chipotle-dominos-and-subway-market-in-pandemic-2020-4?IR=T

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