Sri Sharada Institute Of Indian Management - Research

(A unit of Sri Sringeri Sharada Peetham, Sringeri)

Approved by AICTE

Plot No. 7, Phase-II, Institutional Area, Behind the Grand Hotel, Vasant Kunj,

New Delhi – 110070

Tel.: 2612409090 / 91; Fax: 26124092

E-mail: administration@srisim.org; Website: www.srisim.org

PROJECT
PROJECT ON PRODUCT INNOVATION AND PRODUCT
DEVELOPMENT AS THE BIGGEST STRATEGIES

SUBMITTED TO SUBMITTED BY:

PROF.NANDI MANISHA
(20090131)
NEERAJ
(20090134)
REETU
(20090143)
ROMI
RATHI (2009145)
Gaurav kumar(2009119)
 Dhwaj kumar(2009117)

ACKNOWLEDGEMENT
A Project Report is never successfully completed without the guidance from
appropriate person. So, Now it is the right time to express my sincere gratitude
towards all those, who have helped me to complete the project.

I would like to thank SWAMI (Dr.) Parthasarathy CMD, Sri Sharda Institute of Indian
Managament - Research who has given me the opportunity to study in such Unique
Institute. I am very much grateful to Dr.S.N Nandi for his expert guidance and for
his moral support and encouragement which lead the project to its current shape
Without their Guidance the work would never been completed.

Last but not the least I would like to appreciate my parents who have always
motivated me directly and indirectly to do my work with utmost Dedication.
Product innovation

Product innovation is the creation and subsequent introduction of a good or service that is
either new, or improved on previous goods or services of its kind. This is broader than the
normally accepted definition of innovation to include invention of new products which, in this
context, are still considered innovative.

Introduction

Product innovation is defined as:

the development of new products, changes in design of established products, or use of new
materials or components in the manufacture of established products

Thus product innovation can be divided into two categories of innovation: development of new
products, and improvement of existing products.

New product development

New product development describes the complete process of bringing a new product or service
to market. There are two parallel paths involved in the process: one involves the idea generation,
product design and detail engineering; the other involves market research and marketing
analysis.

Improvement of existing products

This includes, but is not limited to, improvements in functional characteristics, technical
abilities, or ease of use.
The product innovation process of Quick-service restaurant chains

Abstract
Purpose – This paper aims to outline the innovation process activities described by quick-service
restaurant (QSR) managers and to compare it with an earlier QSR process model and with those
used in other food service settings.
Design/methodology/approach – Six semi-structured interviews with QSR chain executives in
the USA were conducted to better understand the underlying factors and dimensions that
describe successful innovation process practices.
Findings – For new QSR menu innovations, the development teams follow a structured approach
to reduce the likelihood of failure due to issues such as poor consumer demand or
implementation. QSR screen new food innovations approximately five times during the
development process. Furthermore, today’s QSR innovation process integrates more
sophisticated market research technology and a post-audit is carried out after the new food
concept has been launched. In comparison with studies of Michelin-starred chefs QSR
development teams use an approach that is much more explicitly
structured as a whole due to the larger scale roll-out as well as greater cross-functional and
regional differences to consider in the QSR setting.

Research limitations/implications – The study was conducted in only one country and on a small
sample. Based on an analysis of the findings, the innovation development process of QSR can be
broken down into 13 main steps. Compared with earlier hospitality innovation studies, the
process in this setting includes multiple screenings for high-risk innovations, and greater
emphasis on operational and training issues.

Originality/value – The study expands the scope of hospitality innovation research and the
findings have important implications not only for QSR settings but also for other restaurant
segments,
and for other hospitality service endeavours.

The importance of innovation as a central component of successful capitalistic

endeavors has been proposed in the literature for more than half a century (Burns and
Stalker, 1961; Schumpeter, 1934). But analysis of innovation management in
foodservice is a much more recent proposition (Jones, 1996; Feltenstein, 1986). The
drivers that influence innovative foodservice products are multifaceted and
challenging, as consumer tastes and food trends change all the time. Although the
overall economy appears to be slowing, the foodservice industry in the USA has grown
continuously in the past 17 years and is expected to continue doing so in 2008. US
restaurants offer jobs to 13.1 million people, and overall restaurant sales are forecast to
reach $558 billion in 2008, a 4.4 percent increase from 2007 (National Restaurant
Every product seems to go through a life cycle: it is born, goes through several
phases, and eventually dies as newer and better products come along. Because all
products eventually decline, restaurants must develop new food items to replace aging
ones. Innovation helps restaurants keep their product portfolio competitive and
thereby achieve competitive advantage. Innovation is a critical issue for prosperity and
growth; it has moved from a strategic option to a mandatory management task. The
dilemma in innovation is that new products are critical for the long-term success of a
restaurant concept, yet the failure rate of new products is alarmingly high (e.g. Cooper,
2001).
For example, McDonald’s, with several billion dollars in sales annually, removed
several new menu offerings a short time after their introduction. McLean Deluxe, Arch
Deluxe and pizza have been marketplace flops for McDonald’s in the past. Not only
were these fiascos expensive with many wasted resources, the corporate image was
damaged as well. While McDonald’s has not been free of innovation failures,
innovation has been described as the key ingredient behind McDonald’s recent success
story. After struggling a few years earlier and posting the first quarterly loss in its
history in 2003, recent business press articles have applauded McDonald’s increasing
sales and high-flying stock price. More recently, many QSR firms have been inspired
by McDonald’s innovation process approach and have mimicked the approach in its
own turnaround plan (Christensen, 2007).
Innovation process models can be defined as a roadmap or thought process for
driving a new food item project from the idea stage through to market launch and
beyond. While the use of innovation process models does not necessarily guarantee
success, the use of a model does increase the chances of success (Cooper, 2001). Thus,
the purpose of this paper is to outline the latest innovation development process
activities of successful QSR chains. Innovations are often developed for financial
reasons, such as increasing revenues and profits. In addition to financial performance
measures, customer satisfaction and employee feedback are also important
performance measures of innovation success in the hospitality sector (Ottenbacher
and Gnoth, 2005).
As mentioned earlier, innovation is a key activity for QSR; however, the literature
appears to be replete with contradictions and outdated assumptions on the innovation
process used by QSR chains. Innovation comprises the two literature streams of new
product development (NPD) and new service development (NSD). The NPD field
focuses on the development of tangible goods, while NSD concentrates on the
development of new service offerings. NSD involves developing new services such as
financial, health care, telecommunications, and hospitality services (Johne and Storey,
1998). The terms innovation and new product development are often used
interchangeably.
An interesting aspect of foodservice is that the “product” that is provided is on a
product-service continuum and requires that successful leaders in this field draw from
innovation management techniques from both new service and new product
development (e.g. Harrington, 2004). In general, the innovation process in foodservice
has received little consideration. Recent studies of the culinary innovation process have
used a one case study approach (Svejenova et al., 2007) or used archival data to infer
institutional change relationships over several decades (Ottenbacher and Harrington,
2007).
This manuscript presents a systematic, well-designed innovation process that
provides important insights for not only QSR but also other restaurant organizations
who are seeking to improve their innovation approach. Further this study compares
today’s QSR innovation process with an earlier QSR process model (developed some 20
years ago) and contrast the QSR process model to those used in other foodservice
settings. It is obvious that there exists a need for further understanding of the
innovation process in QSR.
Quick-service restaurants (QSR)
Quick service restaurants offer a relatively limited menu, limited service and low
prices (Ninemeier and Perdue, 2005). These food items can be easily prepared or
processed and served quickly. QSR food is highly processed and prepared on a
large scale with standardized cooking and production methods. In most cases, menu
items are made from processed ingredients prepared at central supply facilities (or
prepared by suppliers) and then transported to individual outlets where the food is
reheated and cooked in a short amount of time. The food innovation process focuses
on consistency of product quality with the keys to success being able to deliver the
order quickly to customers, to eliminate labor and equipment costs in the individual
stores.
Historical growth in the QSR business came from adding more stores to their
portfolio. However, this growth is only meaningful as long as the firms do not saturate
their core markets. A more contemporary growth strategy for QSR focuses on
unexploited niches for expansion beyond simple opening of more restaurants; QSR are
creating new options for innovation. For example, increasing sales during times of the
day when QSR share of food and drink consumption is low; McDonald’s introduced a
new food item (the McGriddle), which helped to increase their share of the breakfast
market by targeting the on-the-go breakfast consumer (Christensen, 2007).
QSR have had to cope with many challenges including obesity lawsuits and an
increasingly health-conscious consumer. Although QSR have not been linked directly
to obesity-related illness to date, Werner et al. (2007) warn that further lawsuits will
follow that will try to do so. As a consequence, QSR have responded by offering
low-carb and low-fat products in their operations (Robinson et al., 2005). Yum! Brands
(KFC, Taco Bell and other brands) were one of the first QSR chains to announce major
food product changes regarding trans fats. All fried chicken served in KFC operations
has zero grams of trans fat (Katz, 2008).
Today’s QSR are not only competing with other QSR, but also with many quick
casual and casual dining restaurants, such as Baja Fresh, Chili’s and Outback.
Furthermore, QSR are also competing with the increasingly present “ready-to-eat”
meals available in most grocery stores. A strategic approach for QSR is grounded in
seeing the business through the customer’s eyes, and focusing on significantly
differentiating the business strategy from that of competitors.
Quick-service
restaurant chains
525
Innovation process in the foodservice sector
There are a number of models of the innovation process. Most are based on new
product development models derived from an engineering perspective and consisting
of six main steps:
(1) Idea generation.
(2) Screening.
(3) Business analysis.
(4) Concept development.
(5) Final testing.
(6) Commercialization (e.g. Cooper, 2001, Booz, Allen & Hamilton, 1982; Urban and
Hauser, 1993).
To evaluate the current innovation process used by QSR chains, this study focused on
early models proposed for this sector and more recent studies that looked at higher-end
sectors of foodservice.
Feltenstein (1986) provided a framework of the innovation process for new menu
items intended to help expand a restaurant’s market share. He described six key steps
in the process:
(1) Assemble new-product task force.
(2) Set new-product priorities.
(3) Generate new-product ideas.
(4) Screen and select ideas.
(5) Develop products.
(6) Plan marketing and rollout campaigns.
Feltenstein noted the risk involved in new product development success as well as the
risk of ignoring innovation as a growth strategy. As a whole and similar to other
models of new product development (e.g. Booz, Allen & Hamilton, 1982), he proposed a
structured and “carefully orchestrated” process to increase the likelihood of success
(Feltenstein, 1986, p. 71).
Harrington (2004) presented a basic product innovation model that appears to be
derived from earlier food product development models. This four-phase framework
appears useful in that it integrates the need to balance and adjust for internal and
external tensions throughout the process. The four phases are:
(1) Culinary innovation formulation.
(2) Culinary innovation implementation.
(3) Evaluation and control.
(4) Innovation introduction.
Additionally, he suggests the need for a more organic model integrating strategic
action planning, marketing considerations, food science and culinary knowledge
perspective.
Ottenbacher and Harrington (2007) considered the new innovation development
process described by one, two and three star Michelin chefs in Germany.

From their analysis, they suggested the foodservice innovation process had both similarities and
differences to traditional new product development. Michelin chefs were less likely to
include several steps perceived as conventional wisdom in traditional new product
models, including an all-encompassing business analysis stage and a thorough
evaluation system. Further, they pointed to the greater importance of frontline
employees in this setting due to the simultaneity of production and consumption and
the importance of human factors in service delivery. Furthermore, top management
commitment and support are critical aspects for the success of the innovation project.
A synthesis of these earlier models provide some important gaps in the research as
it applies to QSR product innovation. First, in general the product innovation literature
did not focus on the hospitality sector (e.g. Booz, Allen & Hamilton, 1982) and the few
studies that concentrated on foodservice investigated either fine dining (e.g.
Ottenbacher and Harrington, 2007), food manufacturing (Harrington, 2004), or may
not reflect the current environment in the QSR sector (e.g. Feltenstein, 1986). A
question remains if this limited view provides an appropriate level of risk reduction for
firms in the QSR environment. Second, the culinary innovation frameworks derived in
fine-dining situations provide a model that is not explicitly tied to marketing concepts
of customer research and financial considerations as key criteria for business decisions.
Whether or not these theoretical marketing concepts are applied in a QSR product
innovation setting remains a key research question with important implications for
academics and practitioners alike.
Methodology
Little empirical research has been conducted on the current innovation process by QSR
chains. Due to the complex nature of the research questions and to provide rich,
meaningful descriptions, this study used a qualitative method. Qualitative research is
appropriate in organizational research when the goal is to better understand complex
issues and processes that are not explicit in surface responses (e.g. Ghauri et al., 1995).
The researchers conducted semi-structured interviews with six highly respected
restaurant chain executives from six different organizations. All of these executives
were very knowledgeable and highly involved in recent innovation activities of these
QSR chains. Due to a lack of new emerging information and themes, the researchers
decided to conclude the data collection after the completion of six in-depth interviews.
The approach of using a limited number of in-depth interviews follows earlier
innovation process studies (e.g. Costa and Sarkar, 2008, Ottenbacher and Harrington,
2007). These executives formed a convenience sample and were selected to ensure
superior knowledge in their firm’s new-product innovation process as well as to include
descriptions from firms of a variety of sizes and locations. Most interviewees were
female (five of the six interviewees) with positions ranging from director of food and
beverage, project manager to senior vice president. The size of the QSR chains ranged
from 75 to 33,000 restaurant outlets. While QSR may be called a variety of labels (fast
food, limited service restaurants, fast causal restaurants, etc.), this study uses the term
QSR as a generic term to describe a segment of the industry that provides a limited
level of service, requires quick service of food to the guests, and demands a strong
price/value relationship to be successful in this market.
Quick-service
This qualitative method allowed the researchers to ask supplementary questions to
attain deeper understanding of complex issues. Each interview took about 90 to 120
minutes; all interviews were done at the interviewee’s place of business. The responses
were transcribed into a written format prior to the analysis of results. The data were
analyzed using qualitative analysis techniques based on interview responses. This
deductive analysis used earlier models and descriptions of new product development
and new service development process stages as a framework to categorize participants’
descriptions of stages and techniques used by firms in this study. Additional
information on specific interview questions and the research protocol is available by
contacting the first author.
Findings
In general, QSR organizations in this study implement a new product development
process that is formal and well structured but also based on the principles of parallel
processing of stages to reduce the development cycle time. Based on an analysis of
QSR managers’ descriptions, it appears the innovation process can be broken down
into 13 steps. Figure 1 provides a flowchart of these steps with a brief description for
each. The following sections discussion each step in further detail.
1. Category strategy
Most QSR new product developments (five of the six interviewees) start and are guided
by the company’s strategy, which is based on the business plan of the organization.
Such a business plan might be yearly, however one large QSR firm develops a business
plan every three years with a specific focus on the product development categories.
These QSR business plans include general strategies but also strategies specific to
different food categories or platforms. A platform shares design, components,
technological and operations capabilities by a set of products in a product family
(Rosenau et al., 1996; Cooper, 2001). Building a platform requires an investment upfront
but from this platform, numerous derivatives can be designed. Thus, the platform
establishes the capability to develop food concepts more quickly and more cost
effective. One interviewee explained that “we try to use everything what we have
before we bring in something new”. Depending on type of operation, these categories or
platforms might include chicken, beef, salads, finger food, breakfast, beverages, etc.
Category planning is done by analyzing the strengths, weaknesses, opportunities,
and potential threats (SWOT analysis). “We identify from a menu standpoint where
there might be gaps in our existing product offering, where there might be an
opportunity to replace a product that has been there for a long time with something
that is much more current and relevant. This provides general direction for our R&D
department to develop concept ideas”.
The objective in this stage is to find out which categories have the best
opportunities for the firm, what is happening in society, what are the social trends,
what are hot new ingredients, in summary “what is the consuming public looking
today in regard to food and QSR, what has appeal to them, which need is unmet and
not available in the QSR food segment”.

2. Idea generation
Following the decision on which food category to focus on, the idea generation begins.
Two sources were identified as the most popular sources of inspiration in this study:
suggestions from employees (six of the six interviewees) and visiting other restaurants
(six of the six interviewees). However, ideas were not only generated by visiting QSR
but also from visiting upscale restaurants. For instance, an idea from an upscale
restaurant, such as a specific spice in combination with chicken, may be transformed
from the upscale food idea into the QSR environment. Food trends are often started
within the fine dining restaurant scene and trickle-down to other restaurant segments.
QSR also firmly monitor current food trends (six of the six interviewees). Sources
include reading food magazines, cookbooks and taking food seminars. Traveling also
was indicated as a source to stay current on trends, flavors and spices. One interviewee
revealed that “my whole department will go to Mexico. We take a one week course on
Mexican food, which teaches us cooking and regional differences of Mexican food”.
Further, inspirations can come from a number of different sources, such as
brainstorming workshops with the management team (three of the six interviewees),
operators and franchisees (five of the six interviewees). For example, owner-operators
invented many of the biggest successes in McDonald’s company history, like the Big
Mac and Egg McMuffin (Gubman and Russel, 2006). Because they do a lot of research
on food trends and new flavors, often suppliers are the inspirational source (five of the
six interviewees). One very large QSR chain considers its suppliers as partners and the
supplier’s culinary experts as resources. “Suppliers have culinary people on staff. For
example, when we want to develop a new salad we ask our suppliers for support.
Depending on the relationship with the supplier, sometimes we hand over the idea or
part of the concept to suppliers and then they come up with items that are appropriate
for us and then combine them with our (existing) ingredients”.
Customer comment cards are also a frequent source of new product ideas (two of the
six interviewees). When customer comments cards indicate a strong demand for a
specific product, such as “I would like to see . . . on your menu” then QSR companies
might consider this suggestion and work further on this idea.

3. Screening
Financial and operational considerations are the most common screening criteria. All
QSR chains use these screening criteria when developing new food products. Financial
screening includes such aspects as cost of ingredients, overall cost, margins and profit.
As a consequence of the financial analysis, the price point of the food item or the final
sales price is frequently a part of the screening process at this stage (two of the six
interviewees).
All chains screen new food ideas in regard to operational aspects. The best idea is
worth nothing if it is not possible to implement it into a QSR environment. Does the
restaurant chain have the necessary equipment to prepare the dish? Do the employees
have the skills to prepare the dish? Can it be prepared and served quickly? A further
operational and financial criterion is the number of new ingredients needed for the new
dish. More new ingredients means increased cost but also more needed storage space,
which is often sparse in individual units.
Five out of six chains screen ideas in regard to fitting their brand or QSR concept.
QSR chains are concerned about offering food that meets the expectations of the
customers. Restaurant chains that integrate a platform approach into their product
development activities also screen new ideas against their platform strategy.

4. Concept test
The next step of the development process is the concept test, which relates to concept
research with consumers. However, this step is only implemented by the three largest
chains in this study. QSR chains investigate what QSR consumers want, what they are
looking for and what potential food product(s) can satisfy their need(s). In general, this
involves showing consumers pictures of samples and receiving feedback on the
potential of the new product ideas. Some organizations do this in-house, while others
outsource this assignment to specialized marketing firms.
New technology allows QSR chains to do this over the internet by showing
consumers pictures of potential new food items on their personal computers. At this
stage, consumers are not eating anything; consumers only visually see potential new
food product ideas. Then consumers rate how appealing the potential food concepts are
to them. One organization solicits consumers to rate the food concepts on a 1-9 scale (on
the internet). In addition, consumers are asked questions in regard to different price
points for these food concepts.

5. Second screening
Followed by the concept test, QSR do a second screening (6/6). This second screening
may include some of the same aspects as in the first screening such as financial and
operational issues. However, the major screening aspect in the second screening is,
generally, consumers’ liking and purchase intentions. The intention of this screen test
is to analyze how consumers (panel) respond to the food concepts and if consumers
would be interested in purchasing these products. Consequently, QSR chains want to
find out which are the most appealing ideas, if it makes sense for them to develop
specific concepts further, and if they should invest more time and money into it. New
food concepts have “hurdles that they need to surpass” before they take the product
any further. “From a scale of 1-9 we look at the top two highest scores (8, 9) – people
must be really interested”.

6. Prototypes
During the sixth stage of the new product development process, QSR chains develop
variations of a food concept - creating prototypes. QSR chains might use contractors to
develop prototypes, such as culinary institutions or research chef consultants. How
many prototypes are developed depends not only on the specific food concept and its
complexity, but also on the specific policy of the brand. While most QSR chains
develop two to four variations, larger organizations develop 15-25 prototypes.
However, depending on the project, large QSR chains may develop up to 60 prototypes.
Developing prototypes involves deciding which ingredients to use and consequently
creating recipes, calculating food cost and pricing, and mapping operational issues
which are related to preparing and selling this food item. The prototypes are evaluated
by taste panels and focus groups. One respondent stressed that it is critical for the

Quick-service
prototypes to consider different geographic variations, such as different consumer food
preferences in different regions of the US.
The taste panels and focus groups are targeted audiences, consisting of profiled and
classified customers (e.g. Do you eat fast food? Do you drink milk shakes? How often?
etc.). In this stage, QSR teams complete blind tastings. Chains often use scale responses
for their prototypes in which the panel or group members are asked to indicate their
degree of agreement or disagreement with a number of statements such as “just right”,
“too much”, “too little”, “too strong”, “too weak”. The goal is to develop new food items
that “have a broad appeal” to consumers.
Following the taste panels and focus groups, one organization (which was the
largest QSR chain in this sample) conducts further research with focus groups. They
call it the “traveling restaurant”. Because “consumers need to taste something in our
restaurant environment to be able to give us a true evaluation”, the chain will build a
restaurant in the back of the focus group facilities. The “traveling restaurant” looks
like a normal restaurant. In this setting, they examine 100 people (ten groups) in three
days. The test takes about three hours and consumers get paid $75 per person. “We do
it in a few cities to make sure that there are no regional differences, we also test with
Asian, African-American, Hispanic – the major ethnic groups”.

7. Third screening
Following the prototype stage, QSR chains again screen the food concepts. This third
screening may include further financial and operational issues. Additional criteria in
this screening stage are supply issues (e.g. “can it be manufactured for us” and “can
they supply it to all of our stores”), food safety and other risk evaluations. McDonald’s,
for example, screened out a new product idea for a salad with shrimp because if
successfully introduced, McDonald’s could diminish the nation’s shrimp supply
(Christensen, 2007).

8. Concept refinement/development
After consumer research with prototypes and further screening, QSR chains refine
their food concepts. QSR chains stress a cross functional approach during this stage,
and thus a variety of departments work together such as marketing, operations, R&D,
supply chain, and packaging. The concept development stage includes four major
aspects:
(1) Product optimization.
(2) Operational procedures.
(3) Training.
(4) Marketing.

These four aspects of the concept development are often tested and fine-tuned
simultaneously.
Product optimization
Product optimization includes not only optimizing the culinary aspects of the food
concept but also involves fine-tuning the recipe, packaging, food safety, and pricing of
the new food innovation. Consequently, chains often do further product and consumer
testing in one or two restaurants of their chain. They want to find out in the real world
if a new food concept is for example “salty enough”. This further testing helps to refine
the product and the recipe.
In addition, QSR chains further optimize the food product and the recipe by working
closely with their suppliers or “manufacturing partners”. Obtaining the best quality
ingredients at the right price (being affordable) is critical for QSR organizations. QSR
chains often own the formula of a food supply item, such as a new steak sauce. One
executive stated that in QSR innovation, “the heavy lifting is often getting the
manufacturer”.
The larger chains often employ a packaging engineer because packaging is critical
for QSR. As one interviewee stressed that “we cannot afford not to have one”. The
packaging engineer also works closely with the manufacturing partners because “he
speaks their language and asks the right questions”. Thus, the manufacturing partner
supports the food concept by designing the right packaging to preserve food quality,
safety, and temperature but he also saves the organization money by cost effective
packaging of the food. However, QSR chains try to use already available packaging
materials within their chain so they do not have to purchase new packaging materials
or develop new packaging.

Operational procedures
Besides optimizing the food product, QSR chains also need to perfect their operational
procedures for the new food concept. The operational aspects are very critical to the
overall success of the innovation project and need to be “operations friendly”. “You can
develop the greatest product, but if you don’t have the support of operations then it will
not work”. One chain uses the slogan – “it is not real until it is real in the restaurant”
for their new product development activities.
Furthermore, QSR chains must meet consumer expectations; thus, the consistency
of delivering the new product is critical. This includes not only the product quality but
also the speed of delivery. Larger chains often do initial in-house operational testing
(three of the six interviewees) to modify operational procedures. Further operational
testing is then done in one or two restaurants of their chain to perfect working systems
and practices. The development of operational procedures includes both how to
prepare and deliver the food and supply aspects.
In addition, another aspect of the operational procedures is food safety. It is critical
that it is engineered not only into the product but also into the operational procedures.
QSR organizations must not only develop operational procedures to which their
employees cook and deliver the food accordingly to food safety standards but also
ensure the manufacturer supply to individual restaurants achieves food safety
standards. Another operational aspect relates to the packaging and if the new tools or
equipment will be used for preparing the food. Overall, during this activity, chains try
to understand everything that affects the operation of the restaurant and the goal is to
optimize operational issues.
One QSR chain has a company requirement that on average a product has to be
produced in the restaurant in 35 seconds (in some exceptions up to 55 seconds).
Therefore, new technology and cooking equipment are a key part of operational
procedures. Recently, several QSR chains introduced computer kiosks in their
Quick-service
restaurant operations to improve the delivery process. These kiosks not only improve
the speed of the purchasing process but also consumers like to use this technology.
English is only the second language for many restaurant employees, and therefore,
training of employees and communication between employees with the consumer is a
huge challenge for many QSR firms. “A kiosk never speaks bad English and is never
rude”.

Training
The third part of the concept development stage is training of the employees. Three
QSR chains have their own training department, which develops training materials
(e.g. DVD) and procedures. One interviewee argued that for new food concepts they
always develop a training manual, which is simple (easy to understand) and supported
with pictures. During testing, firms also further develop and refine the necessary
training procedures because it is an “iterative learning process”. One chain first trains
an area director and his 12 restaurant managers (of his area), who then will train their
employees. QSR chains not only audit their training efforts during the concept stage
but also during the market test. They visit the restaurants several times to find out
“what worked and what did not work”. The training department might have to rework
the training materials (“Where do we have to make changes?”) or make the
adjustments and changes to their training materials before they finally launch the food
innovation system-wide. By product launch, their training undertaking is accurate and
refined. “It is very important that every employee understands what we want them to
do, we don’t want employees’ interpretations”.
Marketing
Marketing is always an important element of new product development of QSR chains.
A first consideration of the marketing plan is the time of the year when the food
concept will be launched. “Where does it fit on the calendar? Is it more of a
summer-type item or is it a heavier item for the cooler months? So, when is the best
time to launch it?”. Marketing research is an important part of developing the
marketing concept. QSR might do further sensory evaluations to get guest feedback.
These are small tests where they try the new product in a few stores and get guests
feedback. “We want to talk to people before we go on to a bigger test or launch”.
The communication strategy for the new food concept is also critical. While smaller
chains prefer to communicate the new food innovation via radio (“we can’t afford TV”),
larger QSR chains, with bigger marketing budgets, choose television to spread the
word (“this is a TV-based business”). Appealing pictures of the new food concept are
not only an important part of the communication strategy but also critical as
point-of-sales in the restaurant outlets.
Creating point-of-sale material is also a main task of the marketing team. Customers
need to understand what the product is and therefore, chains often include colorful
photographs in their point-of-sale materials. Another aspect of the marketing concept
development is to decide on the right sales price.
9. Fourth screening
Before the food innovation is market tested, the concept will be screened once again.
The food concept is screened in terms of how it compares with the competition,
financial aspects and fitting with the brand/concept.
Because the new product development team wants to make sure that “we have done our
homework and research”, they present the food concept to the executive group.

10. Test market

The basic idea of a test market is to try the food concept and its marketing plan to
verify the pricing and the purchase intent of consumers for the new food item. One way
to test market is to conduct a trial sell with a limited set of customers evaluating the
plan prior to a full launch. The test marketing stage is especially beneficial in the case
of higher risk and mass-market innovations. During this stage, chains add marketing
support to the food concept. This support includes point-of-purchase materials (e.g.
banners, window posters menu-boards) and communication strategies. In general,
smaller chains communicate their new food product to the consumer with radio spots,
while larger QSR chains produce TV commercials. Firms introduce the new food
concept in a specific region similar to a full product launch. The purpose is twofold: to
communicate information about the new food innovation to consumers and to see how
well it sells. The test market also offers further opportunities to test the operational
procedures and the manufacturing partners’ processes.
During the test market, QSR chains implement a sales analysis of the new food
concept by getting further feedback from consumers. One chain puts stickers on the
new food product to get customer comments. One such sticker asked: “what do you
think about our new product?” and provided a 1-800 number to call for feedback.
Customers do not get an incentive; however, QSR chains receive “great feedback –
mostly through cell-phones”. Often customers eat the new product in a restaurant and
immediately thereafter provide feedback on the new item. “When they call we ask them
about four to five questions”, one interviewee explained. QSR organizations investigate
reactions when consumers buy the products because “customers love to give
comments” and these are often helpful hints. They collect about 50-100 buyer reaction
cards per store. Each buyer reaction card contains about 8 questions to find out what
consumers think about the product and ask questions, such as: “Would you buy it
again?”. “Customer satisfaction is one of our critical decisions if we will go forward to
launch system-wide”.
Smaller chains do not always conduct market testing because it is expensive and
resource intensive. However, if the product is complicated (not necessarily expensive),
if new equipment is used or if many new ingredients are used, market testing is also
executed by smaller organizations.

11. Final pre-launch screening

After conducting a trial sale, the results from the test market are evaluated as well as
results from previous tests and screenings. Again, financial and operational
considerations are part of this screening in addition to feedback from managers and
employees. Each QSR chain has specific “hurdles” for a successful test market
outcome. In addition, QSR chains analyze the product mix to investigate if the new
food item is cannibalizing other products on the menu.
Quick-service
12. Launch
After completing all previous process stages, the innovation is launched in the market
– QSR chains sell the new food item in all their restaurant outlets. International QSR
chains first launch the new food concept on a national scale and then later, if success is
likely, on an international level. One interviewee of an international chain explained
that the decision to launch a new food innovation is made by each country. “Each year
we make international presentations and each county will decide upon introduction of
new products”.

13. Evaluate performance

After the commercialization of the innovation, the final activity of QSR chains’ product
development process is to review of the success of the food item. QSR chains reflect on
three main aspects of the performance of their innovation project. They analyze the
performance in regard to financial measures, customer satisfaction and operational
feedback. Financial aspects are especially analyzed in regard to sales and profitability
(six of the six interviewees). Customer satisfaction (six of the six interviewees) is
evaluated from guest feedback in the form of directly talking to consumers who order
the product in a store, surveys or from monitoring consumer calls from a 1-800 line.
Operational feedback is mainly gained from employees, operational managers and area
managers.

Discussion
The risk of new product development failure in the foodservice industry has been a
continuing concern (Moskowitz, 2001). Researchers in the field suggest failure rates as
high as 80-90 percent within the first year of introduction, representing a multi-billion
dollar loss to the food industry (Rudolph, 1995). To minimize this risk, researchers and
practitioners have long proposed a structured approach to new-product innovation. A
synthesis of the results of this study provides some interesting findings as to the
process used and changes in the QSR business sector since Feltenstein’s (1986)
framework was first published.
The current process is a formal one that is both structured and iterative in nature.
For new menu innovations, the development teams follow a structured approach to
reduce the likelihood of failure due to issues such as poor consumer demand or
implementation. For incremental or minor changes, the teams might omit some steps
and use a more flexible process.
One interesting finding is the iterative screening and testing process. Firms in this
study did screening steps approximately five times during the development process.
Testing was done at several stages of the development process, such as concept test,
prototypes, concept refinement and test market. These additional screening steps and
the continuous testing during the process increases development time but are likely to
reduce the risk of failure. The screening and testing also ensures that financial and
operational goals are met and that supply issues, successful implementation and food
safety standards are met. In addition, screening the food concept and testing it at
different stages of the process helps ensure that current consumer needs and wants are
considered.

A second discovery in the new product development process used by firms in this
study is the growing variety of issues that are being addressed to ensure a greater
likelihood of success and how QSR organizations build on general trends at the
higher-end of the marketplace. For instance, the current process for QSR firms reflects
seasonality, regional differences, and demographic/psychographic differences as part
of the screening process. The process also reflects the growing importance of
franchisees, suppliers, manufacturers, food safety, authenticity and new flavors in
creating a successful QSR product.
Today’s QSR also carry out a post-audit after the new food concept has been
launched. With the help of an effective evaluation system, QSR analyze sales, market
reactions and problems so that managers can benchmark the performance and
undertake necessary changes. The performance evaluation also involves a crucial
assessment of the strengths and weaknesses that lead to a review of what has been
learned and what should be done to ensure greater execution success for future
innovations.
In comparison with studies of Michelin-starred chefs (e.g. Ottenbacher and
Harrington, 2007; Svejenova et al., 2007), QSR development teams use an approach that
is much more explicitly structured as a whole. This process makes sense due to the
larger scale rollout as well as greater cross-functional and regional differences to
consider in the QSR setting. While it may appear Michelin chefs give greater attention
to the creativity part of the process (and this is certainly true in regards to new food
paths or presentations), QSR development teams seem to use as much creativity but
target areas beyond just the creation of the menu item.
Conclusion

In conclusion, the new product development process of QSR follows a structured

approach. This approach has been developed to reduce risk of failure, increase product
quality and improve customer satisfaction through the use of iterative screening,
testing and feedback loops. Since the Feltenstein (1986) article on the process, QSR
development teams appear to be going beyond basic fast food traditions to address the
growing “foodie” culture in the US. Signs of this development are apparent in the
greater concern for regional differences and a growing interest in new flavors and
authenticity expressed by the participants.
Today’s QSR innovation process integrates more sophisticated market research
technology. Market research provides a valuable role in the development of new food
concepts. It appears that market research is a valuable tool that supports managers
and innovation teams in making the best decisions possible. QSR need to gain
knowledge of how consumers in the marketplace will view their potential food
innovation project, and competent managers need to select the appropriate market
research techniques to detect superficial consumer reactions.
Furthermore, QSR teams use “platforms” to build on earlier learning, speed the
process, increase efficiency and increase effectiveness of new products in high volume
situations. The application of a platform approach within innovation activities might
be a managerial implication for fine dining restaurants if they want to improve their
efficiency and effectiveness.
Quick-service

Interviewees in this study spoke to the importance of suppliers, employee and

customer feedback or input. But, QSR teams also work with franchisees, consumer
groups with vastly different demographic characteristics (i.e. varying by unit location)
and greater cross-functional involvement. Some of the most successful new product
ideas in QSR history were invented by owner-operated franchisees. Further, QSR
development requires not only supply partners but also manufacturing partners to
ensure consistent quality and availability. QSR suppliers are much more part of a new
product development project and thus more critical to overall success. Previous studies
on food innovation did not find the amount of outsourcing that was done by QSR in
this study. QSR establish strong working relations with their suppliers that could be
viewed as a strategic alliance. The innovation project benefits from this alliance with
lower food costs, reduced R&D expenses, faster development time and better product
quality. A final development that has been brought to the fore across the foodservice
industry is safety and security. QSR in this study use food safety as a key hurdle for all
new product decisions.

Managerial implications
New product development continues to be an important element for success in the
foodservice industry. Managers of this process in a variety of settings can learn from
the structured approach used by QSR teams as well as the differences that may need to
be implemented for any restaurant sector by contrasting the QSR example with the
process shown in earlier studies of high-end segments (e.g. Ottenbacher and
Harrington, 2007; Svejenova et al., 2007). It is suggested in the literature that many food
trends and innovations “trickle down” from fine dining to other restaurant segments.
However, a key implication from this study is the potential trickle up or learning effect
for other foodservice segments from the QSR chains innovation process activities.
Regardless of the restaurant sector, successful managers of this process need to
facilitate the use of creativity as part of this structure and not allow the formal
structure to stifle the creative process. While this creative process includes new menu
innovations, it also demands a creative process to address innovations in management,
training, supply issues and provide a realistic setting for guest feedback prior to a
large-scale rollout.
There are several implications regarding marketing and marketing concepts. First,
while all of the QSR firms utilized consumer research as part of the concept testing
process, the extent varied substantially by firm size. An implication is that smaller
hospitality firms should utilize new technologies in cost effective ways to maximize
marketing research. Product development should be guided by consumer preferences
and consumer demand. QSR restaurants that are successful in their innovation
activities do an outstanding job in this regard.

The platform concept has been successfully used in product development in a

variety of industries (e.g. automotive manufacturing, IT, etc.). The QRS sector uses this
approach to its advantage in its innovation activities. Other hospitality segments
should consider utilizing platforms in their innovation development to simultaneously
reduce cost, time, and complexity.

Another managerial implication is the use of strategic partnerships with suppliers.

By using the expertise of the suppliers, QSR firms in this study increase product
quality, reduce total end product costs (balancing food cost with direct labor cost),
utilize external knowledge and creativity, and increases consistency. Therefore, other
hospitality managers should look for ways to work closer with suppliers for
continuous innovation.

The new product development process model implemented by QSR can be

interesting and helpful for other hospitality segments. However, hospitality managers
should use critical judgment for their innovation activities because not all innovation
projects require such a rigorous approach. For example, a minor menu modification or
other incremental changes demand only a shortened process. Hospitality managers
should view this innovation model not as a static framework but as a tool to guide
strategic innovation management.
QSR are regarded as leaders in operational consistency. This study reveals that
QSR chains can only achieve this operational consistency if they plan and implement
tactics that lead to consistency after the introduction of the new food items. The strong
emphasis on effective training and operational procedures as a critical part of the new
product development process.