Beer-at-Burger-Chain Fad May Leave Hangover
Want a beer with that burger and fries?
Fast feeders such as Burger King, White Castle and Sonic are dabbling in booze in test markets. Starbucks has started selling wine and beer in five Seattle locations and at one in Portland, Ore. It plans to offer wine and beer in seven locations in Chicago and will expand the offerings to Southern California and Atlanta to boost evening sales.
The moves can bring higher check prices, but also regulatory headaches. And for big fast-food chains, selling booze on a large scale won't deliver huge margins -- at least at first -- since it's also likely to add upfront costs for franchisees who would need to install new equipment such as coolers and booze lockers.
In short, it seems like a sporadic and possibly short-lived trend.
"This is a flash in the pan," said Harry Schuhmacher, editor of Beer Business Daily, a leading beer trade publication. "I don't think that people go into fast-food restaurants with the intention of lounging and sticking around and having drinks." And "in the case of Starbucks, people are looking for a quiet place to go, not necessarily a raucous place to go. And alcohol can sometimes transform the ambiance. I think it's a test , and I think these guys are going to find the risks don't outweigh the benefits."
There are plenty of risks. For one, most states require that people who handle or serve alcohol be at least 18 years old and be supervised by someone age 21 or older, said Alex Heckathorn, a consultant at Compliance Service of America, a consulting firm providing alcoholic-beverage licensing assistance. This poses complications for fast feeders that often hire minors. Mr. Heckathorn also noted that many states require special alcohol training for employees, a potentially costly and time-consuming endeavor for fast-feeders relying on part-time help.
Starbucks mandates that all employees in booze-selling locations be 21 or older, said Clarice Turner, senior VP-U.S. retail at Starbucks.
Further complicating matters, local licensing rules make it nearly impossible for fast feeders to sell booze in some places. "Fast-food menus would not qualify for licensing as a restaurant because many jurisdictions define restaurants as places that serve entrees, and entrees do not include sandwiches or salads," Mr. Heckathorn said. "We have to remind clients on a routine basis that hamburgers fall into the sandwich category."
So with all these hurdles, why are fast feeders even experimenting in the first place?
Michael Schaefer, global head of consumer foodservice research at Euromonitor International, said that since the recession, many chains are looking to grab the group of consumers that are on tight budgets but would otherwise want to go out for an informal dinner and beer.
Sonic agreed to serve alcohol in two Miami-Fort Lauderdale locations at the request of one franchisee."[The franchisee] didn't expect [alcohol sales] to be a huge part of the business, but the competition around them offered beer and wine," said Drew Ritger, senior VP-business planning and purchasing at Sonic.
Starbucks was looking to boost sales in the evening, when the coffee giant typically sees lower traffic. Along with the booze, Starbucks serves small plates of food, such as cured meats. Ms. Turner noted that the alcohol option is attractive for customers who don't want to go to a bar or restaurant, but still want to relax somewhere before heading home.
Eric Giandelone, director-foodservice research at Mintel, said Starbucks has the best chance of long-term success among the chains because "they have so many locations that are in urban or walkable areas that would get nighttime walking traffic."
Burger King in 2010 announced plans to sell beer in select locations, but has run into roadblocks. For instance, Florida regulators earlier this year ruled against a "Whopper Bar" in Miami Beach, finding that four investors had common interests in both the fast feeder and Anheuser-Busch, which violates rules meant to separate alcohol makers from retailers. Burger King has appealed the decision and can keep its license until a final decision is rendered. The chain in 2010 had plans to offer beer at its Whopper Bar near Times Square in New York, but was unable to get a liquor license and has since given up on obtaining one.
Fast-casual chains such as Chipotle and Smashburger have long served alcohol. But even the most successful ones are only generating some 5% of sales from booze, said David Henkes, VP at Technomic, a food-research group. Smashburger serves beer at more than 90% of its 156 U.S. locations, said Tom Ryan, founder and chief concept officer. "We knew from all the consumer research that there were several key burger occasions that required alcohol," such as "date night, girls' night out or guys' night out," he said.