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Low-Calorie Restaurant Offerings, a Better Bottom Line?

Low-Calorie Restaurant Offerings, a Better Bottom Line?
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A new study by the Hudson Institute shows that incorporating more low-calorie items into a restaurant’s menu doesn’t just help address the nation’s growing obesity problem, it also helps grow the restaurant’s bottom line. It’s what Wall Street and healthcare experts like to call a “win-win.”

The results of the Hudson study, conducted over a five-year period from 2006 to 2011, are telling. Servings in restaurants that added more lower-calorie items rose by 8.9 percent. Servings among the 21 restaurants studied that offered fewer lower-calorie items dropped by a whopping 16.3 percent.

More importantly, according to the study, same store sales rose by 5.5 percent in restaurants that added more lower-calorie items and fell by 5.5 percent in those that offered fewer low-calorie items.

"Consumers are hungry for restaurant meals that won't expand their waist lines, and the chains that recognize this are doing better than those that don't," said Hank Cardello, lead author of the report.

The implications are big for the $660 billion U.S. restaurant industry as well as for the country’s fight against obesity. The medical cost of adult obesity is an estimated $147 billion a year, according to the study.

“Until now, there has been little evidence regarding how restaurant chains can do well by doing good,” the institute’s report said. The evidence came about following the collection of five years’ worth of data on restaurant servings, customer traffic and sales data on menu items of 21 of the nation’s largest restaurant chains such as McDonald’s (NYSE: MCD), Panera Bread (NASDAQ: PNRA), and Yum! Brand’s (NYSE: YUM) Taco Bell.

As a result, the Hudson Institute concluded that boosting the selection of low-calorie items “can help quick-service and sit-down restaurant chains improve the key performance metrics demanded by their shareholders and Wall Street.”

Financial results for Panera Bread, an early adopter of calorie-count boards that list nutritional content of its menu items, are impressive. Comparable same-store sales jumped five percent in the fourth quarter of 2012. Panera’s stock price has risen 300 percent in five years, and it added 123 new bakery-cafes across the country in 2012.

The Hudson Institute report follows one from 2011 that examined the business impact of selling better-for-you foods and beverages among consumer packaged goods companies such as PepsiCo (NYSE: PEP), General Mills (NYSE: GIS), Kraft (NASDAQ: KRFT), Coca-Cola (NYSE: KO), and Campbell Soup (NYSE: CPB).

That report found that companies with higher-than-average sales coming from better-for-you products showed superior sales, operating profits, and company reputations.

"The bottom line is that it's good business to sell more lower-calorie and better-for-you products," said Cardello. "This holds true for major food and beverage companies and for restaurants."

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