Fast-food chains are increasingly serving alcoholic drinks to lure in new customers. In this highly competitive industry, companies are continually looking for an edge over other players and adding alcoholic drinks to their menu is a sure way of increasing their margins (mixed drinks offer profit margins of up to 90%). It could also be one way for fast food chains to keep up with with their higher-end fast-casual competitors, which are becoming increasingly for quality-conscious consumers globally.
Fast-food chains have been making inroads into the alcohol space for years
The higher prices of alcoholic menu items helps increase the customers’ average check and restaurants serving alcohol are more likely to attract customers at night which counterbalances typical fast food sales patterns, often heavily reliant on breakfast and lunch business.
If serving alcohol at fast food restaurants has proved trendy, most efforts have remained modest with no global roll-out in sight. And there are many reasons for this.
Licensing costs and logistical hurdles
In the U.S for instance, liquor licenses in the U.S are not only expensive and complicated to obtain, but also carry hefty annual renewal fees in many states. Additionally, offering alcoholic beverages comes with large logistical efforts and to make matters worse, many states have geographical restrictions on the sale of alcoholic beverages. Regulations often make it harder to find real estate, as there might be limitations on the allowed distance to churches and schools if an establishment wishes to serve alcohol. This is why for many fast-food chains, alcohol is frequently relegated to "special" locations, seemingly designed around the novelty of serving alcohol.
Fast-food executives argue that their typical customer usually sees the consumption of their products as a social occasion with a group of friends. To limit the negative effects, fast-food chains are taking measures to ensure a responsible serving policy to retain a family-friendly environment (such as clearly marked glasses or not serving alcohol at drive-thrus) and capitalize on an overall positive perception from their customers.
The strategy seems to have shifted towards making alcohol available in highly targeted locations with a higher density of younger, urban consumers, with less regulatory hurdles to overcome or investing in new delivery channels altogether.
Case in point, although Starbuck's Evening concept was decommissioned in 2017, the coffee chain has not entirely stopped serving alcoholic beverages. Instead they will focus this area of their business on their new upscale retail and bar concept Starbucks Reserve. So far, only four Reserve locations have opened in Milano, New York, Seattle and Shanghai but the company aspires to open more than a thousand sites worldwide.