Benchmarking the servicequality of fast-food restaurant

franchises in the USAA longitudinal study

Hokey MinDepartment of Management, College of Business Administration,Bowling Green State University, Bowling Green, Ohio, USA, and

Hyesung MinDepartment of Tourism Management,

Yuhan University, Bucheon, South Korea

Abstract

Purpose – To help fast-food restaurants enhance their competitiveness and then increase theirmarket share, the purpose of this paper is to measure the service performances of fast-food restaurantfranchises in the USA and identify salient factors influencing the service performances of fast-foodrestaurants over time.

Design/methodology/approach – This paper develops a set of benchmarks that helps fast-foodrestaurants monitor their service-delivery process, identify relative weaknesses, and take correctiveactions for continuous service improvements using analytic hierarchy process and competitive gapanalysis.

Findings – This study reveals that a service attribute considered most important to the fast-foodrestaurant customers’ impressions of service quality is taste of food. This preference has not beenchanged over time. Also, we found a pattern of the correlation between the overall level of customersatisfaction with the fast-food restaurant and its word-of-mouth reputation. Furthermore, wediscovered that the customers tended to be more favorable to easily accessible and national fast-foodrestaurant franchises than less accessible, relatively new, and regional counterparts.

Research limitations/implications – The current study is limited to the evaluation ofcomparative service quality in the USA. Thus, this study may not capture the national differencesin the restaurant customers’ perceived service quality.

Practical implications – For the last four decades, Americans’ obsession with fast serving, cheapmeals has made the fast-food restaurant a mainstay in their daily life. As the appetite for fast foodgrows, every corner of the American Society has been infiltrated by fast-food restaurants. With theincreasing number of fast-food restaurants competing in the market, their survival often rests ontheir ability to sustain high-quality services and meet changing needs/preferences of customers.This paper provides practical guidelines for enhancing the competitiveness of the fast-food restaurantfranchise.

Originality/value – This paper is one of the first to compare the service quality of fast-foodfranchises in the USA and develop dynamic service quality standards for fast-food restaurantfranchises using a longitudinal study.

Keywords Benchmarking, Fast-foods, Restaurants, Customer services quality,Analytical hierarchy process, United States of America

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1463-5771.htm

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Benchmarking: An InternationalJournalVol. 18 No. 2, 2011pp. 282-300q Emerald Group Publishing Limited1463-5771DOI 10.1108/14635771111121711

1. IntroductionOwing to gradual changes in American life styles, Americans now spend more money onfast food than they do on higher education, personal computers, new cars, movies, books,magazines, newspapers, videos, and recorded music (Schlosser, 1998). In 2004, Americaspent $148.6 billion on fast food and accounted for 64.8 percent of the fast-food sales ofthe ten countries that consumed fast food most in the world. In other words, the averageAmerican spends $492 per year on fast food (Workman, 2007). Despite the popularity offast food, fast-food restaurants have historically operated on slim-profit marginsranging from 4 to 7 percent (Nessel, 2010). The low-profit margin of the fast-foodrestaurant industry stemmed from the continuous wholesale-food price inflation. Forexample, the wholesale-food price rose 7.6 percent in 2007 and 8.5 percent in 2008(Wiki Analysis, 2009). To make it worse, the revenue of the US fast-food restaurantindustry declined by 4.7 percent in 2009, according to the IBIS World Industry Report(2009). As such, fast-food restaurants have experienced intense competition in the recentyears due in part to the saturation of a fast-food restaurant market and the worldwideeconomic downturn. With tighter profit margins and increasing competition, thefast-food restaurant’s success depends heavily on its ability to retain customers(i.e. restaurant patrons) by enhancing customer value or innovating service offerings.Indeed, the longer customers remained with a particular fast-food restaurant, the moreprofitable they became to the fast-food restaurant (Reichheld and Sasser, 1990; Lovelockand Wright, 2002). According to Kotelikov (2008), a 2 percent increase in customerretention has the same effect on profits as cutting costs by 10 percent. Similarly,a 5 percent reduction in customer defection rate can increase profits by 25-125 percent.

Considering the significance of customer retention to the fast-food restaurant’sprofitability, the fast-food restaurant should adapt to the changing needs and preferences(e.g. removal of trans-fats) of customers. For example, the recent hike in gasolineprices may force some customers to dine at the nearby fast-food restaurant or makefewer trips to the fast-food restaurant that is a greater distance from their neighborhood.Also, those needs and preferences may represent various service attributes such as thegreater selection of healthy foods, value meals, fast drive-in services, better amenities,24/7 access, and courteous/friendly employees. Once these service attributes arerevealed, the fast-food restaurant should identify what service attributes customersconsider most important and how well the fast-food restaurant is performing relative toits competitors with respect to each of those salient service attributes. In an effort to helpthe fast-food restaurant enhance its competitiveness that relies on the customerperception of its overall service quality in comparison to other competitors, this paperconducts a competitive benchmarking study that aims to translate customer servicerequirements into comparative quality measures. Neely et al. (2005) noted that the mostbeneficial form of benchmarking was competitive benchmarking because it focused onthe direct measurement of competitor performance and provided information on whatcustomers really wanted and what competitors were doing to meet customer needs.

Competitive benchmarking in the service sector is known to improve serviceperformance by as much as 60 percent in less than a year (Harrington and Harrington,1996). Even though the application of competitive benchmarking to the service sector ischallenging due to the intangible nature of service quality and the subsequent lack ofuniversal service standards, competitive benchmarking has been successfully applied tovarious service organizations such as hotels and restaurants (Morey and Dittman, 1995;

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Min and Galle, 1996; Min and Min, 1996, 1997, 2002; Phillips and Appiah-Adu, 1998).However, no prior literature but Min and Galle (1996) to date has reportedany benchmarking studies on fast-food restaurants. In fact, fast-food restaurantbenchmarking is not on the list of periodic service benchmarking studies conducted bythe Customer Service Benchmarking Association (2008). To fill the void left by priorbenchmarking studies, this paper addresses the following research questions:

RQ1. Which elements comprise customer service attributes that influence thefast-food restaurant customer’s perception of service quality?

RQ2. Which service attributes are most important for customer satisfaction?

RQ3. Which fast-food restaurant is perceived to be the industry leader?

RQ4. How do we compare the fast-food restaurant’s service performance with thatof the industry leader using competitive gap analysis?

RQ5. How do we develop a strategic action plan for continuous serviceimprovement of the fast-food restaurant?

RQ6. How do the customer needs and preferences change over time and howsignificantly do those changes affect the service performances of fast-foodrestaurants?

2. Service attributes relevant to fast-food restaurant customersThe benchmarking process begins with the establishment of service standards throughidentification of service attributes that comprise service standards.Since serving customers better is the ultimate goal of benchmarking, we first identifiedservice attributes that are most important to fast-food restaurant customers. These serviceattributes are derived from determinants of fast-food restaurant service quality identifiedby Min and Galle (1996), Kara et al. (1997) and Tsai et al. (2007). Examples of these include:taste of food, competitive price, service response time, cleanliness of the fast-foodrestaurant, fast-food restaurant location, amenity, safety, employee courtesy, restaurantoperating hours, and the availability of healthy menus. Also, notice that this list includesword-of-mouth restaurant reputation that may influence the diner’s fast-food restaurantchoice/patronage, but not necessarily the diner’s extent of satisfaction with the fast-foodrestaurant (Ou and Abratt, 2006). Also, the contribution of these attributes to overallcustomer satisfaction (or overall service quality of the fast-food restaurant) was measuredby the customer feedback that we solicited through the questionnaire survey.

To elaborate, the customer feedback was obtained from the sample of 262 fast-foodrestaurant customers who have dined at ten different fast-food restaurants (McDonalds,Burger King, Wendy’s, Arby’s, Hardee’s, Subway, Johnny Rocket, Red Robin,Fuddruckers, and Roy Rogers) located in the southeastern and midwestern USA duringthe period of January 2008 through November 2009. These fast-food restaurants werechosen for the study because of their similar characteristics in terms of sizes, location,menus, target customer bases, and service amenities (e.g. availability of children’splaygrounds, drive-in services). For example, we did not include some popular fast-foodfranchises such as Pizza Hut, Kentucky Fried Chicken, Taco Bell, and Long John Silver’swhich specialized in limited menu items such as pizzas, fried chickens, Mexican stylefood, and fried seafood. On the other hand, despite being a casual dining restaurant,

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Red Robin was still included in the study since its food offerings such as burgers andsteak fries are similar to those of other restaurants under study and it has nationallybased franchises with approximately 400 restaurants all across the USA. Although thesample that we chose is not reflective of the entire fast-food restaurant industry, we usedthis sample to illustrate how fast-food restaurant service standards can be set and how toconduct the benchmarking process. Through a five-page questionnaire survey, theparticipants provided us with data related to their demographic profile (e.g. gender,marital status, age), frequency of their fast-food restaurant visits, the patronagebehavior, the relative importance of service attributes to overall fast-food restaurantservice quality, and the level of customer satisfaction based on their service experiences.Some of the non-demographic questions were selected from service attributesconsidered to be critical to service quality (Vazquez et al., 2001; Lovelock and Wright,2002; Min, 2006).

The Statistical Packages for Social Sciences (SPSS) for Windows (2008) were used toanalyze the data collected from this sample. All of the participants reported havingvisited at least one of the seven fast-food restaurants for this study. In fact, a majority(72.4 percent) of the participants said that they visited one of these fast-food restaurantsat least once a week in the past. A vast majority (94.3 percent) of them reported havingdined at one of these fast-food restaurants at least once a month. More than two-thirds(70.2 percent) of them spent an average of $5 or more per visit. Most of the surveyparticipants are frequent diners of the fast-food restaurants. Among these, roughly half(50.4 percent) of them patronize a particular restaurant; thus are familiar with fast-foodrestaurant service quality.

In particular, these participants were carefully selected to maximize responses to thesurvey. Rather than distributing the questionnaire to the potential participants throughthe mail, six surveyors (the author plus five hired graduate assistants) approached agroup of people who had just dined at the fast-food restaurant, or handed out thequestionnaire to the restaurant diners through local church organizations, universityclasses, and apartment complexes where the surveyors resided. Occasionally, a souveniritem (e.g. pen, notepad) with a nominal value was offered to the reluctant participants toencourage them to fill out the questionnaire. The rationale for the use of this surveymethod is a potential increase in survey responses by face-to-face interactions withpotential respondents. In fact, low-response rates are an ongoing concern in conductingtraditional mail surveys (Greer et al., 2000; Larson and Poist, 2004). For mail surveys,response rates in the neighborhood of 10-20 percent are not uncommon (Yu andCooper, 1983; George and Mallery, 2001). Thus, to avoid the potential non-response bias,we directly approached and asked restaurant diners to answer the structuredquestionnaire. Also, we solicited survey participation from a number of differentlocations (e.g. churches, universities, residential areas) to increase sample size. However,notice that the geographical coverage of this direct contact survey can be still limited.

The results of the survey revealed that there were a total of 15 service attributes thatwere considered relevant to fast-food restaurant service quality. These salient attributeswere identified based on importance ratings provided by the respondents who werebeing asked to indicate how important a given attribute is to them in gauging the level oftheir satisfaction with service quality. Myers (1999) suggested that importance ratingswere one of the most straightforward but effective ways of measuring customersatisfaction and determining the relative importance of service attributes

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to service quality. As summarized in Table I, the attribute considered most important informing a perception of fast-food restaurant service quality is taste of food. The next fourmost important attributes were cleanliness of the fast-food restaurant, service responsetime, competitive price, and quality of prior service. These results are consistent withthose of other service quality studies such as Crawley (1993), Babin and Darden (1996),Min and Galle (1996) and Miranda et al. (2005) indicating that facility atmospherics suchas cleanliness of the fast-food restaurant can lift the mood of the diners and may impelthem to visit more. Similarly, Dijksterhuis et al. (2005) argued that subtle environmentcues such as cleanliness of the fast-food restaurant might unconsciously affect therestaurant customer’s dining behavior. Also, as expected, competitive price turned out tobe a central influence on fast-food restaurant service quality. This finding is congruentwith that of Curry and Riez (1988) indicating that the price paid for the food significantlyinfluences the customer’s service experience.

On the other hand, word-of-mouth reputation, amenity, proximity to ahighway/major road, safety, and health food offering were considered relativelyunimportant. It is interesting to note that, unlike other service settings such as hotels,employee courtesy was not a deciding factor for fast-food restaurant service quality.This finding may be due to the fact that hotels primarily sell intangible experiencethrough their employees’ direct interactions with customers, whereas fast-foodrestaurants primarily sell instant meals without much involvement of their employees.Relative insignificance of employee courtesy to overall service quality of the fast-foodrestaurant may be due to limited face-to-face interactions with employees resultingfrom the increased use of drive-in service. Indeed, more than two-thirds (67.9 percent)of our survey respondents reported using drive-in service.

Another finding was that four out of the six most important attributes seemed torepresent “functional service.” Functional service refers to service attributes that are

Average degree of importance RanksService attributes 2009 (n ¼ 262) 1994 (n ¼ 111) 2009 1994

Taste of food 1.31 (0.520) 1.31 (0.49) 1 1Cleanliness 1.63 (0.693) 1.48 (0.83) 2 2Service response time 1.75 (0.714) 1.69 (0.72) 3 3Competitive price * 1.77 (0.762) 2.12 (0.88) 4 5Quality of prior service 1.86 (0.795) 1.67 (0.77) 5 4Proximity to a customer’s residence * 1.97 (0.787) 2.46 (0.94) 6 8Proximity to a customer’s school/workplace * 2.08 (0.827) 2.42 (1.05) 7 7Employee courtesy 2.15 (0.807) 2.15 (0.97) 8 6Operating hours 2.18 (0.922) 9Variety of food * 2.34 (0.878) 2.70 (0.97) 10 10Safety 2.39 (1.138) 11Healthy food 2.42 (1.102) 12Proximity to a highway exit or major road 2.71 (1.088) 13Amenity 2.75 (1.110) 14Word-of-mouth reputation 2.84 (1.066) 2.66 (0.93) 15 9

Notes: *Difference is statistically significant at:a ¼ 0.05; scale: 1 – extremely important, 2 – somewhatimportant, 3 – neither important nor unimportant, 4 – somewhat unimportant, 5 – not at all important;numbers in parentheses are standard deviations

Table I.Attributes for thefast-food restaurantservice quality

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akin to attributes of a product (e.g. food) and/or can be improved without direct referenceto customers (Chakrapani, 1998). This category of the service attributes includes taste offood, cleanliness of the restaurant, competitive price, and restaurant location (proximityto a customer’s residence). On the other hand, “personal service” refers to serviceattributes that are difficult, if not impossible, to improve without reference to customers(Chakrapani, 1998). This category of the service attributes includes service responsetime, employee courtesy, restaurant operating hours, amenity, and safety.

To see if the 15 service attributes could be broken down into sub-categories,we conducted exploratory factor analysis. The exploratory factor analysis was precededby the Bartlett’s test of Sphericity. The Bartlett’s test (with a x2 value of 729.452) showedthat some of these service attributes were significantly correlated among themselves.The Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy was also employed tomeasure the strength of the relationship among service attributes. A factor analysis wasfurther justified, since the KMO value of 0.744 was greater than a threshold score of 0.70.

Considering the statistical significance of correlation among these service attributes,we conducted principal component analysis to determine the minimum number ofcommon factors needed to explain correlation among the attributes using the eigen valuegreater than one rule. To obtain a more meaningful representation of the factor structure,we used the varimax rotation with Kaiser Normalization. To elaborate, varimax rotationis an orthogonal rotation of the factor axes to maximize the variance of the squaredloadings of a factor (column) on all the variables (rows) in a factor matrix where eachfactor tends to have either large (close to 1) or small (close to 0) loadings of any particularvariable (Kaiser, 1958; Fabrigar et al., 1999). In particular, we chose a varimax rotationbecause it enables us to easily identify each variable with a single common factor.As summarized in Table II, we extracted five common factors:

Factors Factor 1 Factor 2 Factor 3 Factor 4 Factor 5

Factor label Serviceimage

Menuselection

Location Accessibility Drawingpower

Eigen value 3.537 1.688 1.394 1.155 1.014Percent of variance 23.583 11.252 9.295 7.702 6.758VariablesCleanliness 0.592 0.428 0.155 0.006 0.012Service response time 0.753 20.015 0.132 0.037 20.096Employee courtesy 0.783 0.260 0.033 0.009 0.052Quality of prior service 0.664 0.140 0.047 0.231 0.069Healthy food 0.062 0.740 20.112 20.064 0.103Variety of food 0.151 0.540 0.050 0.198 0.296Word-of-mouth reputation 0.116 0.502 0.174 0.454 20.076Safety 0.275 0.617 0.044 0.106 20.127Proximity to a customer’s residence 0.176 20.151 0.748 0.027 0.195Proximity to the school or workplace 0.054 20.014 0.871 0.038 0.005Proximity to a highway or major road 0.062 0.300 0.590 0.233 20.032Amenity 0.113 0.139 0.109 0.726 20.008Operating hours 0.049 20.019 0.041 0.793 0.137Taste of food 0.366 20.271 0.018 0.229 0.507Competitive price 20.145 0.226 0.129 20.010 0.819

Note: A KMO measure of sampling adequacy ¼ 0.744

Table II.Factor analysis results

of service attributes forfast-food restaurants

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(1) service image;

(2) menu selection;

(3) location;

(4) accessibility; and

(5) drawing power.

These factors are found to have an eigen value greater than 1. That is to say, the resultof the factor analysis verified that the 15 service attributes could be classified into fivecategories of services:

(1) service image;

(2) menu selection;

(3) location;

(4) accessibility; and

(5) drawing power.

3. The development of service standardsTo stay competitive, a fast-food restaurant must establish proper service standards inrelation to its customers’ needs and expectations. With this in mind, the surveyparticipants were asked to rate on a five-point Likert scale the service performance of thesix fast-food restaurants with respect to 15 attributes listed in Table I. These fast-foodrestaurants are: McDonalds, Burger King, Wendy’s, Subway, Arby’s, and Hardee’s.A rating of the service performance of the fast-food restaurants was used to determine aleading fast-food restaurant (benchmark) which best exhibits each service attribute andprovides its customers with the highest overall service quality. To develop an objectiveservice standard, the raw ratings were converted to relative priority scores using ananalytic hierarchy process (AHP) introduced by Saaty (1980). AHP is a systematicscoring method that was designed to synthesize the fast-food restaurant customers’ levelof satisfaction with each service attribute into an overall service performance score ofeach fast-food restaurant. Accordingly, AHP helps the fast-food restaurant not onlyidentify the principal competitors in the market, but also assess the service performanceof the fast-food restaurant relative to its competitors. In contrast with the SERVQUALinstrument suggested by Berry et al. (1985), AHP permits the fast-food restaurantmanager to investigate the sensitivity of the service performance measure to changes incustomer perception of importance of service attributes and the customer’s degree ofsatisfaction with those attributes (Min and Min, 1996). Furthermore, AHP can enhancethe fast-food restaurant manager’s ability to make tradeoffs among various quantitative(e.g. price, restaurant operating hours, quick response time) and qualitative attributes(e.g. cleanliness, employee courtesy, safety) (Saaty, 1988). The application ofbenchmarking to fast-food restaurants involves four major steps (Wind and Saaty,1980; Zahedi, 1989; Min and Min, 1996):

(1) Break down the service-evaluation process into a manageable (e.g. no more thanseven) set of criteria and attributes and then structure these into a hierarchicalform.

(2) Make a series of pairwise comparisons among the criteria and attributesaccording to the customers’ satisfaction level with service performances.

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(3) Estimate the relative weights of service criteria and attributes based on thecustomers’ perceived importance of those criteria and attributes. Also, determinethe local priority scores and ranks of the respective fast-food restaurant in termsof their service performances.

(4) Aggregate these local priority scores and synthesize them for the overallmeasurement of fast-food restaurant service quality. Then, identify thebest-practice (leading) fast-food restaurant.

Based on the above steps, the process of benchmarking was structured into five levels(Figure 1). Since this hierarchical representation eases the complexity of analysisthrough decomposition, it aids the fast-food restaurant in understanding the interactionsamong various service criteria and attributes. As shown in Figure 1, the top level of ahierarchy represents the ultimate goal of determining the best-practice fast-foodrestaurant. At the second level of a hierarchy, the five distinctive service criteria:

(1) service image;

(2) menu selection;

(3) location;

(4) accessibility; and

(5) (customer) drawing power

were placed because they are generally considered important in measuring thefast-food restaurant service quality.

The attributes belonging to one of the five service criteria were connected to thebottom level of the hierarchy represented by six fast-food restaurants under evaluation.

4. The service performance evaluation of fast-food restaurantsFor illustrative purposes, we considered the base-line scenario involving six fast-foodrestaurants for their service performances relative to others. Under this scenario,we estimated relative weights of criteria, and attributes and then derived priority scoresof each fast-food restaurant with respect to the given criteria, and attributes through aseries of pairwise comparisons. Herein, relative weights represent fast-food restaurantcustomers’ perceived importance of each criterion and attribute. As indicated earlier,these weights were determined primarily based on the surveyed opinions of fast-foodrestaurant customers. Since these customers’ perception of service quality can besubjective and inconsistent, we estimated the degree of consistency in the customers’opinions using a consistency ratio (CR), that is mathematically expressed as:

CR ¼CI

RI;

where CI ¼ consistency index, RI ¼ random index:

CI ¼ðlmaxÞ

n2 1lmax ¼ maximum eigen value of the matrix of pairwise comparisons;

n ¼ number of criteria or attributes in the consideration; and

RI ¼ mean CI of a randomly generated reciprocal matrix from a ratio scale of 1-9.

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Figure 1.Hierarchy ofbenchmarking fast-foodrestaurants

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The relative weights and consistency ratios were calculated using the AHP softwarecalled Expert Choice (2000) program. Also, the AHP enabled us to derive the priorityscores from the customers’ satisfaction level with services rendered to them during theirvisitation of the fast-food restaurant. These scores, however, are not absolute measures(raw scores), but relative measures that represent the service performance of thefast-food restaurant relative to its competitors. Thus, pairwise comparisons wereintended to derive numerical values (relative measures) from a set of fast-food restaurantcustomers’ judgments, rather than arbitrarily assigning numerical values to criteria andattributes. These pairwise comparisons of fast-food restaurants produced a finalranking of fast-food restaurants with respect to their service performance relative toothers. Since all of these pairwise comparisons are tested against pre-assignedconsistency ratios, consistency is ensured with an overall consistency index of 0.00.It should be noted that a consistency ratio of 0.10 or less is generally consideredacceptable (Saaty, 1980).

The detailed results of the comparative performances of fast-food restaurants withrespect to each service attribute are summarized in Table III. These results show thatMcDonalds tops the list in terms of overall service quality. In particular, McDonalds isthe leader in terms of service response time, location, amenity, operating hours, andcompetitive price. However, Subway turns out to be the service leader with respect tocleanliness, employee courtesy, quality of prior service, healthy food, a variety of food,word-of-mouth reputation, safety, and taste of food. Aggregation of local priority scoresinto global priority scores (overall service quality metrics) indicated that McDonalds andWendy’s ranked highest and second highest, respectively (Table IV). McDonalds isconsidered the best-practice fast-food restaurant (benchmark) in terms of its overallservice quality. On the other hand, it is intriguing to note that despite some strengths,Subway is ranked third best in terms of its overall service quality since it fell behindseveral other restaurants with respect to service response time, competitive price,operating hours, and location (Table V). Regardless, as shown in Table VI, bothMcDonalds and Subway were the two most popular restaurants in terms of thefrequency of their visits. Especially, Subway’s popularity grew dramatically for the last15 years, whereas both Burger King and Hardee’s suffer from declining popularity.Subway’s increased popularity may stem from its continuous service improvement incleanliness, employee courtesy, taste of food, and a variety of food, although its apparentweakness is relatively high price of food and slow response time as compared toMcDonalds, Wendy’s and Burger King.

To see if a fast-food restaurant ranking changes in accordance with the changes inrelative importance of service attributes such as taste of food, competitive price, andlocation convenience, we performed a series of sensitivity analyses for all the attributes.We discovered that, irrespective of changes in a relative weight of the importance ofservice image, location, and accessibility, McDonalds would be a superior fast-foodrestaurant to the others including Wendy’s and Subway. On the other hand, if a relativeweight of taste of food increased from a given weight of 0.575 to 0.850, both Subway andWendy’s were preferred to McDonalds. Table VII shows that a ranking of the fast-foodrestaurants is sensitive to changes in the importance of taste of food and competitiveprice, whereas it is insensitive to quality of prior service, variety of food, healthy food,safety, proximity to a workplace/school and a highway. These results imply that serviceattributes such as taste of food and competitive price can be key differentiators

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Criteria Attributes Restaurants Priority scores Ranks

Service image Cleanliness Subway 0.01202 1McDonalds 0.01089 2Wendy’s 0.01018 3Arby’s 0.01036 4Burger King 0.00944 5Hardee’s 0.00812 6

Service response time McDonalds 0.01226 1Wendy’s 0.01092 2Burger King 0.01000 3Subway 0.00863 4Arby’s 0.00797 5Hardee’s 0.00705 6

Employee courtesy Subway 0.00865 1Arby’s 0.00807 2McDonalds 0.00800 3Wendy’s 0.00766 4Burger King 0.00741 5Hardee’s 0.00646 6

Quality of prior service Subway 0.01048 1Wendy’s 0.00998 2McDonalds 0.00967 3Arby’s 0.00852 4Burger King 0.00849 5Hardee’s 0.00634 6

Menu selection Healthy food Subway 0.00757 1Wendy’s 0.00720 2Arby’s 0.00719 3McDonalds 0.00682 4Burger King 0.00682 4Hardee’s 0.00568 6

Variety of food Subway 0.00833 1Wendy’s 0.00785 2McDonalds 0.00732 3Arby’s 0.00715 4Burger King 0.00666 5Hardee’s 0.00539 6

Word-of-mouth reputation Subway 0.00770 1Wendy’s 0.00645 2McDonalds 0.00642 3Burger King 0.00573 4Arby’s 0.00530 5Hardee’s 0.00358 6

Safety Subway 0.00714 1Wendy’s 0.00714 1Burger King 0.00714 1Arby’s 0.00714 1McDonalds 0.00681 5Hardee’s 0.00642 6

Location Proximity to a customer’s residence McDonalds 0.01455 1Wendy’s 0.01322 2

(continued )

Table III.Local priority scores offast-food restaurants

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for enhancing the fast-food restaurant’s competitiveness. For instance, sales promotionsthrough deep discounts and value-meal coupons can attract more customers. By thesame token, improvement of taste of food through the use of better quality meat andfresh ingredients may enhance the fast-food restaurant’s competitive position.

5. Managerial implications and recommendationsIn today’s saturated fast-food restaurant market, mere compliance with past servicestandards will not result in the level of improvement necessary to become

Criteria Attributes Restaurants Priority scores Ranks

Subway 0.01191 3Burger King 0.01153 4Arby’s 0.00874 5Hardee’s 0.00677 6

Proximity to a customer’s school/workplace McDonalds 0.01217 1Wendy’s 0.01217 1Burger King 0.01217 1Subway 0.01035 4Arby’s 0.00962 5Hardee’s 0.00669 6

Proximity to a highway or major roads McDonalds 0.00898 1Wendy’s 0.00898 1Burger King 0.00898 1Subway 0.00808 4Arby’s 0.00718 5Hardee’s 0.00628 6

Accessibility Amenity McDonalds 0.01337 1Subway 0.01239 2Wendy’s 0.01209 3Burger King 0.01205 4Arby’s 0.01200 5Hardee’s 0.01009 6

Operating hours McDonalds 0.01855 1Wendy’s 0.01821 2Burger King 0.01652 3Subway 0.01419 4Arby’s 0.01260 5Hardee’s 0.01087 6

Drawing power Taste of food Subway 0.03405 1Wendy’s 0.02898 2Arby’s 0.02766 3McDonalds 0.02658 4Burger King 0.02534 5Hardee’s 0.01834 6

Competitive price McDonalds 0.02776 1Wendy’s 0.02303 2Burger King 0.02082 3Subway 0.01827 4Hardee’s 0.01499 5Arby’s 0.01424 6 Table III.

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the “best-of-breed” fast-food restaurant. In other words, fast-food restaurants need toachieve service excellence by constantly improving service performances. Fast-foodrestaurants cannot improve service performances unless they understand whatthe leading competitors do in the market and what level of service gaps exists betweencurrent performances and best practices. They also need to cater their service offeringsto the dynamically changing preferences and needs of their customers over time.Thus, we proposed dynamic benchmarking as an effective way of sustaining serviceexcellence. This section summarizes several major findings of the current benchmarkingstudy as compared to the previous benchmarking study conducted in 1994,

Overall priority scoresobtained from AHP(overall consistency

index ¼ 0.00) RanksRestaurants 2009 1994 2009 1994 Overall level of customer satisfactiona

McDonalds 0.190 0.161 1 2 1.94 (0.870)Wendy’s 0.184 0.163 2 1 1.88 (0.782)Subway 0.180 0.155 3 3 1.79 (0.910)Burger King 0.169 0.145 4 4 2.21 (0.937)Arby’s 0.154 0.132 5 6 2.20 (0.898)Red Robin Not applicable 2.55 (0.779)Johnny Rocket Not applicable 2.79 (0.707)Fuddruckers Not applicable 2.89 (0.552)Hardee’s 0.123 0.134 6 5 2.96 (0.691)Roy Rogers Not applicable 3.00 (0.403)

Notes: aThe numbers represent the average score of a five-point scale for the degree ofcustomer satisfaction evaluated by the respondents where: 1 – very satisfied, 2 – somewhat satisfied,3 – neither satisfied nor dissatisfied, 4 – somewhat dissatisfied, 5 – very dissatisfied; the numbers inparentheses are standard deviations

Table IV.Comparison of fast-foodrestaurants with respectto overall service quality

Average frequency of visits RanksRestaurants 2009 (n ¼ 262) 1994 (n ¼ 111) 2009 1994

McDonalds 2.01 (0.859) 2.10 (0.97) 1 2Subway * 2.07 (0.881) 3.32 (0.90) 2 6Wendy’s 2.12 (0.862) 2.02 (0.82) 3 1Burger King * 2.56 (0.891) 2.12 (0.92) 4 3Arby’s 2.85 (0.847) 2.92 (0.88) 5 5Red Robin 3.59 (0.642) 6Johnny Rocket 3.73 (0.532) 7Fuddruckers 3.79 (0.525) 8Hardee’s * 3.79 (0.468) 2.32 (0.67) 9 4Roy Rogers 3.92 (0.317) 10

Notes: *Difference is statistically significant at: a ¼ 0.05; scale: 1 – most frequently visited, 2 –occasionally visited, 3 – rarely visited, 4 – never visited; numbers in parentheses are standarddeviations

Table V.The popularity of thefast-food restaurant

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expounds the managerial implications of those findings, and develops practicalguidelines for continuous service improvement.

First, we discovered that a service attribute considered most important to thefast-food restaurant customers’ impressions of service quality is taste of food. Also,the effect of “atmospheric” impression such as cleanliness of the restaurant seems to besignificant, because cleaner dining environments may look more sanitary to thecustomers. That is to say, neatly cleaned tables, chairs, and floors in the fast-foodrestaurant can play a significant role in improving its customers’ impressions of servicequality and thereby retaining its customers. It is also not surprising to find that people goto the fast-food restaurant due to its quick service response time. Thus, the relativeimportance of these service attributes to the fast-food restaurant customers’ impressionsof service quality virtually remains the same as the 1994 study. On the other hand, therestaurant customers tend to value competitive price significantly more than they did in1994 (Table I). Also, the fast-food restaurant customers were very sensitive to pricechanges (Table VII). This finding indicates that the fast-food restaurant customers arestill looking for bargain or value meals. In particular, in this era of worldwide economiccrisis and rising food prices, a significant price increase without noticeable improvementin taste of food and physical restaurant environments can undermine the fast-foodrestaurant’s competitiveness. Thus, we recommend that the fast-food restaurant shouldfocus more on “every-day low price” strategy than on “occasional coupon or promotionalsales” to obviate customer defections and phantom demand. Another intriguing findingis that the fast-food restaurant customers tend to take restaurant location (namely,proximity to their residences, schools, and workplaces) far more seriously than before.

Competitive gapsb

Key attributesBenchmarka

(McDonalds) Wendy’s Subway Burger King Arby’s Hardee’s

Service imageCleanliness 2.14 0.15 * * 20.20 * 0.33 * 1.12 * 0.73 *

Service response time 1.64 0.20 * 0.69 * 0.47 * 1.21 * 1.21 *

Quality of prior service 1.94 20.06 20.15 * * 0.27 * 0.26 * 1.02 *

Employee courtesy 2.27 0.10 0.17 * 0.18 * 1.41 * 0.54 *

Menu selectionVariety of food 2.22 20.15 * * 20.27 * 0.22 * 0.66 * 0.79 *

Word-of-mouth 2.17 20.01 20.36 * 0.26 * 0.43 * 1.72 *

LocationProximity to residence 1.49 0.15 * 0.33 * 0.39 * 1.02 * 1.71 *

AccessibilityOperating hours 1.63 0.03 0.40 * 0.20 * 0.77 * 1.15 *

Amenity 2.28 0.22 * 0.18 * 0.25 * 0.24 * 0.74 *

Drawing powerTaste of food 2.05 20.17 * 20.45 * 0.10 20.08 0.92 *

Competitive price 1.56 0.32 * 0.81 * 0.48 * 1.48 * 1.33 *

Notes: Statistically significant at: *a ¼ 0.05, * *a ¼ 0.10; athe benchmark index representsthe average score of a five-point scale for the degree of customer satisfaction where: 1 – extremelysatisfied, 2 – somewhat satisfied, 3 – neither satisfied nor dissatisfied, 4 – somewhat dissatisfied, 5 – notat all satisfied; bthe positive gap occurs when the service performance of a given restaurant is worse thanthat of its benchmark (McDonalds)

Table VI.Competitive gap analysis

of fast-food restaurants

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This pattern reflects the fact that, with rising gasoline prices in times of a severeeconomic downturn, the restaurant customers prefer to dine at the restaurant not toodistant from their home, school, or workplace.

Second, as expected, the overall leader (i.e. McDonalds) of fast-food restaurantservice quality turned out to be the most frequently visited restaurant (Table V). In fact,we discovered some correlation between the relative service performance of thefast-food restaurant and its popularity (Tables IV and V). Similarly, we found a patternof the correlation between the overall level of customer satisfaction with the fast-foodrestaurant and its word-of-mouth reputation as evidenced by the top three rankings ofSubway, Wendy’s, and McDonalds (Tables III and IV). That is to say, fast-foodrestaurant branding can foster positive images of its service quality and subsequentlyhelp attract more customers in the future. Thus, this finding reaffirms earlierdiscoveries by Ou and Abratt (2006) and Balmer (2001) that word-of-mouth reputationor branding could have a long-lasting impact on patronage, competitiveness, andbusiness survival. Also, our survey result indicated that nearly half (43.7 percent)of the surveyed customers, who were disappointed with the service quality of afast-food restaurant, would not return to the same fast-food restaurant. Thus,sustaining the high level of service quality is essential for customer retention. Moreimportantly, it should be reminded that good branding has a lasting impact on thecustomer’s loyalty to a particular fast-food restaurant. Indeed, Rhee and Bell (2002)observed that many customers had a primary affiliation to a “primary store” that

Service attributes Degree of sensitivity

Service imageCleanliness Somewhat insensitiveService response time Somewhat sensitiveEmployee courtesy Somewhat insensitiveQuality of prior service InsensitiveMenu selectionVariety of food InsensitiveHealthy food InsensitiveSafety InsensitiveWord-of-mouth reputation Somewhat insensitiveLocationProximity to residence Somewhat insensitiveProximity to school/workplace InsensitiveProximity to highway InsensitiveAccessibilityAmenity Somewhat insensitiveOperating hours Somewhat insensitiveDrawing powerTaste of food SensitiveCompetitive price Sensitive

Notes: “Very sensitive” – a ranking of all the restaurants changes drastically in the entire weightrange; “sensitive” – a ranking of several restaurants changes constantly in the entire weight range;“somewhat sensitive” – a ranking of two restaurants changes gradually in the limited weight range;“somewhat insensitive” – a ranking of one restaurant changes gradually in the very limited weightrange; “insensitive” – a ranking of no restaurant changes in the entire weight range

Table VII.Sensitivity analysis ofservice attributes

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captured the majority of their purchases despite being presented with a significantinducement to shop elsewhere. Thus, we recommend that the fast-food restaurantshould develop a long-term branding strategy to prevent service failures and foster itsnice images. Such a strategy may include: recognition of loyal patrons by their firstnames, special coupons/discounts or free meals/drinks for repeated visitors, and quickattention to service failures (e.g. customer complaints).

Third, the customers tend to be more favorable to easily accessible and nationalfast-food restaurant franchises such as McDonalds, Wendy’s, and Subway than lessaccessible, relatively new, and regional counterparts such as Roy Rogers, Hardee’s,Fuddruckers, Johnny Rocket, and Red Robin. This tendency may have something to dowith the risk-averse trend of today’s customers who do not want to dine at theunfamiliar restaurants. As a matter of fact, half (50.4 percent) of the surveyedcustomers reported patronizing the same restaurant for repeated visits. Also, given theincreasing importance of location to the restaurant service quality, less accessiblerestaurants such as Roy Rogers (primarily located near the major highway exits or restareas) and Hardee’s with the limited number of establishments may suffer from thedeclining popularity. For example, the Hardee’s popularity has significantly declinedover the years (Table V). Considering this finding, we recommend that relatively newand regional fast-food restaurants should locate their establishments near to the clusterof other competing restaurants such as McDonalds and Wendy’s to negate theircompetitor’s locational advantage and then draw the attention of potential customers.

As summarized above, this study incorporated the customers’ perception of servicequality into the fast-food restaurant benchmarking process and then evaluated “what-if”scenarios associated with changes in the customers’ perception of service quality(i.e. changes in relative importance of service attributes) using the AHP. Althoughthe current study was one of the first longitudinal studies to evaluate the comparativeservice performances of the fast-food restaurants over time, it can be extended to includelarge samples in different regions across the USA. Similarly, this study can be extendedto include samples from different countries and then conduct cross-cultural studies toexamine any cross-cultural differences in the customer perception of fast-foodrestaurant service quality. Also, future studies can be directed toward the identificationof various latent variables (e.g. diners’ gender, age, profession, ethnicity) that mayinfluence the diners’ perception of restaurant service quality using the structuralequation model.

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Corresponding authorHokey Min can be contacted at: hmin@bgsu.edu

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