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Restaurants Cross Lines Through Recession Woes

By Bruce Horovitz, USA TODAY: The recession is jolting the restaurant industry to concoct who'd-a-thunk-it products that are redefining what even the industry's biggest brands stand for.

Never mind that KFC's (YUM) middle name is "fried," as in Kentucky Fried Chicken. Its biggest campaign of 2009 is to sell what it calls unfried (i.e. grilled) chicken.

Pizza Hut, whose first name is pizza, is pushing pasta like there's no tomorrow. Home delivered, no less.

McDonald's, (MCD) the world's biggest fast-food chain, is in the midst of rolling out a line of designer coffees — even as Starbucks (SBUX) is peddling value meals.

It gets crazier. Domino's (DPZ) is delivering subs and pasta-stuffed bread bowls. Boston Market, the rotisserie chicken king, is pitching crispy chicken. Arby's (WEN), the anti-burger chain, is hyping Roast Burgers. Cheesecake Factory (CAKE), known for its gigantic servings, is offering "small" meals. Even Morton's, (MRT) the pricey prime steakhouse, has $5 burgers at the bar.

"This is a defining moment for the industry," says Hudson Riehle, research chief at the National Restaurant Association. "The financial crisis has brought with it a redefining of boundaries."

The fallout looks — or tastes — surreal. Many of the food innovations appear to be the opposite of some chains' founding principles, and carefully honed brand image. Could sushi at Taco Bell(YUM) be next?

The driver is how the recession is eating into the heart of the $566 billion restaurant industry, which has seen 10 consecutive months of same-store sales declines and 19 consecutive months of falling store traffic.

"The industry has never faced a period of stress like this," says Alan Hickok, a veteran restaurant industry consultant. "There's never been anything this deep."

As a result, the big chains are spinning out new products about as fast as any time in the industry's history. "There are innovations, and there are spinovations," says Russell Weiner, marketing chief at Domino's. "When you're trying to grow a category, you need to bring in innovations."

Innovations beyond a chain's usual fare can build sales by helping to quash the "veto vote," the person in a group who can stop or divert a fast-food run because they don't want a burger or chicken or pizza. If all three items and more are on the same menu, it can thwart the trip-killer.

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