The Five Biggest Fast-Food Controversies of 2012
By Jonah Loeb Dec 27, 2012 12:00 pm
This year has been tumultuous for the restaurant industry. Here are the stories that made the biggest headlines.
MINYANVILLE ORIGINAL For better or worse, it’s year-end list season! They’re fun for readers, easy for writers, and helpful for everyone. It’s been a particularly tumultuous year for fast food companies; some of the biggest stories of 2012 have sprung from restaurants, and many of them have been pretty scandalous indeed. Let’s count down the five biggest fast food controversies of the year and see if we can make any sense of them.
Back in February, consumers collectively gagged as stories emerged about one of the materials that has been going into ground beef for years: a substance known previously as "lean finely textured beef," but now simply dubbed "pink slime." Throughout the ‘90s up to the present day, companies have been spraying beef trimmings with citric acid or ammonia gas and spinning them in a centrifuge to remove gristle. Gross, right? Well, after ABC News ran a series of stories about the stuff that McDonald’s (NYSE:MCD) had only recently removed from its own products, food-safety advocates went absolutely bananas, sparking a controversy about the very nature of meat itself. Supermarkets weren’t immune to the uproar, either, as both Whole Foods (NASDAQ:WFM) and Trader Joe’s were forced to issue statements that they had ordered their suppliers to identify and discontinue products that contained the material.
If suppliers and manufacturers can tell a few horror stories, then fast food employees are Edgar Allan Poe. When they took to Reddit in July to tell all, the results were sometimes harrowing. In response to a question about what menu item they’d advise customers never to eat, employees listed McDonald’s chicken McNuggets, Wendy’s (NASDAQ:WEN) chili (reportedly made from yesterday’s hamburgers), and Subway chicken breasts as some of the worst offenders. Another particularly disgusting story involved the rotation of the frying oils at Burger King (NYSE:BKW), where the oldest and least appealing oil is used to cook nothing but fish filet sandwiches. None of the companies suffered financial woes after the tell-all, but the story certainly made the Internet rounds due to Reddit’s rising profile.
As reported in greater depth elsewhere on this site, some of the biggest political talking points in this election year have come from restaurant companies. Papa John’s (NASDAQ:PZZA) CEO John Schnatter rubbed many the wrong way when he announced that he’d be giving away 2 million free pizzas and simultaneously cutting his employees’ hours to avoid rising costs due to President Obama’s health care reform law. Darden Restaurants (NYSE:DRI) and DineEquity (NYSE:DIN), the owners of Olive Garden and Applebee’s respectively, saw significant negative reactions to similar statements by various high-ranking figures, and Darden even saw its quarterly income drop by 37% after the controversy. Obviously, customers and employees alike were incensed by hearing financial threats coming from millionaires.
This one didn’t make a lot of headlines in the US, but it’s a major (and ongoing) story in China. Yum Brands (NYSE:YUM), which owns China’s biggest fast food company, KFC, has come under intense scrutiny. This comes at the end of a troubled few years for the Chinese food industry, which has been plagued for some time with reports of sometimes serious health concerns, and Yum has come under fire after food safety authorities announced that KFC had been supplied with chicken that contained excessive amounts of antibiotics. As of Christmas Eve, Yum had announced that authorities had found the levels of antibiotics to be within acceptable levels (which sounds like faint praise), but the damage had been done: The company has seen its fourth-quarter same-store sales fall 4% and its share price fall from $74.47 to $65.01 in the past month.
The biggest fast food firestorm of the year involved fried chicken, gay marriage, and the Internet. Georgia-based chicken chain Chik-Fil-A made headlines in June when COO Dan Cathy made several statements in which he declared that redefining marriage to include same-sex marriage was “inviting God’s judgement on our nation.” The resulting boycott led to a massive counter-boycott in which conservatives flocked to Chik-Fil-A restaurants and Tweeted pictures of their meals in support of Cathy’s statements. The day of the counter-boycott, the average restaurant in the chain saw its sales rise 29.9% above a typical day. After Boston mayor Thomas Menino swore to keep Chik-Fil-A from expanding to his city, former Arkansas Governor Mike Huckabee declared his support for Cathy, expanding the story to a truly national scope. The whole affair has several brand analysts claiming that Chik-Fil-A’s brand may never fully recover, but there’s no doubt that the chicken chain made the year’s biggest splash in the restaurant industry.
No positions in stocks mentioned.