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Are Licensed Toys in Fast-Foods Kids’ Meals an Endangered Species?

You won’t be seeing any more of this from Wendy’s

This week, Wendy’s announced that it will no longer offer licensed toys as part of its kids’ meals. In so doing, Wendy’s became the third fast-food chain since 2011 to discard the proven business model of using licensed toys in kids’ meals to generate buzz and restaurant traffic. What’s going on?

Licensing Toys for Kids’ Meals

In 1973, the now defunct Burger Chef became the first chain to introduce a kids’ meal. In addition to burger and fries, the “Funmeal” featured riddles, puzzles and small toys. Six years later, McDonald’s launched the “Happy Meal” with Burger King and other chains quickly following suit. The strategy: Get the kids and the parents and families will inevitably follow.

For decades, the strategy has worked. Kids’ meals are big business for the fast-food chains, generating revenues of over $1.2 billion per year, according to the Federal Trade Commission. Essential to the strategy is including toys that kids actually want. Accordingly, fast-food chains look to major licensor like Disney, Nickelodeon or Mattel, to provide high-profile, “hot” toys, often as a tie-in to a new blockbuster movie. Of the $580 million fast-food chains annually spend marketing to kids under 12, $360 million is to license and produce toys for kids’ meals.

No fast-food chain is more heavily dependent on the licensed toy strategy than McDonald’s.

The Kids’ Meal Loses Its Luster

Although it remains a staple of fast-food menus, the kids’ meal has lost much of its luster in the past five years. Sales of kids’ meals decreased 6% in 2011, according to an NPD Group study. Reasons for the decline:

  • Health: For over a decade, the fast-food industry has been under attack over issues of nutrition and childhood obesity. Although many chains have responded by offering healthier versions of their kids’ meals, self-regulation has done little to blunt the criticism.
  • Ethics: Much of the public criticism focuses on the ethics of using toys to get kids to eat food of dubious nutritional value. “Marketing to children has become a highly sensitive issue and just about anything the chains do gets criticized,” notes Chicago fast-food industry analyst Scott Hume. One public interest group has gone so far as to sue McDonald’s for “deceptive marketing” by including toys in its Happy Meal (a federal judge threw out the case). In 2011, San Francisco became one of the first cities to enact a local ordinance requiring that kids’ meals with toys meet specific nutritional standards.
  • Millennials: Kids’ meals don’t appeal to millennials the way they did to earlier generations. “Today’s kids are more assertive about making their own menu choices as early as age 5,” notes     Hume. “They want smaller versions of the adult versions of the items their parents order.” The millennial’s coolness toward the kids’ meal extends not just to the food but the toy. “Millennials are turned on by technology and video games, not the static toys in kids’ meals.”

Is the Problem the Meal, the Toy or the Licensed Toy?

The combination of public pressure and diminishing sales has made some chains skittish about kids’ meals. In 2011, Jack in the Box announced that it would include apple slices and other healthy offerings and no longer include toys of any kind in its kids’ meal.

Two years later, Taco Bell became the first national fast-food chain to eliminate kids’ meals altogether. Although health was also cited, for Taco Bell, it was all about the Millennials. In explaining the move, CEO Greg Creed said “we wanted to strengthen and be really clear and focused on our brand positioning as the brand for Millennials. And a kid’s meal is just inconsistent with the edgy, left-of-center Millennial brand.” To be fair, it wasn’t a hard decision for a chain like Taco Bell which derived less than 1% of its revenues from kids’ meals.

Wendy’s is keeping the kids’ meal and the toy but eliminating the licensed toy. Starting this fall, Wendy’s new Kids’ Meal play platform will feature classic games like tag and capture-the-flag designed to encourage “simple, creative play.” “In an era where creativity is widely acknowledged to be a skill required for success, our new creative play platform gives parents simple activities to nurture and develop their kids’ creativity that families can enjoy together,” according to a company spokesperson.

Taking a page out of the same book, McDonald’s in the U.K. recently began including Roald Dahl centenary edition books in Happy Meals.

What Lies Ahead?

The perceived exploitation factor that comes with putting a toy in kids’ meals is multiplied when that toy is licensed. “A Minions toy in a Happy Meal looks like pandering,” notes Hume. It’s much safer to rely on lower profile brands and “creative play” the way Wendy’s is doing. “Who’s going to criticize ‘Tag’ and ‘Capture the Flag’?,” chuckles Hume. Unlicensed toys also remove the risk for fast food chains if a tie-in movie flops.

The good news for licensors is that the Wendy’s, Taco Bell and Jack-in-the-Box episodes are likely to pose little more than a minor threat to the long-term future of licensed toys in kids’ meals. “The key is McDonald’s and there’s no indication that McDonald’s is backing away,” explains Hume. “No chain spends more on licensing and promotion and no chain gives away more toys” (McDonald’s distributes over 1.5 billion “Happy Meal” toys each year—which is more than Hasbro and Mattel sell). So as long as McDonald’s stays the course, there’s bound to be a place for licensed toys in kids’ meals.


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