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Will This Fast-Food Startup Topple McDonald’s?

8 August 2012 in Trading Ideas

The data on America’s obese has never seemed more bleak. As recent government data shows, about 70% of Americans are considered overweight, with 36% of those people deemed obese.

As the Financial Times’ Gillian Tett recently noted, that’s almost twice the ratio seen just three decades ago, and it makes the US the world’s fattest industrialized nation, when ranking countries by average body-mass index. (Are we feeling flattered?)

One new approach at salvation by some local and state governments – witness New York City Mayor Michael Bloomberg’s crusade against the Big Gulp – has been to offset obesity, and its significant contribution to the nation’s health care costs, with taxes on the junk food that is expanding our waistlines and clogging our arteries.

Tax the unwanted behavior, the thinking goes, and you’ll get less of it.

Others, however, are taking the entrepreneurial approach: What if you can wrest away market share from junk food purveyors simply by offering consumers something better?

That’s the goal of Lyfe Kitchen, a restaurant chain in the making (it now comprises one store in Palo Alto, Calif.) that intends to capture the growing attention being paid to the anti-obesity movement, as well as the increased popularity of organic and sustainable food movement.

And while the company seems to recognize its immediate target audience – Lyfe, for example, stands for Love Your Food Everyday – and touts its grass-fed beef and lack of butter and white flour, this will also be, at the end of the day, a fast-food burger joint.

And therein lies the sweet (sugar-free, of course) irony: Lyfe’s cofounder and chief executive is Mike Roberts, a former cofounder and chief executive of McDonald’s (MCD). Roberts’ goal, as a recent story in Wired reveals, is to take the supply-chain management practices learned at the fast-food giant and apply them to a new venture that will, among other things, pluck the Brussels sprout back from obscurity and put it front and center as a fast-food staple.

Roberts, who once mulled a vegan McNugget menu item during his McDonald’s tenure, believes that American mothers, who are still the average family’s mealtime executive deciders, are more focused than ever on healthy food.

The larger bet by Roberts is that America’s obesity epidemic is no match for healthier fast-food alternatives.