Why the Average McDonald's Makes Twice as Much as Burger King

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Mc Donald s and Burger King logo
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By Venessa Wong

McDonald's (MCD) may recently have struggled to lure customers, but it still does far more business at each location than rival burger chains. The average McDonald's restaurant in the U.S. drew $2.6 million in revenue last year. Average sales for No. 2 chain Burger King (BKW): $1.2 million, according to data from its largest franchisee, Carrols Restaurant Group (TAST).

What accounts for this more-than-a-million gap? "Everything from marketing and site selection to product initiatives and franchisee selection have been historical factors," said Nick Setyan, vice president in charge of equity research at Wedbush Securities, in an email. Here are four factors that drive higher sales volumes at McDonald's:

1. McDonald's gets more customers during off-peak hours. Look no further than the strength of its breakfast business relative that of Burger King, says Darren Tristano, executive vice president at restaurant consultancy Technomic. Egg McMuffin is part of the fast-food vocabulary in a way Burger King can't match. And beverage and snack offerings such as McCafe and wraps have helped increase McDonald's sales between meals. The dramatic impact from off-peak business explains why chains such as Taco Bell (YUM) are entering the battle for morning customers, while others such as Starbucks (SBUX) are seeking more afternoon and evening business.

2. The power of the Happy Meal. McDonald's has the largest share of kids meal sales in the fast-food industry and gets about 10 percent of total sales from Happy Meals, %VIRTUAL-article-sponsoredlinks%the most commonly advertised child-oriented fast-food item on television. Burger King, meanwhile, is still trying to win back "parties with kids and seniors and women," said Josh Kobza, Burger King's chief financial officer, at a conference last year. One way to do that: "We got rid of the creepy king character that tended to scare away women and children."

3. McDonald's has an edge on efficiency. Despite recent operational challenges at McDonald's, which have slowed down service, it is still more efficient. Its drive-through service can handle more cars at peak times, Tristano says, and McDonald's restaurants are adding a third service window to get customers through even faster. The average service time at McDonald's drive-throughs is 189.49 seconds, compared to 198.48 at Burger King, according to QSR Magazine. Drive-through service is important: Burger King franchisee Carrols gets 65 percent of its sales from the drive-through.

4. More marketing dollars. McDonald's spends a lot more on marketing than competitors, as Tristano points out. Its advertising costs in 2012 were $787.5 million vs. Burger King's $48.3 million, and the gap widened last year when Burger King itself spent only a few million on advertising in order to focus on equipment updates. In its 10-K submission, Burger King said it expects to spend less on advertising until 2016; the company declined to comment for this story.

-Wong is an associate editor for Bloomberg Businessweek. Follow her on Twitter @venessawwong.

Why the Average McDonald's Makes Twice as Much as Burger King

Tucked away at the McDonald's C.O.B. — or Campus Office Building — is the test kitchen, where the fast food chain comes up with all sorts of products.



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The kitchens are up on the top floor on Big Mac Blvd. Yes, McDonald's names all the "streets" in its global headquarters office building.



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Here's what Big Mac Blvd. looks like. Kitchens on the left, cubicles on the right.



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Here we are — the test kitchen is called the Culinary Center.



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It's a bit strange, actually — a McDonald's kitchen encased in glass that's more fitting for a conference room.



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The kitchen has some appropriate reading.


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We met up with Chef Jessica Foust, a nutrition and culinary manager at the test kitchen.



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Judging by the setup, the kitchen was prepped to handle the McWraps and Fish McBites. The box o' fish is the McDonald's latest limited-time offering, hitting locations just in time for Lent.



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It has all the gadgets that a regular McDonald's kitchen would have.



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Like these handheld pumps.



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And the usual cups and shakers.



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There's even a little guide on how to get buns toasted perfectly.



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So we ran through the whole process of making a McWrap — a product that McDonald's is counting on going forward.



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The whole assembly line was set up — simple enough.



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The finished product (well, after we'd taken a bite) — just like you'd see in restaurants.



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We also got to try those Fish McBites, which weren't in stores yet.



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The breading's different from a Filet-O-Fish and it's a totally different experience.



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A lot of people shy away from fast food fish, but it wasn't too bad. We wouldn't go out of our way to order it, though McDonald's Filet-O-Fish lovers might.



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What's Foust's favorite item that never made it into restaurants? A blueberry yogurt ice cream shake, she told us.



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That's not the only kitchen at the McDonald's HQ. There are plenty more running down the side of Big Mac Blvd.



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On the way to another one, we ran into Chef Dan Coudreaut, the executive chef at McDonald's.



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Other chefs were at work too. This one was getting some bacon ready for some unknown project.



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It was a bit of a mess in there, like a scientist's lab, with chefs busy at work with their food.



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There's also the Sensory Evaluation Center, which McDonald's uses to test the new stuff they're experimenting with in order to get the feedback to improve the products.



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It's a key part of product development. In the Difference Test, you evaluate everything from appearance and color to viscosity and flavor.



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The items come through a magic door. We tasted a set of mango pineapple smoothies and each of them were slightly different.



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