Fast Food's Slow Fail: Why Burger King Will Never Be Great Again

Burger King
Burger King

Did you hear that Burger King hired away Hamburglar from McDonald's (MCD)?

It must have. How else could one explain how the new BK menu looks suspiciously similar to what the folks manning the fryers under the golden arches are serving up?

Yes, the new BK menu is a lot like the old Mickey D's menu.

The fast food chain will introduce smoothies, available in both strawberry-banana and mango flavors -- just like you-know-who. A new chicken entree wrapped in a soft flour tortilla and garnished with lettuce and either honey mustard or ranch is a dead ringer for the snack wrap at McDonald's. Don't even get me started on the caramel frappe!

Pretty sneaky, Hamburglar.

Have It Your Way

Things aren't going well at Burger King these days. Wendy's (WEN) -- which has its own unique problems -- actually overtook the home of the Whopper to become the country's second-largest burger chain by sales volume last year. BK had been cemented into second place since 1972 until the red-haired girl seized the throne.

The silver lining here is that retail investors aren't paying the price for BK's fall from grace. Brazilian private-equity firm 3G Partners acquired the fire-grilled burger specialist in late 2010.

It was clearly a bad bet, as a meandering chain that seems to be down to copying the leader even as it swaps out its silver medal for a bronze one probably won't be popular with investors.

We'll find that out soon enough. Burger King announced on Tuesday night that it will combine with London-listed investment vehicle Justice Holdings. The move will eventually find Burger King returning to the New York Stock Exchange.

Don't expect a warm welcome from investors when the move is complete.

Copy cats are nothing new
There's nothing inherently wrong with copying the top dog. Burger King had no problem aping McDonald's Sausage McMuffin when it needed a new breakfast sandwich a couple of years ago. Wendy's and BK continue to update their fries to see if they can match the appeal of the shiny shoestrings at McDonald's.

There's also nothing desperate about tweaking the menu. Wendy's reformulated its signature burger back in September for the first time in its 42-year history. It probably wasn't the reason for the chain passing Burger King, but it obviously didn't hurt. Even McDonald's isn't afraid to mix things up. The fancy coffee and fruit smoothie beverages that BK is adding now seemed daring when they were put on the menu by Mickey D's two years ago.

However, the unoriginal nature of the menu tweaks at a time when franchisees are getting frustrated isn't going to get BK growing again.

You may be stuck with this one, 3G Partners.

This One's for You, Guys

Unlike the family-friendly McDonald's with its Happy Meals or the female-friendly Wendy's with its signature salads, BK has targeted young male diners.

Roll past the drive-thru menu and snapshots of multi-patty burgers tempt young carnivores who aren't watching their waistlines or cholesterol counts like their fathers must.

However, the competition for these taste buds is intensifying. Virginia's Five Guys is opening hundreds of new locations a year. West Coast icon In-N-Out Burgers is taking baby steps eastward, expanding into Texas last year. If you live in a major metropolitan city, you're probably within range of at least a half-dozen gourmet burger joints that have opened up in recent years. All of these concepts are angling for the BK diner looking for a better-quality meal.

BK knows that this may be it. If its new menu doesn't help it woo the steadier traffic numbers that McDonald's and Wendy's have been pulling over the years, this may be the end of the line.

Burger King is also turning to an ambitious store makeover to refresh its brand, but that will require getting franchisees to buy in. In an effort to get store owners to commit to the new plan, BK is offering a 50% discount on the annual $50,000 franchise fee for operators that go through with the remodeling.

Some of the Burger King stores are even starting to add Coca-Cola (KO) Freestyle machines -- the type that are starting to pop up at upscale burger joints -- that let thirsty patrons mix and match dozens of flavored soft drink combinations.

It may not be enough. The market may be too competitive, and the chain itself so stale that even photocopying the Mickey D's cookbook and sprucing up its restaurants may not bring back sales.

Hamburglar have swiped the playbook, but only time will tell if he remembered to take the spectators.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Coca-Cola. Motley Fool newsletter services have recommended buying shares of McDonald's and Coca-Cola.


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