Can Burger King Finally Beat McDonald's?

Burger King Worldwide (BKW) is back.

The Whopper topper posted better than expected financial results on Monday.

It may not seem all that impressive at first. Revenue slipped 26% during the company's first full quarter as a new public company. However, the top-line retreat is intentional. Burger King has been handing over company-owned locations to seasoned franchisees. During the quarter alone, Burger King refranchised 221 locations worldwide.

Naturally, revenue will be lower at the stores being transferred to franchise owners, but the incoming royalties and other related revenue should help boost the company's margins. It happened this time: Despite the sharp decline in revenue, adjusted earnings per share climbed 11% to $0.17 a share. Analysts were projecting a profit of just $0.15 a share.

Having it its way
Same-store sales rose 1.4% during the period. It may not seem like much, but keep in mind that this was the same quarter in which larger rival McDonald's (MCD) posted similar store-level production. Unlike Burger King's ability to grow its bottom line on adjusted basis, Mickey D's actually posted a decline in net income.

Perhaps more impressive is that Burger King got there without ripping off the McDonald's playbook.

Earlier this year it seemed as if BK menu changes were merely mirroring what was working at its larger burger-flipping competitor. McDonald's added snack wraps, popcorn chicken, and smoothies. Burger King played along.

However, the Home of the Whopper took some chances this time. It rolled out a Summer BBQ menu featuring barbecued chicken and pulled pork sandwiches. Recently it reintroduced its chicken parmesan sandwich with its upgraded chicken patty.

Maybe Burger King needed McDonald's to find its way back after a few lean years, but now it's ready to carve its own path.

Taking back the silver
After slipping below Wendy's (WEN) -- on a sales volume basis -- last year, Burger King is finally in a position to take back second place.

Sure, it has a net debt position of $2.6 billion. However, the 12,600-unit chain's frachisee-intensive model will make it a cash flow machine. In fact, Burger King initiated a dividend policy this week.

It won't be much at $0.04 a share every three months, but it's a start. At a time when McDonald's disappointed investors with its softest sales growth rate in nine years, Burger King is just starting to get in a groove.

BK won't catch up to McDonald's in terms of sheer size. (It has less than half as many locations worldwide as the Golden Arches.) However, if it keeps performing like this relative to expectations, it may not be long before it replaces McDonald's as the market darling of fast food stocks.

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