Want Fries With That Burger? By 2020, You'll Reply 'No to Both'
Today, three of the top five fast food chains in America are burger companies. McDonald's (MCD) ($35.9 billion in sales for 2013) crushes all competition for revenues. Subway, though it has more restaurants, comes in a distant second at $12.7 billion, followed by Starbucks (SBUX) ($11.7 billion), Wendy's (WEN) ($8.8 billion) and Burger King ($8.5 billion).
Janney Capital projects that in 2020, McDonald's will fry up $43.8 billion in sales -- still No. 1. But Starbucks ($18.8) and Subway ($18.4) are predicted to trade places in the 2 and 3 spots, and Dunkin' Donuts ($11.6) and Chick-fil-A ($10.8) are expected to round the top five, as the other burger chains slide down the list. As lead analyst Mark Kalinowski said on the Huffington Post, "Americans' tastes are evolving" towards flavorful fast casual dining locations.
I'd Like Improved Quality and Taste Instead
Janney Capital predicts the shift stems from several factors. Customers want higher quality and better tasting meals. That may seem obvious, but based on the fast food people have been eating the past few decades, it hasn't always been the case. This is why chains like Chiptole Mexican Grill (CMG) (recently surpassing McDonald's in sales growth), Dunkin' Donuts (DNKN) and Chick-fil-A stand to make significant strides in the industry. Even though Chick-fil-A has been a lightning rod for boycotts and protests over the religious convictions of its leaders, the chain has been consistent in service and food quality, and its sales have kept growing.
McDonald's has noticed the trend, so it's going through an 18-month makeover, changing the service and menu. What could be the hardest task of the rebrand is regaining customer trust, for example, by demonstrating more integrity and consistency, and having its equipment working and WiFi available when advertised -- two current problems facing the chain.
Yet, food quality has to be the top priority. McDonald's will keep its signature Egg McMuffins, Big Macs and french fries while adding fruits, vegetables and sustainable beef. With Chipotle's emphasis on responsibly raised "unconventional meat," it shouldn't come as a surprise to see McDonald's follow suit.
Other factors leading to declining sales are better options for similar prices -- such as Panera (PNRA) and Starbucks -- plus attention to the treatment of fast food employees across the industry. McDonald's, being the iconic brand, may be suffering the brunt of the frustration, justified or not. The brand also continues to struggle from the recession. The restaurant lost many customers due to the financial crisis, only to see a significant amount not return.