Is Burger King Gaining Ground on McDonald's?


For many years, both Burger King and McDonald's have been known as fierce competitors with mostly differentiated menus. Burger King is known as "The home of the Whopper" while McDonald's most famous sandwich has always been the Big Mac. The two have coexisted, promoted their own menus, and rarely crossed the line of selling each other's signature menu items. That is, until now.

Burger King and McDonald's have been showing uninspiring same-store sales growth in the U.S. and Canada. Burger King reported a 0.3% decline last quarter while McDonald's fared a bit better with a 0.7% increase in the U.S. Both have been introducing a number of new menu items in attempts to bolster sales.

McDonald's appears to continually introduce new menu items that are vastly different from its core menu. It's offering apple slices instead of French fries. It's pushing its Mighty Wings. It's introducing new lattes and wraps. While it has seen a bit of success from such introductions, CEO Don Thompson stated that they were "unable to overcome our current negative guest count momentum."

Burger King moving in
While McDonald's has been busy taking its eye off the ball of its core menu, Burger King appears to be using this opportunity to move into McDonald's turf. First, instead of pushing fruit as a healthier side dish to French fries, Burger King launched SATISFRIES. SATISFRIES are French fries with 40% less fat and 30% fewer calories than McDonald's French fries. So far this move is paying off. Burger King reported a spike in guest traffic following the launch of the lower-fat fries at the end of September.

Next, on November 6 Burger King announced the introduction of the BIG KING sandwich. It has two patties wedged between three buns and its own special sauce. Hmm. Where have we heard that before? Ah, yes. The BIG MAC has two patties wedged between three buns and its own special sauce. It's clearly a direct attack on McDonald's most famous sandwich; a sandwich it's spent a lot less time and money promoting while it pushes its Monopoly game and all of the new menu items.

McDonald's only saw a 0.2% rise in U.S. same-store sales in October, a slower pace than the 0.7% rise in the third quarter. If Burger King shows any success at turning BIG MAC fans into BIG KING fans, McDonald's is in danger of slipping backwards. As it is, McDonald's is already worried about economic conditions in 2014. CFO Peter Bensen stated they are going to "delay a limited number of new openings" due to this concern.

A poke in McDonald's ribs
Most recently on Nov. 14, Burger King announced the introduction of the BBQ Rib Sandwich for only $1. What timing. Just over three weeks earlier, McDonald's made remarks about the popularity of its McRib sandwich in its conference call. Now, it has to share the market with Burger King who is undercutting the McRib which goes for over $3. Given Burger King's all-at-once direct menu competition with McDonald's on its some of its most popular menu items, it's going to be even more of a challenge for McDonald's to show any same-store growth in the short term. I doubt McDonald's has any plans to fight back with a McWhopper or McOnion Rings.

Foolish final thoughts
Take notice of Burger King's same-store sales growth following these menu introductions. If they are rising higher than we've seen in the recent past and McDonald's sales are trailing even lower, then it's safe to conclude Burger King is successfully stealing guest and market share away. Look for further menu introductions from both sides of the burger war.

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Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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