Burger King Hits McDonald's Where It Hurts

Burger King’s latest move could be a game changer.

Mar 16, 2014 at 9:00AM

Siteplan
Source: Burger King.

We probably should have seen this coming. After all, for the last few months, Burger King Worldwide (NYSE:BKW) has taken its royal crown back amid strategic moves aimed directly at dethroning its larger rival McDonald's (NYSE:MCD). The latest policy change from Burger King threatens a key McDonald's demographic as the Home of the Whopper ups the stakes.

McDonald's getting a bad run of cards
Domestic same-store sales growth for McDonald's has gone from bad to worse. This started right around the time Burger King began its one-on-one card game with the launch of Satisfries last September. The company boasts that the fries have "40% less fat [and] 30% fewer calories than the leading French fries." The leading French fries being the ones McDonald's serves, of course.

In that quarter of the launch, McDonald's domestic same-store sales were up a modest 0.7%, which isn't terrible considering the company's already massive size. From there, domestic same-store sales gained only 0.2% in October, and the tumble began in November with a 0.8% decline. In the fourth quarter, results dropped by 1.4%, which puts the December drop in the 1.5% to 2% range. In January, the downward momentum continued with a 3.3% plunge.

Satisfries

Source: Burger King.

Whopper-size bets
While McDonald's was busy dilly-dallying with apple slices and Mighty Wings that seemingly nobody really wants, Burger King saw McDonald's unattended Big Mac and raised it a Big King. The Big King looks and sounds like a Big Mac, with two patties, three buns, and special sauce. The company even pushes the comparison in its marketing.

Next, Burger King saw the McRib sandwich and raised it a $1 BK BBQ rib sandwich of its own, only at a fraction of the cost. This was no coincidence.

Burger King continues to place bets, eyeing a piece of McDonald's large bankroll. The company announced a partnership to quickly move into France for the first time, one of McDonald's most successful markets in Europe. Burger King's goal is to take 20% of the market as soon as possible there.

Burger King's chips continue to fly into the pot. It's launching more exotic coffees aimed at the McCafe. It brought on a spicy chicken sandwich similar to McDonald's spicy chicken sandwich. Then there's the redesigning, or reimaging, of restaurants that has been going on for quite some time already. Pop into a reimaged Burger King, and you'll probably notice it looks much like a reimaged McDonald's. You get the idea.

Burger King moves all-in
On March 4, Burger King announced that its Satisfries will now be the standard french fries with the Kid's Meal. Burger King says, "This reduced fat, reduced calorie menu item will provide children with a crinkle cut option that tastes so good, kids will never know they're lower-fat."

Chief Marketing Officer Eric Hirschhorn points out that kids are picky, but the Satisfries taste tests were a success. Parents get to reduce the fat and calories in their kids' diets while the kids don't have to sacrifice taste. It's a win for everybody.

Images

Source: Burger King.

Recall that McDonald's felt a bit of the sting surrounding the negative publicity from the documentary Super Size Me. McDonald's has been often criticized for targeting children with unhealthy food. The child demographic has always been a decent chunk of its sales. Burger King's latest move to focus more on improving the health of kids but doing so in stealth mode potentially makes Burger King look better while giving McDonald's a fresh black eye.

Foolish final thoughts
There are two modes we've seen over the years in the burger wars: defensive and offensive. Look for McDonald's to respond in one way or the other; lately it has been in no mode at all, it seems, leaving the company wide open to sneak attacks by Burger King. For Burger King, I suspect we have yet to see the last of its introductions. Look for more to come as well as continued same-store sales improvements, and watch for more slippage of same-store sales by McDonald's.

Can you imagine investing in Burger King back when it had just a few restaurants?
Opportunities to get wealthy from a single early investment in companies like Burger King or McDonald's don't come around often, but they do exist -- and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers