McDonald’s Finally Gets on the Same Page as Burger King … Game On?

The Burger Wars are back. Burger King better watch out.

May 4, 2014 at 10:00AM

If you're going to pick a fight with the big guy and give him a sucker punch, you better make it count because you'll probably only get one shot. That seems to be the case with Burger King Worldwide (NYSE:BKW) as it commenced a multi-front sneak attack while McDonald's (NYSE:MCD) back was turned. Unfortunately for Burger King Worldwide It may have actually been just the kick in the rear the sleeping McGiant needed.

Mcdonalds Dengshikou Beijing
Source:  McDonald's

What Burger King got away with ... temporarily
While McDonald's was busy angering its franchisees with the kitchen-complicating, low-demand Mighty Wings flop and letting its guard down, Burger King went right after McDonald's core products. It hit McDonald's with "diet" French fries in response to McDonald's apple slices, sucker punched it with a Big King sandwich in response to the Big Mac, head butted it with a BK BBQ rib sandwich in response to the McRib, and uppercut it with a spicy chicken sandwich in response to a similar one at McDonald's.


Source: Burger King

Why take risks with whole new products when McDonald's is barely marketing its core successes? Restaurants need to innovate to keep their patrons excited and intrigued, but Burger King has figured out that the best course of action is to try new sandwiches that are extensions of its already successful and popular ones -- or at least those of competitors like McDonald's.

The revelation
This plan has paid off. While both Burger King and McDonald's complained that severe winter weather hurt their same-store sales, Burger King has been growing at a faster pace. Burger King posted slightly positive results for the fourth quarter of last year and the first quarter of this year, but McDonald's showed declines of 1.4% and 1.7%, respectively.

Burger King credits its success, which included a 2% gain in global same-store sales, to a "commitment to launching fewer, more impactful products and simplifying in-restaurant." Funny. That's exactly what critics have been complaining about in regard to McDonald's for quite some time now. Customers, shareholders, franchisees, and people on the back of way-too-long drive-through lines have been all in agreement.

Enough is enough
It looks like McDonald's may have finally gotten the message, woke up, and smelled its own coffee. Don Thompson, CEO of McDonald's, stated on the latest conference call:

We're more effectively balancing our focus on the core menu including the Big Mac, Egg McMuffin and our world famous fries. Our core products are familiar favorites for our customers. They truly represent McDonald's to all of our customers and at about 40% of total sales, they are an incredible business asset for us that requires a constant drumbeat of communication. 


Source: Burger King

Well duh, McDonald's. You mean it's a good idea to continue with the strategy that you have used for several decades to build yourself into a powerhouse? If McDonald's doesn't take its eye off the ball on its most popular products then Burger King won't have a chance to steal much market share.

Foolish final thoughts
Thompson mentioned, "Our major focus in the U.S. is right now and it's kind of a back to the basics with some enhancements in terms of our productivity and capability in the restaurants." Back to the basics. Good news for McDonald's shareholders. Not so good news for Burger King.

It appears that McDonald's and Burger King are now on the same page in terms of simplicity and core menu focus. McDonald's has almost always won in a one-on-one duel against Burger King, so the Home of the Whopper may have its work cut out for it. The year of 2014 promises to be interesting for both restaurants.

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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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