The Real King of Selling Burgers Sells You the Worst Burgers

Here is proof that marketing rules the day.

Jul 20, 2014 at 10:22AM
Mcdonalds Big Mac

Source: McDonald's

Whether they're packed tall in a Big Mac, wide in a Whopper, squarely sticking out of the bun, or served short in a slider, Americans can't get enough hamburgers.

If you ask the average American where they get their favorite burger, you might cause offense if you ask if the answer is McDonald's (NYSE:MCD).

Yet even though the king -- it's not Burger King (NYSE:BKW) -- is the place we love to hate, it still wears the crown in terms of sales.

Apparently taste isn't really the king
Do you remember when Burger King used to say "Taste is King" in its commercials? Well, scratch that.

Consumer Reports conducted a survey of 32,405 of its subscribers in which it asked them to rank various fast food chains. What was the result? McDonald's hamburgers received the worst ranking. And Burger King came in just a hair higher.

Regional chain The Habit Burger Grill got the top ranking. In-N-Out Burger came in second. In total there were 21 burger restaurants in the running, yet the majority seemed to have trashed McDonald's and Burger King even though both were the biggest and best known of the names. Maybe that's the problem.

McDonald's still dominates
You would think that with McDonald's haters its individual stores would rank low on sales. Instead, as you probably already know, McDonald's remains one of the top sales-generating restaurants on a per-restaurant basis across the country.


Source: McDonald's

In 2012, the average McDonald's in the US generated sales of $2.6 million, much more than the sales per restaurant of other chains that beat it on taste.

In-N-Out Burger came in at $1.9 million per location, Burger King was way down at $1.2 million, and Five Guys was barely above $1 million.

Nobody even came close unless you throw chicken into the mix, and then Chik-fil-A beat McDonald's at $3.2 million per location.

That leads to two observations
Okay, so McDonald's loses the Pepsi challenge, yet McDonald's still sits on the throne in most markets where you find it. It seems like even towns with multiple McDonald's but only one location of a competitor with superior taste will often see more business at each McDonald's.  It's uncanny.

Conclusion No. 1 is that marketing rules. And something should be said for consistency, service, and trust. As much as many of us may say we hate McDonald's, one thing we know when we're in a rush and no matter where we are is that we feel confident we will get the same product, the same temperature, the same quality (even if it's not the best), and the same speed, from the same reasonably clean kitchen. In short, the risk is low.


Source: McDonald's

Second, perhaps there is something to that "location, location, location" thing you often hear about as the three secrets to success in the restaurant industry.

You have to admit it -- McDonald's has secured some really good real estate spots. With locations often at corners of major intersections, rest stops, and even inside of Wal-Mart, the convenience factor sure doesn't hurt. Perhaps part of its genius is location scouting since it sure doesn't seem to be winning too many blind taste tests.

Foolish final thoughts
The bottom line is that McDonald's clearly has great execution since it sells us such low-ranking food so successfully. I can only imagine how often we'd eat at McDonald's or Burger King if they actually started selling products, especially new kinds of burgers, that more of us raved about. 

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Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide, McDonald's, and PepsiCo. The Motley Fool owns shares of PepsiCo. 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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