Call it the triple threat, but it looks like McDonald's (NYSE:MCD) has finally landed a punch at Burger King Worldwide (UNKNOWN:BKW.DL) in the ongoing, never-ending burger wars. Will the latest simple move by McDonald's help it fight its way out of the corner it has found itself backed into?
Recall that in 2013 and into early 2014, McDonald's left its guard down and allowed Burger King to land blow after blow. While McDonald's almost quit marketing its classic signature great sellers such as the Big Mac. It instead chose to focus on new silly creations such as the Mighty Wings and McFish Bites. Burger King seized the opportunity by launching the Big King sandwich, an obvious copycat to the Big Mac.
And it worked. While Burger King has been seeing same-store sales climb quarter after quarter, McDonald's domestic same-store number has been clipped month after month, including another 1% drop for May. To add insult to injury, Burger King increased the beef content in its Big King by 25% bigger than the Big Mac and flaunted it in advertising as "size matters."
It looks like McDonald's got the memo
No, I'm not talking about the new Bacon Clubhouse Burger, though it was a good attempt it didn't seem to be enough to put McDonald's back in the black. What I'm referring to isn't even new -- it's the triple cheeseburger.
It's simple, it's been around forever (though mostly unknown to many), and now it's only two bucks and being promoted heavily by McDonald's. Cheaper than the Big King, and the third patty puts it over the top with 20% more beef at 4.8 ounces, compared to the 4.0-ounce Big King.
It's basically a Big Mac without the secret sauce and with a third patty in place of a third bun in the middle. Burger King said size matters, and perhaps McDonald's finally listened. Of course, both chains have even bigger burgers with the double quarter pounder from McDonald's and the Double Whopper from Burger King, but the triple cheeseburger and the Big King are the two warriors in the arena for this round.
Back to basics
The triple cheeseburger is nothing special in terms of innovation, and that's why it just might work. In terms of domestic growth, the trouble McDonald's seems to find itself in is from trying too hard to reinvent itself and overcomplicate its kitchen.
The triple cheeseburger is simple -- and cheap -- not just for consumers, for but the kitchen, too. There are no new ingredients that aren't already used for a variety of other menu items. And the sandwich seemed to have worked very well in the 1990s, right around the same price point; hopefully McDonald's is learning not to fix what isn't broken.
Of course, inflation means $2 in 1993 was worth a lot more than it is now, so McDonald's will likely realize far less profit per burger this time around. But if it jump-starts traffic in the restaurants, it's a good move. Besides, most people will also order a drink and fries, both of which have extremely high profit margins at between 90% and 95% for soda and over 75% for French fries.
It will be interesting to see in the coming months if McDonald's really does have its groove back this time around, or if it's another head fake as Burger King continues to chip away market share. We should hear more from both companies in late July.