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Instant Analysis: Burger King Is Going to the Dogs

By Rich Duprey - Feb 16, 2016 at 4:00PM

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One of the big three burger joints wants to sell hotdogs, too.

What happened?
Restaurant Brands International (QSR 2.26%) announced its Burger King chain would add hot dogs to its national menu later this month, not as a limited time promotion, but as a permanent item.

Does it matter?
Burger King says over 20 billion hot dogs are eaten every year and putting them on the menu at all 7,100 of its restaurants means it will be the largest restaurant chain selling them. Nathan's Famous (NATH 3.41%), which largely sells nothing but hot dogs, has only 267 stores in 23 states, while Sonic (SONC), which sells hot dogs, coneys, and corn dogs along with burgers and chicken, has just over 3,500 locations.

It's a low-risk addition, too. Sonic has found simply reveling in the decadence of its burgers, fries, and, yes, dogs keeps sales growing by leaps and bounds. In its fiscal first quarter earnings results, Sonic said same store sales jumped 5.3% helping profits rise 33%.

Hot Dogs are a popular food item that Burger King says shouldn't be "relegated to summer barbecues and baseball games." They likely won't displace burgers, as just the big three burger joints sell tens of billions of dollars worth of patties every year, but they do promise to provide a point of differentiation.

The problem is, Burger King is so synonymous with burgers -- and its name doesn't help -- that becoming a hot dog king is not likely to happen.

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Stocks Mentioned

Nathan's Famous, Inc. Stock Quote
Nathan's Famous, Inc.
NATH
$57.85 (3.41%) $1.91
Sonic Corp. Stock Quote
Sonic Corp.
SONC
Restaurant Brands International Inc. Stock Quote
Restaurant Brands International Inc.
QSR
$49.75 (2.26%) $1.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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