Stephen Foley: It’s not the king and even the burgers may be history
Burger King’s biggest fans – young men – have been hardest hit
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 24 March 2012
US Outlook Here is a whopper of a headline from the world of fast food: Burger King is no longer the nearest challenger to McDonald's among the US burger chains.
It has fallen into third place behind Wendy's, home of the square beef patty, according to leaked data from the forthcoming Technomic report on the restaurant industry here. Outside of the US, Burger King has vastly more restaurants than Wendy's, so it won't be losing its status as global No2 any time soon, but its performance in its home country has been something of an unfolding tragedy.
You need only go into the average Burger King to see why. Thanks to two stints of private-equity ownership since UK-listed Diageo sold the company a decade ago, Burger King has underinvested in its restaurants and in its menu.
Wendy's has been trying to get customers to think of it as a fancier place, more akin to the increasingly hot Five Guys or In-N-Out Burger chains than to McDonald's.
Cash-strapped Burger King, on the other hand, has narrowed its focus to keeping the loyalty of its biggest fans – young men, mainly – only to find that this is precisely the group that has been hardest hit by the recession.
And for 3G Capital, Burger King's owners since 2010, the threat from Wendy's is only getting more potent. Recently installed Wendy's chief executive Emil Brolick has jacked up capital expenditure by 25 per cent this year to fund a new ultra-modern design for its restaurants.
The big picture is that while Wendy's and Burger King duke it out for the No2 slot, McDonald's streaks further ahead. Technomic puts Burger King on sales of $8.4bn last year, Wendy's on $8.5bn and McDonald's on $34.2bn.
McDonald's went through the fire of public criticism in the past decade and came out stronger. It long ago broadened its range of its products to include cafe-quality coffee and smoothies and fancy wraps and salads, and it has used every one of its formidable benefits of scale to keep its prices low and its kitchens humming at peak efficiency.
Much of the credit goes to chief executive Jim Skinner, who announced this week that he will hand over the reins to his deputy, Don Thompson, in July.
With beef prices rising inexorably in the teeth of demand from emerging countries, and with men increasingly joining women in reaching for healthier food options, we might be watching the slow death of the American beefburger.
McDonald's has nothing to fear from that. As for Burger King, maybe being usurped by Wendy's will be a much-needed shock to the system.
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