McD’s Plays Chicken with Burger Rivals

Discussion
Aug 29, 2006
George Anderson

By George Anderson


Burger King, Hardee’s, Carl’s Jr., Jack in the Box and numerous other chain and independent fast-food and fast casual restaurant’s have tried to cash in on the so-called beefier burger trend. So where has McDonald’s, the one of billions-of-burgers-served fame, been during all this? Concentrating on building its business with chicken sandwiches and salads, that’s where.


According to research from NPD Group, McDonald’s may be moving in the wrong direction. The research firm said dinnertime burger sales at fast-food chains are at a three-year high while salad sales are falling off after three years of growth.


Harry Balzer, vice president at NPD Group, told Crain’s Chicago Business, “It’s pretty clear that burgers are back.”


Over the past several years, McDonald’s has focused on introducing higher-priced chicken sandwiches and salads to its menu. During that time, it has not introduced a new burger option for the legion of McDonald’s patrons.


According to Wade Thoma, vice president of menu management at McDonald’s, there is no plan to introduce a new burger in the immediate future. “Right now, our priority is still on chicken,” he said.


“There’s always the danger of going too far and forgetting that your core customer still eats burgers,” said Janna Sampson, director of portfolio management at OakBrook Investments. “They may need to rethink that if they start to lose business to Wendy’s and Burger King.”


Discussion Questions: Is it time for McDonald’s to introduce a new burger item(s) to its menu? Do you believe the chain has lost its focus on its burger
business? Is it in danger of facing a hit to its business because it is trying to be all things to all people?

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9 Comments on "McD’s Plays Chicken with Burger Rivals"


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Mark Lilien
Guest
14 years 6 months ago

McDonald’s had its worst comp sales trend in 3 years in July. Wendy’s and CKE (Carl’s Jr. and Hardees) had good comp sales increases, and they claimed their increases were due to burger menu enhancements. It’s easy for McDonald’s to come up with innovative burgers of its own, and they undoubtedly will. Fast food restaurant chains have nonobvious profit drivers. As franchisors, they theoretically benefit from sales increases regardless of their operators’ margins. But if they squeeze their operators too much, eventually the franchisor gets hurt, too. Best solution for everyone: high-margin menu enhancements that drive increased traffic, not greater volume from lower-margin innovations. I suspect that big burgers have lower margins than drinks and salads.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 6 months ago

Step by well-thought-out step, McD’s timing is nearly always impeccable – for them, not for pundits and “industry observers.” Certainly several competing chains are offering GBBs (Great Big Burgers), accompanied by clever and omnipresent advertising. These GBB introductions induce trial, which creates impressive unit movement numbers. (When starting from zero, any growth looks good.)

Consider McD’s track record over the last few years and see if you can identify a misstep or missed step. When it’s appropriate for them, they often lead with innovation. But when it’s better for them to follow, they’ll do that, too. When it’s time for McD to offer a GBB, they’ll have one. Even now some of their franchisees are testing variations.

Bernice Hurst
Guest
14 years 6 months ago

McDonald’s has never been as popular in the UK as the US – they closed down quite a few branches this year. That said, their salads and alternative meals haven’t been well received either. There are now quite a few independent chains serving much better burgers so the dish itself is still popular but the fatty fast food aspect seems to have a much more limited audience. On the other hand, the newer chains are much more expensive so are attractive to a different audience. People wanting cheap fast food will still go for McDonald’s – and that includes families – but so far the advertising of monster burgers is more offputting than enticing.

Leon Nicholas
Guest
Leon Nicholas
14 years 6 months ago

Burger King and others are just going after what BusinessWeek called the “retro-sexual.” My money is with McDonald’s — they’re on the right side of the economic, demographic and nutritional trends. To whom is the quad-stack bacon burger appealing? Are they where the growth is?

Don Delzell
Guest
Don Delzell
14 years 6 months ago

Mark is correct: big burgers have lower margins than the other items mentioned.

It is really not that easy for McDonald’s to introduce entirely new food products. The operational design within a McD’s restaurant is not built around flexibility. It is built around efficiency with a fixed product offering – fixed to the extent of using the same ingredients. Hence a double Quarter Pounder is easily introduced, but a Half Pound burger would not be.

Having said that, this is a miss by McDonald’s. I have no market research to prove this, but I think the big burger volume is coming out of casual dining, as economic conditions shift purchasing downward in location. I do not think this trend will go away. To some extent, the breadth of offering is trend driven. However, the ability to satisfy a customer previously better served in a casual dining store will not go away.

Ben Ball
Guest
14 years 6 months ago

Guess I’m with Doc on this one. The “Thick Burger” trend seems so off strategy with McDonald’s investment in menu variety and (perceived, at least) healthier fast food that it would be a major disconnect in their message. The hardest thing in business is to maintain focus. The cumulative performance of McD’s versus their competition over the past few years would suggest they’ve got it right — for them.

Lacey Anderson
Guest
Lacey Anderson
14 years 6 months ago

From a public relations standpoint, it would be a media nightmare for McDonald’s to introduce beefier burgers. McD’s is perceived as the industry leader and is often on the front lines of the public attacks for “causing America to get fat.” It has made great gains in offering seemingly healthier choices (though the single hamburger is still one of the best menu options). Missing the boat on the special hamburger or not, I’ll still be back for the special salad one day and their addicting fries another.

John Lansdale
Guest
John Lansdale
14 years 6 months ago

As far as the Weston A. Price foundation is concerned McD’s is always straying too far from beef. The question is though, with the end of their public Atkins/”meat is healthy” campaign, are they willing to spend more promoting red-meat in new ways, such as a new angle on tradition/love/etc.? By the looks of this question though, they’re going to spend their PR money influencing the fast food retailers directly. It’s their way of saying to McD-tailers, it’s your turn to promote beef, we tried.

Barry Wise
Guest
Barry Wise
14 years 6 months ago

McDonald’s seems to be trying to compete with other quick service chains by introducing products that are outside McDonald’s core strength rather than sticking to what made them successful. Burgers and fries have been the foundation of McDonald’s menu since Ray Kroch’s early days, and for them to lose their focus on the basics will definitely cause a problem for them.

Perhaps McDonald’s needs to look at what Yum has done with co-branding, by housing Taco Bell, KFC and Pizza Hut under the same roof. By taking a page from Yum’s play book and integrating Chipolte’s offerings, and possibly a successful chicken brand into a combined operation where appropriate, McDonald’s may find great success overall. But then, maybe they just want to look at In-N-Out Burger.

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