4 reasons McDonald's still creams the competition

The company may be stumbling, but it hasn't stopped running circles around its rivals.

By MSN Money Partner Mar 26, 2014 12:15PM
McDonald's Happy Meal (© David Paul Morris/Getty Images)By Venessa Wong, Businessweek

McDonald's (MCD) may recently have struggled to lure customers, but it still does far more business at each location than rival burger chains


The average McDonald's restaurant in the U.S. drew $2.6 million in revenue last year. Average sales for No. 2 chain Burger King (BKW): $1.2 million, according to data from its largest franchisee, Carrols Restaurant Group (TAST).


What accounts for this more-than-a-million gap? "Everything from marketing and site selection to product initiatives and franchisee selection have been historical factors," said Nick Setyan, vice president in charge of equity research at Wedbush Securities, in an e-mail. 


Here are four factors that drive higher sales volumes at McDonald's:


1. McDonald's gets more customers during off-peak hours. Look no further than the strength of its breakfast business relative that of Burger King, says Darren Tristano, executive vice president at restaurant consultancy Technomic


Egg McMuffin is part of the fast-food vocabulary in a way Burger King can't match. And beverage and snack offerings such as McCafe and wraps have helped increase McDonald's sales between meals. The dramatic impact from off-peak business explains why chains like Taco Bell (YUM) are entering the battle for morning customers, while others such as Starbucks (SBUX) are seeking more afternoon and evening business.


2. The power of the Happy Meal. McDonald's has the largest share of kids meal sales in the fast-food industry and gets about 10 percent of total sales from Happy Meals, the most commonly advertised (PDF) child-oriented fast-food item on television. 


Burger King, meanwhile, is still trying to win back "parties with kids and seniors and women," said Josh Kobza, Burger King's chief financial officer, at a conference last year. One way to do that: "We got rid of the creepy king character that tended to scare away women and children."


3. McDonald's has an edge on efficiency. Despite recent operational challenges at McDonald's, which have slowed down service, it is still more efficient. Its drive-through service can handle more cars at peak times, Tristano says, and McDonald's restaurants are adding a third service window to get customers through even faster. 


The average service time at McDonald’s drive-throughs is 189.49 seconds, compared to 198.48 at Burger King, according to QSR Magazine. Drive-through service is important: Burger King franchisee Carrols gets 65 percent of its sales from the drive-through.


4. More marketing dollars. McDonald's spends a lot more on marketing than competitors, as Tristano points out. Its advertising costs in 2012 were $787.5 million vs. Burger King's $48.3 million, and the gap widened last year when Burger King itself spent only a few million on advertising in order to focus on equipment updates. In its 10-K submission, Burger King said it expects to spend less on advertising until 2016; the company declined to comment for this story.


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167Comments
Mar 26, 2014 5:11PM
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Fricking unbelievable. A story about fast food and most of the posts are political rants. It's not the dems and repubs that are ruining this country, it's all the idiots that fanatically follow them no matter what and hate the other guy no matter what.
Mar 26, 2014 1:59PM
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Reason# 5, most people still don't know what real food is.
Mar 26, 2014 1:39PM
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Because they're everywhere !

''gee, I'm hungry....oh, there's a Mcd right there ! ''

Mar 26, 2014 3:54PM
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Listen, I’ll admit that I rarely eat at McDonald's, but I must admit there is the one thing I truly like about them. Check it out; I spent 2-months in the Republic of Singapore - a beautiful, safe, modern, pro-USA, cosmopolitan city/nation - with many, many great restaurants.

 

My one and only problem during my stay there was simply this: I’m NOT a lover of seafood (allergic to shell fish) - and all the other foods (meals) I consumed while there, while very good, just simply did NOT satisfy my palate (personal sense of taste and flavor ) for some good ole fashion “AMERICAN” tasting food.

 

Finally broke down and made a stop in one of the many McDonald’s restaurant located throughout Singapore. GUESS WHAT! I was in heaven. Simply put - the Quarter Pounder with Cheese, Onion Rings, and French fries served at that McDonald’s near Singapore’s Chinatown - TASTED EXACTLY THE SAME as if I had ordered it at from my neighborhood McDonald’s restaurant here in Hollywood, Florida.

Mar 26, 2014 2:01PM
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Once in a while it's OK ,but not every day.I actually prefer Wendy's if I'm in a rush and need something quick to eat.Quality seems better and it's not as salty as McD's. Service is more accurate at Wendy's also.
Mar 26, 2014 4:46PM
Mar 26, 2014 1:28PM
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It's because cheap & quick.

Not tasty or nutritious.

Mar 26, 2014 5:57PM
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In n out is the best and it's because of the grease. Try eating a lean burger. some ground up round. No way, got to have the grease. I don't think one a week will hurt you but that's enough.


Mar 27, 2014 1:53PM
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no because people are freekin lazy and would rather feed their kids junk food instead of taking the time to make them a healthy meal
Mar 26, 2014 7:55PM
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Keep the medium coffee at a dollar and I'll keep going to McDonald's in the morning for my joe. Cheapest and the best tasting coffee that I can get my hands on in the morning. Can't wait for them to start selling their coffee grounds at retail stores.
Mar 26, 2014 5:53PM
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Haven't eaten there in months and don't miss it even a little. Even without my business I know they will never go away though.
Mar 26, 2014 2:37PM
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I would put marketing dollars at the top of this list and make it the reason number 1. and 2. exist.
Mar 26, 2014 8:19PM
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Stop pulling my burger from a drawer full of burger juice and maybe I'll go back to eating there. I used to love Burger King's burgers, right off the grill. Now, it's just disgusting.
Mar 26, 2014 6:56PM
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In 'n Out Burger runs circles around McD's.
Mar 30, 2014 11:22AM
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If you use enough salt and fat people will eat anything..
Mar 26, 2014 7:48PM
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Haven't eaten McDonalds "food" in probably 10 years now or close to it. Stopped all other, the few I chose to buy from, last year and do not miss it at all. Don't care what labels they put on their food saying how safe it or healthy it is, it isn't.

When I was a kid fast food was the ultimate in dining experiences. But now I do worry about farming, the meat industry etc., and the amount of crap put into the ground and into the seeds to grow plants,  and the amount of hormones, steroids, whatever some lab cooked up to make a cow or chicken fatter in half the time.

Fast food restaurants serve all that poison and if I can avoid it, I do. Mega-farms are scary places. Workers actually crap in the fields and human feces as fertilizer is not acceptable in any amount. So enjoy that McD's salad or lettuce, tomato and onion on your burger. There's a chance you're eating human poo tainted vegies.

And you wonder where these ecoli outbreaks come from.

Mar 26, 2014 7:06PM
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I always liked the Whopper better than anything at McD's. However, the rest of McD's menu can't be topped. Their fries rule!
Mar 26, 2014 2:52PM
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Uhhhh --- huuuu --- Did you say "cream" ?

Yes --- Americans are in the hospital more than ever -- choking on that "cream".

Mar 27, 2014 4:26PM
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I ate a Mickey D's fish sandwich today and it was good!
Mar 30, 2014 4:39AM
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Drive through windows should be closed. Lazy Americans.  Park it, get out, and go in.
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