Franchisee fracas

Burger King admits in filings that its debt "may have an adverse effect" on its business. But it also says it has an advantage in that almost all of its stores are run by franchisees, who fund growth by paying for new stores and store upgrades.

This would make more sense if Burger King didn't have such a spotty record in getting along with its franchisees. "Burger King has had problems with franchisees over the years," says Hottovy. "There have been cases where they have not been on board with new products."

Burger King admits as much in filings. "Our franchisees are independent operators and we have limited influence over their restaurant operations," says the company.

In contrast, a strength of McDonald's is its generally good relations with franchisees, says Hottovy.

Tough competition

A good relationship with franchisees is crucial in a competitive playing field, where Burger King faces tough players on all fronts.

In one corner, there are the relative upstarts -- smaller chains like Five Guys, In-N-Out Burger and Smashburger, that are becoming quite popular.

Then there are powerful, established companies entering the ready-to-eat food fray, like Starbucks (SBUX) and Whole Foods Market (WFM).

And then there are the big, traditional players like McDonald's and Burger King. McDonald's has a huge advantage in its sheer size. McDonald's now has more than 33,500 restaurants in 119 countries worldwide, compared with just over 12,500 for Burger King, in 82 countries. This gives the Golden Arches bargaining leverage with suppliers to help ensure low prices and consistent quality.

Like many U.S. companies in relatively mature industries, Burger King is looking to expand in high-growth emerging markets such as Brazil, China, Russia and Turkey, as a path forward. Indeed in June alone, Burger King inked deals for a joint venture in Russia, China and Turkey. But there, too, Burger King faces McDonald's.

And back in the U.S. market, things definitely won't be easy for Burger King. "On the one end, there are a bunch of new guys growing fast and taking market share at a rapid clip. On other end you have the very dominant McDonald's," says Hottovy. "Burger King faces an uphill battle. I don't really look at them as a huge threat at this point."

In short, Burger King is going to need more than a bacon sundae to get out of this jam.

Stocks mentioned in this article include: Goldman Sachs (GS), Burger King Worldwide (BKW) and McDonald's (MCD).

At the time of publication, Michael Brush did not or control shares of any stock or fund mentioned in this column.

Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.