Burger King's newest weapon: Delivery
Door-to-door service joins booze and smoothies in the chain's fight against McDonald's and Yum Brands.
If all that's been standing between New Yorkers and a Whopper is severe sloth or fear of the outside world, they're running out of excuses.
Burger King (BKW) on Monday announced plans to start its BK Delivery service in New York City. From 10 a.m. to 11 p.m., residents can get reasonably warm Whoppers, mozzarella sticks, chicken sandwiches, fries and other Burger King items brought to their door for a $10 minimum order. Judging by Burger King's delivery menu, it's going to take at least two burger combos to hit that mark, so either commit to some extra hours in the gym or call over some culinarily forgiving folks to go in on a 10-burger combo with you.
Burger King already launched BK Delivery in Miami, Houston and Washington, D.C. Still, New York is a big test for a program that's just the recovering restaurant chain's latest effort to compete with McDonald's (MCD), Yum Brands (YUM) and even Starbucks (SBUX) in an ever-diversifying fast-food market. Last year, Burger King experimented with selling beer and wine at "Whopper Bar" locations and watched as Sonic (SONC), White Castle and Pizza Hut did the same.
Even Starbucks followed suit by selling beer, wine and small-plate dishes at shops in the Pacific Northwest. That worked out so well that the coffee giant is expanding booze and food sales to locations in Southern California, Chicago and elsewhere.
That is exactly the kind of me-too marketplace Burger King is facing as it expands its menu, does away with company-owned stores and shifts to a more franchise-based model. McDonald's turned pressure from Starbucks into its McCafe coffee drink and pastry concept, which Burger King countered by switching its coffee to Starbucks-owned Seattle's Best in 2010. When Jamba Juice (JAMBA) found success with smoothies, Starbucks followed by adding Vivanno smoothies in 2009. McDonald's added smoothies to its McCafe menu in 2010 while Burger King just got around to blending them back in August.
Do any of these ploys work? It depends on how you execute them. McDonald's shift toward premium items once considered out of its depth contributed to a 3.5% drop in revenue last quarter. Now the folks under the Golden Arches are refocusing on the cheap and quick Dollar Menu. Yum Brands, meanwhile, doesn't have much competition in the combination Taco Bell/KFC/Pizza Hut department and watched profits jump 19% last quarter as it largely stuck to the basics.
Burger King, however, isn't buying what Yum is selling. While Yum extracts a good deal of its profits from company-run stores -- especially in China, where 83% of stores are company-owned -- Burger King is trying to shield itself from market fluctuations by making all of its locations franchise-owned. As far as its menu goes, Burger King grew tired of courting the 18-to-35 male age group with ever-growing Whopper varieties and decided to woo kids and seniors with more smoothies, chicken and pulled pork sandwiches, sweet potato fries and cinnamon rolls. Same-store sales jumped 1.4% last quarter as a result.
BK Delivery smacks of the same "extreme" pandering Burger King used in the '90s when it hired MTV's Dan Cortese to pitch in-store table service, popcorn "just to chill with" and "dinner baskets" with steak sandwiches and shrimp boats. With just about all its competitors going through the same identity crisis amid economic uncertainty and changing tastes, it's tough to fault the King for trying to hit customers where they live.
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