Face-lift helps Wendy's overthrow Burger King
With McDonald's entrenched as No. 1, Wendy's is moving into second place.
McDonald's (MCD) is the 800-pound gorilla of fast food. The $100 billion company turned quick-service restaurants into a science, has more than 33,000 locations worldwide, and is a heavyweight in breakfast and beverage sales in addition to selling burgers and fries.
It's nearly impossible to knock No. 1 McDonald's from its perch. So that's why fast-food restaurant Wendy's (WEN) is instead focused on the No. 2 spot and, according to reports, has dethroned Burger King to become America's second-most-popular burger joint.
The strategy? Higher-quality food, redesigned restaurants and marketing that showed American consumers who's the best -- behind McDonald's, of course.
It may sound silly to have a goal of second place. But it's important to be realistic. McDonald's dominates the marketplace with a 49.5% share of the "limited-service burger segment" business. Consider: With just a bit of growth, MCD will do more in sales than all of its competitors combined.
In 2010, Burger King's market share in the burger biz was 13.3%, while Wendy's share was 12.8%. But thanks to healthier options -- including skin-on fries seasoned with natural sea salt as well as higher quality fare like its premium Dave's Hot 'n Juicy Cheeseburgers line -- reports indicate big gains for Wendy's.
According to a report by Janney Capital Markets released Tuesday, Wendy's likely has passed Burger King in market share this year.
That may be a bragging point for Wendy's -- however, the U.S. "limited-service burger segment" is only a small piece of the fast-food pie. Chipotle (CMG) has been one of the biggest growth stories of the past few years -- with shares soaring over 260% since January 2010. Wendy's stock is up less than 10% in the same period.
Also, international growth is really what's fueling American-based restaurants. Take Yum! Brands (YUM). Almost 75% of its operating profits come from abroad, including from some 3,200 KFC locations in China -- and even KFCs in Kenya! Even behemoth McDonald's has room to grow overseas, with the Golden Arches recently announcing a plan to open 700 stores in China over the next two years -- roughly one a day -- to build on its current total of 1,300 locations in the Middle Kingdom.
In short, a bigger bite out of the American burger market is nice…but not filling enough for a big restaurant stock these days.
Part of the reason restaurants like KFC and McDonald's do so well abroad is thanks to a well-followed brand in the U.S. Wendy's might be able to export its popularity later. However, with rivals like Yum! and Mickey D's already gobbling up international market share, it shouldn't focus too much on winning in the U.S. when the big profits are to be made overseas.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.
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Wendy's is my first choice when it comes to enduring fast food.
Bk has gone downhill due to cost, taste, and portions imo.
Wendy's by far has the most natural tasting Burgers. The reason I like Wendy's French Fries, they are thicker as you can actually taste Potatoes' and not flimsy-greasy and over salted fries as McDonald's are the worst fries I know of from any fast-food or regular restaurant. Time to pick on Burger King ... in the early days of existence they "Did it your way" and had good Menu selection of other Sandwiches. But that was in the later 1970's and early 1980's and I have no idea why they changed strategy only to go Downwards. BK left the Burger-Fast Food market a long time ago. Back to McDonald's as I knew it during the 1970's - Great and the Ideal Stop for Kids (Grown Ups too) while making a long drive to someplace. As a kid was a nice treat using my allowance money. Okay .. I'm 51 years old and was around when these places started opening Franchises around the USA in the 1970's. It was a great time to be a kid for Junk Food Junkie. Today- the present- and also looking back All the Fast Food Joints (KFC, BK, Wendy's, McD's, Pizza Hut, Subway, Arby, etc. ) have gone down hill since around 1990 there about. So in the last 20 plus years ... Quality ,Taste and Service has been tossed out the door. It's time to go back and do it the Original Way .. Customer/Consumer gets Quality food with Satisfaction. Wendy's is still my choice /preference when selecting a quick meal on the road when I have little time. Everyone ... Please stay home and fix a real home cooked meal. Save your money. Remember a healthy diet and proportions of the nutritional/ healthy Food Groups makes for a better life. Limit your stops to Fast Food and Restaurant to only a few times a year. If you have lots of money to burn ... hire a live in Gourmet Chef and eat well.
If you're not well off financially then again time to set your priorities and cook nutritional meals at home and Save the cash for better things in life.
It doesn't matter who the gorilla is. They all are reducing their burger sizes, fry sizes. Soda is damn cheap to make so .25 cents is too much for a large size.
Poor quality, poor portions, poor service, poor preperation.......
Dave Thomas is gone now, Wendy is now on the most recent TV commercial.
Oh well! We can pick on spokesperson's or mascots or bizarre characters for these 3 franchises. The King and Clown are childish but wasn't meant for grown-ups and the plan was to entice children (gimmick- increase-promote sales). Everyone wouldn't mind being King "BK" (or Queen) but young kids find Clowns "McD's" to be more entertaining and Yes ! Kids Meals with a Free Toy .... wow !!!!! plus some McD's had a Play Areas also welcoming Birthday Celebrations/ Group Parties. Last you had Ronald McDonald House foundation- charity ? McD's has many ideas which kept them at #1.
It could be possible one day Wendy's may be at #1 ... who knows?
Dave did it the usual way with no gimmicks to sell. In life, in person, and talked sensible.
The Best Fast-Food Commercial ever were the Old Ladies " Where's the Beef "? for Wendy's.
As you know .. they showed us that they (Wendy's) uses real Beef and thick hamburger patties.
Time for a sequel ... may we have Betty White step forward please !!!!
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