McDonald’s VS Burger King
Every rivalry must start as well as end with a reckoning.
McDonald’s and Burger King’s fast-food feud has been raging for ages. McDonald’s is the Big M, the chain that puts the “global” in “global corporation.” But recently, the slightly smaller global chain Burger King has decided that it’s spent enough time languishing in the shadow of the golden arches.
For more than 60 years, McDonald’s has been the trailblazer that set the standard by which all other franchises operated. But there are signs those roles may be reversing. A revitalized Burger King is forcing McDonald’s to adjust to it, not the other way around.
McDonald’s and Burger King started in the franchise food business in 1955 and 1954, respectively. McDonald’s has always been the larger company, but each firm has unquestionably influenced the other throughout their six-decade-plus rivalry.
When talking about an overall metric, McDonald’s undoubtedly wins compared to Burger King in almost every aspect.
For example, McDonald’s offers more variety in burgers, breakfast menu items, desserts, coffee drinks, salads, and more! However, Burger King is still an excellent fast-food restaurant with several delicious options!
Each restaurant boasts iconic products. Burger King has the Whopper sandwich, and McDonald’s counters with the Big Mac and Quarter Pounder. The Whopper and Big Mac are the two best-selling burgers of all time. Burger King boasted 1.7 billion Whopper sales per year in 2002. McDonald’s reached that same figure with Big Macs in 2017.
Each firm continues to push its international presence, although with mixed results. One reason is culture. Many Europeans, for instance, consider fast-food to be a quintessentially American tradition. Food menus for Burger King and McDonald’s sometimes struggle to appeal to foreign consumers, leaving international markets underdeveloped, particularly in the Asia-Pacific region.
McDonald’s: The Real King of Burgers
McDonald’s has the highest market capitalization of any fast-food restaurant chain in the U.S., at more than $168 billion in October 2020. (It’s worth noting that Subway has more stores and Starbucks has higher revenues.) It has 36,000 franchises in nearly 120 countries, employs 1.9 million people, and serves more than 70 million meals every day.
McDonald’s market cap as of October 2020. But Subway has more stores globally, at 44,758, and Starbucks has higher revenue, at $26.5 billion in 2019. McDonald’s locations brought in more than $21 billion in 2019. Even with growth figures slumping since early 2014, McDonald’s sits atop the fast-food world.
But those slumping figures should concern investors, who have not realized a great return for several years. MCD performed admirably during and immediately after the global recession of 2008–2009. It turns out cheap fast-food is essentially recession-proof, but 2014 was the worst year for the company since 2003.
Under Ray Kroc, its founding franchising visionary, McDonald’s became the world’s premier food brand by selling the rights to operate a McDonald’s store. With this model, MCD keeps overhead costs down and lets local owners deal with individual units. Food costs remain low and service remains fast for a culture increasingly on the go.
McDonald’s CEO Steve Easterbrook gave a presentation to shareholders in the second quarter of 2015 to address concerns over performance. His turnaround strategy included an intentional examination of Burger King’s recent success.
It is not likely that McDonald’s will be able to slash management and administrative expenses by more than 25%, as Burger King managed to do between 2011 and 2013. But it is telling that Easterbrook identified re-franchising company-owned restaurants as a way to drive up margins.
Burger King: A Fast-Food Revival
After a tumultuous and disappointing start to the 21st century, Burger King’s shareholders saw The Wendy’s Company, Subway, and Starbucks take turns passing them as McDonald’s’ chief competitor, at least in terms of sales revenue.
Then, private equity firm 3G Capital purchased the struggling giant for $4 billion in 2010. It ignited a recovery effort that has turned out to be quite successful. Burger King merged with Canadian coffee staple Tim Hortons in 2014 to form a new publicly-traded company called Restaurant Brands International.
By Q3 2017, Burger King was outperforming McDonald’s and Wendy’s by significant margins. A report by Citi Research concluded that 3G Capital made two significant strategic adjustments: trimming business fat and simplifying its public image. It worked, and operating margins grew from 17% in Q2 2011 to more than 40% by the third quarter of 2018.
The primary revenue stream for Burger King Worldwide (BKW) comes from franchises, including royalties and fees; royalties come from a percentage of revenue from each unit. As of 2020, 99.7% of Burger King locations are franchised.
Burger King does win in the burger department, which goes well beyond the health aspect, although that’s a nice benefit. Additionally, Burger King has fresher ingredients, a much sturdier bun, and a more balanced hamburger compared to McDonald’s with the ingredients-to-burger ratio.
On top of that, consistency in the quality of the burgers, such as the Whopper, from one Burger King to the next is another reason Burger King tops McDonald’s in burger wars. But, one area where McDonald’s does win, though, is that its burgers don’t sit nearly as heavy as Burger King, which makes it better for lunch if you want something lighter.
Burger King offers superior customer service and has a reasonably quick drive-thru service as well. On top of that, Burger King has started a marketing campaign going onto the Facebook page for McDonald’s and replying to the bad customer service complaints. With that, Burger King is sending links to those complaining, which gives them a free Whopper, and that’s a clever marketing department that shows it cares more about customer service.
In addition to that, if you walk into a Burger King, you feel like you’re welcome because everyone greets you and is ready to take your order. In comparison, McDonald’s doesn’t have that same welcoming environment.
Burger King has fallen in popularity with American consumers through recent years, which has to do with it not offering more healthy options. For example, McDonald’s has a variety of healthier options, such as wraps, salads, apple slices, and more, making it a better option for health-conscious people.
However, when you look at the Burger King menu, you don’t see those options, and the Impossible Whopper, which is a plant-based burger, was never marketed the right way. Additionally, the lack of healthy options has contributed to Burger King falling from the second-largest fast-food restaurant in system-wide sales down to number six.
McDonald’s wins single handedly in the breakfast department, and there’s no debate about this. Furthermore, McDonald’s has some of the most iconic breakfast items in all fast-food markets, including the Egg McMuffin and various McGriddle offerings.
On the other hand, Burger King hardly can say it has a breakfast menu, and it took them 12 years after McDonald’s to have a breakfast menu. However, the Croissan’wich from Burger King is pretty good, but it doesn’t compare to the variety of breakfast items McDonald’s offers!
Doubling the Stakes
At a time when the McDonald’s menu is as complicated as ever, creating record drive-thru wait times, according to Citi Research, Burger King is repackaging or rebranding old items to help consumers out.
One part of the revival strategy is directly challenging to McDonald’s products. In November 2013, Burger King introduced the Big King sandwich, with two patties, a three-layer bun, and a special sauce, as a not-so-subtle competitor to the successful Big Mac from McDonald’s.
When McDonald’s brought back the McRib sandwich, Burger King unveiled a $1 BK BBQ Rib as a cheaper alternative. In 2018, Burger King announced a double quarter-pound burger in a direct shot at McDonald’s’ quarter-pound burger.
Which has more Earning?
For example, McDonald’s brings in about $37 billion annually within the United States, whereas Burger King pulls in about $10 billion annually. However, Burger King is sixth in sales, so it’s competitive, but it just cannot compete with the marketing, loyalty, and branding that McDonald’s has mastered. Additionally, McDonald’s has a more loyal customer base willing to stick with the company even when it strikes out with menu items, which helps the company keep consistent sales.
Franchises
Meaningfully investing in Burger King and McDonald’s usually means buying and operating a new franchise unit. Since each company operates on an international level and no two markets are identical, the easiest way to compare franchising options is to look at Franchise Disclosure Documents (FDDs).
According to the 2020 FDD for McDonald’s, the initial investment amount for a McDonald’s franchise falls between $1.3 million and $2.3 million. The corporation also charges an initial franchise fee of $45,000.23
Burger King’s franchises require similar investments. The 2020 BK FDD suggests that, excluding the costs of real estate acquisition and improvement, total initial investments fall between $333,100 and $3.4 million, with an initial franchise fee of up to $50,000.
Whose Stock is Better?
Aside from any “battle of the burger” talk, the two fast-food chains have similar business models. They are each focused on attracting franchisees.
For investors, the real difference between the two is versatility. By choosing to invest in a more diversified brand, your interests are automatically more hedged than if you focused on a single brand — but QSR’s high level of indebtedness is a major limiting factor.
McDonald’s offers more versatility under a single umbrella and better financial health. However, the best part about deciding whether to invest in McDonald’s or Burger King is that you don’t have to choose. This isn’t a lunch choice; it’s your investment portfolio.
So which one is better now?
McDonald’s Vs. Burger King isn’t a competition at all, with McDonald’s taking a majority of the category comparisons, including prices, Coke, breakfast options, sales, and coffee products. However, if you want a burger, your best option is Burger King because the flame-grilled aspect of the burger, the ingredients, and the bun is far superior to McDonald’s!
But, McDonald’s excels in fries and chicken nuggets, but Burger King makes better chicken sandwiches and has better customer service. Additionally, McDonald’s offers several more healthy menu items compared to Burger King, which is likely why Burger King has fallen in popularity in recent years.
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