Like Coca-Cola vs. Pepsi or General Motors Company vs. Ford Motor Company, the battle between Burger King and McDonald’s represents one of the big rivalries in the American history of business. For more than sixty years, McDonald’s has been the leader that set the standard by which all the other chains operated. But there’re signs such roles might be reversing.
A refreshed Burger King is compelling McDonald’s to adjust to that, not the other way around. Burger King and McDonald’s started in the fast-food business in 1954 and 1955, respectively. Each chain brags about the iconic products. McDonald’s has the Quarter Pounder, and Big Mac, and the Burger King Menu counters with the Whopper sandwich. The Big Mac and Whopper are the two top-selling burgers of all time.
In 2002, Burger King bragged about the 1.7 billion Whopper sales for each year. McDonald’s reached the same amount as their Big Macs in 2017. Each brand continues to push the worldwide presence, although with varied results. One cause is actually the culture.
A lot of Europeans, for example, contemplate fast food to be a typically American tradition. Food menus for McDonald’s and Burger King at times struggle to attract foreign consumers, leaving global markets underdeveloped, mainly in the Asian Pacific region.
McDonald’s: The King of Burgers:
This fast-food chain has the maximum market capitalization of any fast-food chain in the United States., at more than 168 billion dollars in 2020. It has thirty-six thousand joints in nearly one hundred and twenty countries, hires 1.9 million individuals, and serves more than seventy million meals each day.
McDonald’s places brought in more than twenty-one billion dollars in 2019. Even with the growth figures slouching since early 2014, this fast-food chain sits atop the fast-food industry. But such slumping figures ought to concern the investors, who haven’t realized a huge return for numerous years.
Under Ray Kroc, the founding franchising visionary, this chain became the premier food brand of the world by selling the rights of operating a McDonald’s restaurant. With this model, McDonald’s keeps overhead charges down and allows the local owners to cope with the individual units. Service remains fast, and food costs remain low for the culture more and more on the go.
The Burden Of The Size:
But huge businesses struggle to keep on growing once they get to a certain size. It’s logistically hard to innovate or address the individual company concerns when the burger chain spans one hundred twenty countries. CEO of McDonald’s, Mr. Steve Easterbrook, gave a presentation to the shareholders in 2015 to address some concerns over the performance.
His turnaround plan comprised an intentional examination of the recent success of Burger King. It’s not likely that McDonald’s will be capable of slashing administrative and management expenses by more than twenty-five percent, as Burger King managed to accomplish between 2011-2013. But it’s telling that Easterbrook recognized re-franchising business-owned chains as a way of driving up the margins.
A Fast-Food Revival Of Burger King:
After a disappointing and tumultuous start to the twenty-first century, the shareholders of Burger King saw Starbucks, Subway, and Wendy’s take turns passing them as the chief competitor of McDonald’s, at least in terms of the sales income.
Then, a private equity firm bought the struggling giant for four billion dollars in 2010. It ignited the recovery effort that’s turned out to be doing quite well. Burger King combined with the Canadian coffee staple Tim Hortons for forming a new publicly traded brand known as Restaurant Brands International.
Trimming The Fat:
By Q3 2017, this fast-food chain was outperforming Wendy’s and McDonald’s by major margins. A report concluded that the 3G Capital made two important strategic adjustments: simplifying the public image and trimming the business fat. It helped, and the working margins grew from seventeen percent in Q2 2011 to more than forty percent by the 3rd quarter of 2018.
The main revenue stream for Burger King Worldwide arrives from franchises, comprising fees and royalties; royalties originate from the percentage of income from every unit. As of 2020, 99.7 percent of BK joints are franchised.
Significantly investing in McDonald’s and Burger King more often than not denotes purchasing and operating a new unit. Since every brand operates on a global level and no two markets are the same, the simplest method of comparing the franchising options is to observe the FDDs (Franchise Disclosure Documents).
According to the 2020 Franchise Disclosure Documents for McDonald’s, the first investment amount for the McDonald’s franchise falls between 1.3 million dollars and 2.3 million dollars.
The business also charges the first franchise fee of 45,000 dollars. Burger King’s franchises need similar investments. The 2020 Burger King Franchise Disclosure Documents suggests that keeping out the charges of the real estate improvement and acquisition, total first investments fall between 333,100 dollars and 3.4 million dollars, with the first franchise fee of up to 50,000 dollars.