Burger King vs. McDonald’s: Battle of the Burgers
Burger King (NYSE:BKW) is stepping up its game in the “worldwide” department. The hamburger franchise announced on Tuesday that it has started a joint venture with French restaurant group Groupe Olivier Bertrand and private equity firm Naxicap Partners to expand into the French quick serve market.
“France is one of the largest quick service restaurant markets in Europe and we have been waiting to find the perfect partner that shares our dream of growing our brand here in the right way,” said José Cil, Burger King’s Europe, Middle East, and Africa president, in a company statement.
The news appeared to help drive shares higher on Wednesday afternoon. Burger King stock climbed as much as 1.6 percent, and at an intraday high of $21.35, flirted with its 52-week high of $21.73. Shares have climbed nearly 28 percent on the year amid a global expansion that, in addition to France, includes potentially high-growth markets such as China and India.
This is not Burger King’s first foray into the French market, though. Burger King set up shop in France in 1981 and exited in 1997, closing about 40 stores due to some corporate financial trouble. Burger King outlets are nearly entirely franchised and require a certain amount of investment from the parent company in order to thrive. Corporate tried to provide support with a $70 million ad campaign in France, but decided to exit the highly competitive market for greener pastures in the U.K., Germany, and Spain.
Now, Burger King is back at it and plans to hit the ground running. “Our development objective is an ambitious one,” said Olivier Bertrend, president of Groupe Olivier Bertrand, in Burger King’s press release. “We have our sights set on a 20 percent share of the French quick service restaurant market and product leadership in the fast food hamburger segment.”
That is no small fish to fry. France’s fast food industry is expected to generate as much as $12.8 billion in sales in 2013, a 4 percent increase over 2012.
Claiming that 20 percent won’t be easy, of course. Ignoring for the moment competition from local food vendors, Burger King’s old enemy, McDonald’s (NYSE:MCD), is already well entrenched in France, with about 1,250 stores. In characteristic fashion, McDonald’s has edited its menu to more closely align with French tastes, a strategy that has so far proven to be fairly successful.
McDonald’s doesn’t break down information for France specifically in its annual reports, but in 2012 the company reported that the U.K., Germany, and France together accounted for 51 percent of total European revenues of $10.8 billion. McDonald’s has been in France since 1979 and has already seen Burger King come and go.