Will McDonald’s or Burger King Find the Right Recipe?
As Burger King (NYSE: BKW) hit its stride with a spectacular Q1 earnings report, McDonald’s (NYSE:MCD) announced it had its own recipe for growth. The fast food giants are surveying the scene and responding with different approaches as the economy struggles through its rebound period, with the winning formula still in question.
For McDonald’s, the company will ramp up efforts in breakfast sales as well as expanding store hours and delivery offerings. “Breakfast All Day” has been a longtime staple in diners across the U.S., but McDonald’s has been inexplicably late to the party. As for 24/7 hours and delivery, the company will continue to push the envelope in hopes of increasing its reach in competitive markets. Densely populated area like New York for example, are ripe for expanded delivery options.
Burger King has used a cost-cutting approach to increase its revenues, a strategy that is clearly working. The company reported earnings up a phenomenal 60 percent in Q1 2013 compared to the previous year’s numbers. Burger King managers took a fine-toothed comb to its stores and came up with a successful expense-trimming plan. Even though sales declined slightly in most markets, its earnings excited investors. McDonald’s CEO Don Thompson told CNBC he’s got a few tricks up his sleeve for keeping the Golden Arches foremost in the consumer’s mind…
“Last year, I was not satisfied,” Thompson said. Yet on the company’s willingness to grow, he reiterated that McDonald’s was committed to growth. “Tastes have been changing and…we at McDonald’s have continued to evolve.” To that end, he promises to look into offering breakfast options like egg-white McMuffins (to the delight of Jim Cramer) and more complex flavor profiles.
Loyal customers should not expect garlic and cilantro in offerings any time soon, but the company’s ability to adapt to changing customer trends will be crucial. Making a move on delivery–acknowledged by Thompson as “a little bit late” on the company’s part–is a long time coming. In fact, McDonald’s is considering rewards programs and other elements millennial consumers expect. This young generation is McDonald’s bread and butter.