Hamburger Wars

8/3/2019 Hamburger Wars

1/29

McDonalds Burger King


2/29

2

Hamburger Wars: BurgerKing vs. McDonald's

Section C

2


3/29

MembersRevathy

Nagmani

Vineeth

Shobhit

VidyaAthira U

Ashwathy

Ron

Anand

Geordie

Febin TSandhya N

3


4/29

Story:McDonalds vs. Burger King

McDonalds:

Founded in 1955

Founder: Ray Kroc

13,000 restaurants

(domestic)

44% of fast-food market

share

Burger King:

Founded in 1954

Founder: McLamore &

Edgerton

7,800 restaurants

(domestic)

21.9% of fast-food market

share

4


5/29

McDonalds ExpansionKroc was first allowed to sell franchises in 1955, by

1960 there was 200 restaurants.

Kroc bought out McDonald brothers. By 1968, there

were 1200 restaurants and sales were $400 million.

By 1972, there were 2,272 restaurants, and sales

were over $1 billion. (By comparison, Burger Kingsales were only $271 million, good for only fourth,

behind McDonalds, KFC, and Dairy Queen)

5


6/29

Burger King ReactionBurger King was first to introduce the dine-in

concept, and drive-through food service. This idea

was quickly adopted by McDonalds and others.

Burger King (along with Pillsbury, the previous

owner) was bought by Grand Metropolitan in 1988.

By 1999, Burger King had 10,506 total owned orfranchised restaurants, with sales of $10.3 billion,

good for second behind only McDonalds

6


7/29

Burger Kings strategy Opened prototype for future restaurants in Reno, NV

in April, 99. Includes new color scheme (blue

instead of tan & brick), different style interior, open

kitchen to show off flame-broiled cooking, and added

virtual fun centers to play areas that provideselectronic interactive games.

7

1/2


8/29

Burger Kings strategy (cont)Menu would remain the same, but new cooking units

would provide opportunity to add new items,

including thicker patties.Heated cabinets would replace heat lamps,

microwaves, and holding chutes.

Company expects that stores would boost averageunit sales to $1.6 million (annual) from the current

$1.15 million (and above McDonalds current of $1.5

million)

8

2/2


9/29

Strength of the WarriorsMcDonalds sales has continually grown, from $11

billion in 1985 to just below $36 billion in 1998.

McDonalds had capitalized big in foreign markets.In 1998, McDonalds had 12,328 foreign restaurants

(2,852 in Japan alone).

McDonalds had found that more stores in a city ledto more per capita transactions, leading to increased

market share. It also had been able to reduce the

cost of building new restaurants by 26%.

9

1/3


10/29

Strength of the WarriorsMcDonalds earnings were still increasing, with 126

consecutive quarters of record earnings through the

third quarter of 96.

Had advantages few could match, including brief

menu, strict operating standards and procedures,friendly service (despite high turnover), and heavy

mass-media advertising aimed at families and

children. 10

2/3


11/29

Strength of the WarriorsBurger King unable to gain ground in 90s: 1993 total

sales were $23.6 billion for McDonalds versus $6.7

billion for Burger King (roughly 28% of McDonalds).

1998 total sales were $36 billion for McDonalds versus

$10.3 billion for Burger King (still roughly 28% of

McDonalds)

Burger King also unable to open as many restaurants(2,700 restaurants in the period between 93 and 98 as

opposed to the 10,600 new restaurants opened by

McDonalds during the same period)11

3/3


12/29

Mutiny : Mc DFranchisee problems:

While McDonalds was big on the major expansion

idea, some franchisees werent as excited. A

McDonalds open just down the road meant that a

McDonalds franchisee owner may be actually

competing directly against another McDonalds.

Franchisee owners also felt stifled by the increasing

controls over operations.

12

1/4


13/29

Mutiny : Mc DMenu problems:

Fearing they were losing adult sales, McDonalds

launched the Arch Deluxe, complete with $200

million promotion. Expectations were for the Arch

Deluxe to be a $1 billion brand in year one.

Didnt perform well, some referred to burger as

McFlop.

13

2/4


14/29

Mutiny : Mc D In a 95 survey, McDonalds got low marks on food

quality, value, service, and cleanliness.

McDonalds reluctantly went to extra value meals to

keep up with Taco Bell. Deluxe revenues were

expected to offset value pricing.

Other attempts at increasing menu choices includeMcDLT, McLean, pizza, and caf style dining. All

considered failures.

14

3/4


15/29

Mutiny : Mc DDomestic vs. Foreign:

While sales overall were increasing, this was due to

the foreign market. Domestic sales had decreased by 3% per store on

average in 1996 (fifth quarter in a row with decrease)

In 1985, foreign restaurants made up 28% of thetotal. By 1998, the percentage was up to 50%.

Sales growth in the United States seems to be

stagnating.15

4/4


16/29

Brainstorming McDonalds needs drastic change to grow.

McDonalds has room to grow without drastic changes.

Lets get it on!

16


17/29

Franchisee RelationsIn 1999, CEO Jack Greenberg eased controls over

franchises, allowing franchisees to have more say over

local menus.

17


18/29

New Weapons Since 1999, McDonalds have allowed some products to

be sold regionally. Examples include the McBrat in

Wisconsin and Minnesota, McLobster Rolls in New

England, and Homestyle Burgers in Texas.

Bagel breakfast sandwiches were introduced in 1999,and have had success.

18


19/29

New Weapons McFlurry (similar to the Dairy Queen Blizzard)

Recent additions (2003) include the premium salad, which

has had much early success.

The newest product is the McGriddle, complete with majoradvertising campaign which includes such slogans as

Bizarre, but yummy

Happy Meals now come with a handheld electronic mini-

game produced by Sega.

Recently announced that they were going to add wireless

internet service to stores in San Francisco.

19


20/29

New WarfareIn 1999, McDonalds bought Donatos Pizza,

Chipitole Mexican Grill, Aroma (coffee shops), and

Boston Market.

However, in 2002, McDonalds sold most of the

Aroma restaurants, along with the Aroma name.

At the end of March, 2003, McDonalds announce its

intent to sell Donatos, Chipitole, and Boston Market.

20


21/29

Current Strength United States: $4.830 billion 47.5%

Europe: $2.718 billion 26.8%

Rest: $2.604 billion 25.7%

Total non-U.S. % = 52.5%

21


22/29

Comparison : With Enemies2009 2002

McDonalds 7.3% McDonalds 7.8%

Burger King 3.0% Burger King 3.6%

Wendys 2.4% Taco Bell 2.2%

Subway 1.9% Pizza Hut 2.1%

Taco Bell 1.9% Wendys 2.1%

22


23/29

New EnemiesFast-food industry as a whole is losing market share

to other restaurants, including the fast casual

restaurants, which offer higher quality food withouttable service.

Currently, Subway has to be considered the biggest

mover in the fast-food industry. They are the fastestgrowing (now with more restaurants the

McDonalds), and with great increases in same store

sales over the past couple of years. 23


24/29

McDonalds struggles Faced with struggling sales, and lost market share,

CEO Greenberg decides in December of 2002 that it

is a good time to retire. Cantalupo takes over.

The last quarter in 2002 marked the first quarterly

income loss in company history (announces theclosing of hundreds of stores, plans included closing

719 stores)

24


25/29

Battle Field : ReportApril of 2003 marked the first rise in U.S. same store

sales (1.3%) in many months.

May of 2003 marked a 6.3% rise in U.S. same store

sales, the highest increase in 4 years. (Incomparison, Burger King is down 7.3% in the first

quarter, with more of the same predicted by the

CEO, Wendys is down 1.9% in June. Taco Bell wasup 5% in June, Pizza Hut up by 2%)

Credit for increase goes primarily to the brisk sales

of premium salads.

25


26/29

Present StrategyOn 6/6/03, McDonalds announced it was going to

reduce new restaurant openings, focus on adding

customers to the current restaurants, and streamline

restaurant development functions.

26


27/29

News It has been revealed that McDonalds has been testing

electronic terminals, called kiosks, that will allow

customers to make selections on a touch screen, and

allow customers to either pick up food at another area,

or have it brought to their table.

27


28/29

28


29/29

29

Documents

Hamburger Wars