3 Reasons Wendy’s Is Eating McDonald’s Lunch

  • Share
  • Read Later
Patrick T. Fallon / Bloomberg via Getty Images

Wendy' s Co. signage is displayed outside a restaurant location in Torrance, California, U.S., on Thursday, Jan. 16, 2014. Photographer: Patrick T. Fallon/Bloomberg

McDonald’s, the world’s largest burger chain, had an impressive run from 2004 to 2011, when the fast food retailer posted average global same-store sales growth of 5.6% per year and tightened its hold on burger lovers from Boston to Beijing.

But the past few years have not been so kind. The company once again released a disappointing earnings report Thursday, stating that same-store sales actually fell globally in over the past three months. While a generally weak economy has convinced many consumers to pull back on their restaurant spending, the burger giant has made a number of missteps (see below). Its performance has been in stark contrast with number two burger chain, Wendy’s. Consider how the two stocks have performed over the past year:

WEN Chart

WEN data by YCharts

Of course, even with a few years of sluggish growth, you’d rather be in McDonalds position than Wendy’s, all else being equal. McDonald’s yearly sales swamp those of Wendy’s—$27.5 billion to $2.5 billion. But Wendy’s has been growing its sales and profit, while McDonalds performance has been stagnant. Here are three reasons why this one-time also ran is nipping at McDonalds heels:

1. Premium Products: With low income folks struggling in today’s economy, fast food chains have to go after the more affluent in order to achieve sales growth. Wendy’s has done this by offering a series of limited-time only premium products, like the bacon cheeseburger on a pretzel bun, and the bacon portabella melt on a brioche bun. These premium products can grab the attention of more discerning eaters and get them hooked on Wendy’s permanent menu items.

2. Service: McDonalds has tried its own series of new menu items, including Premium McWraps, Egg White Delight McMuffins, blueberry pomegranate smoothies, just to name a few. But the slew of new products significantly slowed down service times as workers struggled to deal with assembling them quickly and efficiently. A recent study by the trade publication QSR magazine did a study of how long it took the average customer to make it through various fast food restaurants drive through service. The result? McDonald’s experienced its slowest average speed of service in the history of the study.

3. Better Instincts: If your new products are going to slow down service, they’d better be a hit with customers. Most of McDonald’s new products from its  Fish McBites to a new offering of chicken wings, fell flat. Wendy’s, on the other hand, put all its chips in a few products, most notably the pretzel bun, which were a huge hit. At the end of the day, success in fast food is going to be primarily about anticipating what will resonate with your customers.

9 comments
MikeLand
MikeLand

Wendys came to our town about 1973.  It opened down the street from our home at the time.  Up until then, our hamburgers usually came from A&W, Charcoal Oven,  or one of the lake marinas.  I don't know why a lake marina had such good burgers but they did. Now we have a dozen gourmet burger shops in town and they all are great.  So, dad loaded us up in the galactic battle cruiser and we hit Wendy's with a vengeance.  At that time, all add-ons cost extra.  A basic burger was meat and bun for a price.  Then as you added lettuce, tomato, pickles, onions, etc, each item was 10 cents.  So a burger quickly got costly.  Dad was livid when he got the bill.  He looked at the tape and it was full of add-ons.  He had a talk with the manager and informed him we would not be returning, ever.  So, for about the next 15 years none of us ate at Wendy's for fear of a restaurant sized bill.  Then they started offering frosties, baked potatoes, and chili.  Those items were all any of us ever ordered.  I did try an order of fries in the late 80's and I only finished half the order.  A couple hours I reached in the sack and pulled out a congealed glop of grease and fries.  Yes, they used pure beef tallow back then.  They have revamped the alacarte pricing since then but I just cannot get myself to eat there often as it has officially been relegated to travel food. That's a place we only eat on travel. 

cookiemonstersmom
cookiemonstersmom

Being able to go to a Wendy's and get something other than a burger is great -- maybe a baked potato with a few fixings and a small chili or a salad on the side. And comparing Wendy's salads to McDonald's salads, Wendy's wins every time.  Just this week I had a salad at Wendy's and then a few days later another salad at McDonalds.  At Wendy's I had the mixed field greens/apple/candied walnuts/chicken salad with raspberry vinaigrette, so delicious.  At McDonalds, I opted for a so-called Southwest salad of just iceberg lettuce, taco chips, and a smidgen of grilled chicken - plain and flavorless. I'll stick with Wendy's.

bobdolegetswood
bobdolegetswood

Just returned from the Philippines... Mcd's there rocks... from the real chicken breast on the spicy chicken to real ketchup without HFCS to the Big Mac that you could actually see the beef.  I know the labor cost is lower but they had 2 people constantly cleaning the dining room and the rest rooms.  Americans need to demand better from our corporations... why does Canada get real sugar in its soda and we get HFCS.  Maybe it has something to do with the State covering health care and not the private sector that first tries to kill us with garbage in our food then over charges us for health care.  Last time I was in Vancouver I brought home some Campbells tomato soup without HFCS... talk about a nice creamy change of pace.

somereasoning
somereasoning

Burger fast food has got to be one of the most at risk segments in the industry. I cannot understand how anyone would want to compete in that niche. Beef prices are going through the roof and will continue to climb. California as a water shortage, cattle is being shipped to Texas because they can't feed it here. That is 50% of the nation's beef. The herds are at record post-war levels, it would take several years to rebuild. It seems that Wendy has it right; eating a burger will become a treat, rather than something we do twice a day. Good deal, maybe we see a little less obesity and heart disease. 

ghosty4
ghosty4

I don't go to McDonald's for wraps, egg whites or blueberry pomegranate smoothies. They need to stop inflating their menus (and thus cutting into their profit margins for the cost of so many varied ingredients) with items people just don't want!

TravisPatterson
TravisPatterson

I think it is because on every corner there is a McDonalds. People frequent the place quite often and get tired of the same menu. We are so tired of the same food over and over again that we will travel the extra miles to taste a little something different.


tcat37
tcat37

Notice the difference in new products? Yummy, rich indulgent-Wendy's. "Healthy"-McDonald's. McDonald's went down the healthy road before with the SAME result. They just need to stop listening to the healthy snobs that don't eat in their restaurants anyway! They have enough healthy stuff on their menu, give us the good stuff and let us decide for ourselves where we eat. Quarter Pounder on a pretzel bun? Yep, I would stop...

T.Rex
T.Rex

"It's not the economy, stupid." (sic). It is the cute red-head they have doing their commercials.

Aasa
Aasa

@bobdolegetswood Hey. if you want a change of pace and taste, make your own soup, and savor the difference! ;-) It will be noticeable. Homemade soup tastes way better than anything that ever came out of a can, and you will know what went into it!