4 Reasons Why Wendy’s Will Never Top McDonald’s

by Beth Gaston Moon | March 20, 2012 1:53 pm

4 Reasons Why Wendy’s Will Never Top McDonald’s

Restaurant Fast Food Wendys 300x199 4 Reasons Why Wendy’s Will Never Top McDonald’s[1]Congratulations, Wendy’s (NYSE:WEN[2]). For the first time in your 42-year history, you have unseated Burger King[3] as the No. 2 hamburger chain. The Ohio-based chain, founded by the late Dave Thomas, generated $8.5 billion in sales in 2011 versus Burger King’s $8.4 billion. Wendy’s did it in a more efficient fashion, as well, with just 5,900 U.S. locations[4] compared to Burger King’s 7,200 stores.

But the victory might be somewhat hollow. After all, in the overall food service business, Wendy’s was easily trumped by Subway[5] (with sales of $11.4 billion last year) and Starbucks (NASDAQ:SBUX[6]) (which sold $9.8 billion of its products last year).

And then there are those giant golden arches themselves: McDonald’s (NYSE:MCD[7]) posted 2011 sales of $34.2 billion, or just over four times Wendy’s results. Sure, Wendy’s fries may taste better[8] — I beg to differ — but McDonald’s will always be ruler of the fast-food kingdom.  Here are a few reasons why.

1. The iconic brand.

My friend Liz, a speech pathologist, was once working with a three-year-old client who had severely diminished communication skills. One thing he could do, however (without prompting) was point to a plastic miniature French-fry container and hum the Justin Timberlake “I’m lovin it[9]” jingle. In fact, the golden arches are the most recognized logo among children[10]. McDonald’s marketing is inescapable, from its jingles to its color scheme to Ronald himself. Even its menu items have character – McNuggets, the Big Mac, the Filet-O-Fish.

In contrast, since Dave Thomas’ passing in 2002, Wendy’s hasn’t had a memorable campaign or a recognizable face. (And Clara Peller, the “Where’s the Beef” lady, passed away in 1987). The only creatively named menu item is the Frosty. And little pigtailed Wendy would lose in a popularity contest to Ronald every time. Even the Hamburgler has more fans.

2. Its menu creates a sense of urgency.  

The McRib is back! The Shamrock Shake is here! Offering these wildly popular items for a limited time only artificially inflates demand and creates a sense of excitement throughout the fast-food fan base. There’s even a website dedicated to finding the McRib[11]. Do any Wendy’s offerings cause such fanaticism? Not that I’ve heard.

mcdonalds mcrib 630 300x210 4 Reasons Why Wendy’s Will Never Top McDonald’s

3. Think of the children!

As mentioned in point one, children are already acutely aware of McDonald’s. And because of McDonald’s licensing agreements with Build-a-Bear[12], Cartoon Network[13], and others, kids will nag their parents to go and grab that oh-so-healthy Happy Meal.

Wendy’s offers a Kids’ Meal (again, a more generic appellation than the famous “Happy Meal.”) And while it has a deal with Mattel (NASDAQ:MAT[14]), the toys “designed for family interaction[15]” are just lesser versions of what you can buy in a toy store. In other words, they aren’t going to spur a special trip.

4. A bigger demographic.

While Wendy’s has been focused on making itself stand out as a healthier and more upscale choice (improving its produce and adding higher-end burger choices), McDonald’s has concentrated on keeping prices low. As a result, the golden arches appeal to a broader demographic that see McDonald’s as a place to pick up good (tasting) food on the cheap.

The numbers, courtesy of food industry research group Technomic, don’t lie: McDonald’s sales are up 26%[16] over the past five years compared to Wendy’s 9% growth rate (Burger King, meanwhile, has been flat).

Why else will McDonald’s always be No. 1?

As of this writing, Beth Gaston Moon does not own any shares mentioned here. 

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2011/05/Restaurant-Fast-Food-Wendys.jpg
  2. WEN: http://studio-5.financialcontent.com/investplace/quote?Symbol=WEN
  3. unseated Burger King: http://blogs.barrons.com/stockstowatchtoday/2012/03/19/the-king-dethroned-wendys-overtakes-burger-king-in-u-s/?mod=BOLBlog
  4. with just 5,900 U.S. locations: http://www.wtae.com/r/30711743/detail.html
  5. easily trumped by Subway: http://www.webpronews.com/wendys-beats-bk-thats-a-delicious-burger-2012-03
  6. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  7. MCD: http://studio-5.financialcontent.com/investplace/quote?Symbol=MCD
  8. Wendy’s fries may taste better: http://www.dispatch.com/content/stories/business/2011/04/13/wendys-claims-win-over-mcdonalds-in-fries-taste-test.html
  9. I’m lovin it: http://www.justintimberlake.com/videos/im_lovin_it
  10. most recognized logo among children: http://abcnews.go.com/Business/kids-mcdonalds-toyota-disney/story?id=10333145#.T2iwGmJSTss
  11. finding the McRib: http://kleincast.com/maps/mcrib.php
  12. Build-a-Bear: http://www.marketwatch.com/story/mcdonalds-happy-meal-to-feature-build-a-bear-workshop-furry-friends-2012-02-08
  13. Cartoon Network: http://www.licensing.org/news/press-releases/cartoon-network-enterprises-and-mcdonald%E2%80%99s%C2%AE-launch-first-happy-meal%C2%AE-featuring-ben-10-ultimate-alien/
  14. MAT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MAT
  15. designed for family interaction: http://www.wendys.com/kids_meal/family.jsp
  16. McDonald’s sales are up 26%: http://www.washingtonpost.com/business/industries/wendys-takes-no-2-spot-from-burger-king-mcdonalds-still-biggest-hamburger-chain/2012/03/19/gIQA43gFNS_story.html?tid=pm_business_pop

Source URL: http://investorplace.com/2012/03/4-reasons-why-wendys-will-never-top-mcdonalds/
Short URL: http://invstplc.com/1dcdPhY