Is Wendy's Poised To Overtake BK As #2 QSR?

by , Dec 1, 2011, 5:46 PM
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Burger King’s new kids’ meals and fries initiatives and pumped-up marketing are going to be particularly critical for the chain, if one analyst’s assessment of the QSR market is on the mark.

Janney Capital Markets analyst Mark Kalinowski recently reported that Janney expects Wendy’s to overtake privately held Burger King for the number-two position within the limited-service hamburger sector, “perhaps as soon as this year,” according to The Orange County Register.

As of 2010, Burger King had a 13.3% share of the segment, to Wendy’s’ 12.8%, according to Technomic. (Both far behind McDonald’s, with a nearly 50% share.)

Kalinowski wrote that Wendy’s is increasing its share through its focus on premium food offerings and store remodelings.

Wendy’s is looking to establish dominance in the premium-quality QSR burger category and attract some business away from fast casuals with upgraded offerings that are higher-priced than traditional QSR burgers but less expensive than fast casual burgers. For example, CEO Emil Brolick recently reported that sales of the chain’s new Dave’s Hot ‘N Juicy burgers have exceeded expectations. At the same time, its prototype store remodels (20 thus far) are designed to provide a more fast-casual-like environment, with updated fixtures and flat-screen TVs, reports CSNews Foodservice.

Wendy’s also recently introduced a mid-tier “W” cheeseburger line, and will roll out a breakfast menu nationwide, Brolick reported.

For its fiscal Q3 quarter ended Oct. 2, Wendy’s reported a 1.8% same-store sales increase for its North American, company-operated stores, and a 0.7% same-store sales gain for franchise stores. For full-year fiscal 2010, Wendy’s reported North American system-wide same-store sales down 0.6%. Only about 300 of Wendy’s 6,600 stores are currently outside of the U.S.; however, new agreements will push that number up to 1,000, with new overseas locations in countries including Japan and Russia.

Burger King saw system-wide same-store sales growth of 1.6% in Q3 2011. However, the gains were driven by its large number of international locations. U.S. sales were flat for the period. For full-year fiscal 2010, BK reported a decline of 2.3% in worldwide comparable-store sales, and a decline of 3.9% in U.S./Canadian comp sales.

Burger King is in the midst of its own major makeover. In August, it began airing its first ads from new agency McgarryBowen, designed to refresh its image by abandoning the BK King mascot in favor of focusing on food quality. A full-blown new marketing campaign for the chain is expected next year.

Meanwhile, in early November, the chain rolled out new BK Crown meals for kids, designed to revive its flagging sales within this important segment with new, boxed packaging featuring a free paper crown and free toys and games. 

The good news on that front, according to YouGov’s BrandIndex, is that the Crown program appears to have improved the chain’s perception among parents. BK’s impression score among parents who have visited a fast-food restaurant in the past three months rose to 21.2 during the three weeks ending Nov. 25, representing a 4.6-point gain over the prior three weeks.

However, BK still ranked 10th among major QSRs during that most recent three-week period, while Wendy’s ranked second, with an impression score of 54.1 -- up 10.6 points versus the prior three-week period. (Subway was #1, with a score of 58.4, up 2.1 points versus the prior three-week period.)

BK’s latest move is this week’s announcement of its rollout of new, thicker-cut fries. The first McGarryBowen TV spot supporting that launch began airing yesterday (“America’s favorite burger, the Whopper, has a new best friend…”). The chain will also give out free value-size orders of the new fries on Dec. 16.

BK is going up against Wendy’s’ successful thick-cut fries, introduced last year, as well as a recent major fries marketing push by McDonald’s.

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