Have We Reached Peak Burger?

Issue 09-08-14   |   Reviewer:   Douglas L. Wilson, MBA
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Abstract

Fast-food sales slipped 0.2 percent last year in the U.S. at McDonald’s and 0.9 percent at Burger King in the U.S. and Canada. Sales at the major fast-food chains grew only 1.1 percent in 2013, compared with 4 percent in 2012. The conclusion is that the historic growth of the burger joint industry may have peaked.

The big chains already may be reacting to the shift by selling more of their company-owned U.S. outlets to franchisees. Some Wall Street analysts encourage such “refranchising” because it transfers the cost of running restaurants onto franchisees, helping the parent company’s bottom line. The now global fast-food chains are also insulating themselves from a U.S. business that has topped out. Another response is global expansion, hoping international businesses will offer growth.

McDonald’s and its rivals have tried to adapt by adding healthier options to their menus, but diners are not choosing McDonald’s over relative newcomers such as Chipotle Mexican Grill. Part of fast food’s problem is related to demographics. McDonald’s, Wendy’s, and Burger King typically appeal more to customers with lower incomes than patrons who frequent some of today’s faster-growing restaurant chains, and lower-income diners have been spending less on restaurant meals. In addition, Millennials do not share their parents’ addiction to fast food. These trends leave the future of legacy burger-and-fries chains in question.





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