The King is Back … But Maybe We Should Just Call Him 'Burger Guy' Now
Greg is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This summer, Burger King (NYSE: BKW) stock hit the public market again. The restaurant chain’s new primary stakeholders hope that investors will line up behind the King, attracted by an exciting new image and direction.
The ideas behind the new Burger King look solid on paper, but in the real world there are a few major factors that will be working against them … factors that will probably cause its stock prices to continue to fall.
The Climate
Since the time Burger King began having financial troubles, U.S. citizens have changed their habits quite a bit. As the restaurant tries to grab the attention of those citizens, it has to deal with — first of all — the fact that they do not have as many dollars in their wallets as they used to. They don’t eat out as many times each week as they used to, and so the competition among restaurants has intensified dramatically.
Secondly, the efforts of First Lady Michelle Obama during her husband’s presidency have had a surprising level of success in changing the way Americans think about food. We have seen trans-fats and “pink slime” disappear from restaurant food; kids’ meals now contain fruit instead of or in addition to other side items; and the city of New York just passed a ban on sugary drinks larger than 16 ounces. A restaurant like Burger King, whose signature product is the 678-calorie Whopper (without cheese), faces an uphill battle getting the attention of a population that is sheepishly trying to do at least a little better job of watching its weight.
The Competition
Several other restaurant chains form a practically insurmountable obstacle to Burger King’s recovery efforts.
McDonald’s
Starting at the top of the fast-food recognition pile, McDonald’s (NYSE: MCD) gently kept up with the nation’s increasing appetite for healthier choices by introducing things like grilled chicken, salads, fruit side items, and smoothies. The further addition of high-end coffee drinks has brought McDonald’s to an enviable point: It has not lost its old customers, but it has also gained new ones that would not be caught dead wiping french fry grease off their fingers.
Subway
In many experts’ opinions, Subway has surpassed McDonald’s as the top fast-food choice in the U.S. The sandwich makers of Subway have been standing behind the counter waiting for a long time, and now the customers are flowing in, ready to trade their greasy burgers for thin-sliced turkey and fresh vegetables.
Jack in the Box/Hardees
Both Jack in the Box (NASDAQ: JACK) and Hardee’s (or Carl’s Jr. in some regions of the country) have gone after the audience that Burger King used to court. Their TV commercials, which are funny, edgy, and frequently off-color, are targeted toward folks that think Subway is for sissies. Jack in the Box adds an all-day breakfast menu and a surprising menu variety (teriyaki chicken, egg rolls, and tacos, for example) for those that aren’t into double hamburgers with three slices of cheese, bacon, and onion rings.
The Confusion
As devastating as these influences are on Burger King’s new campaign, the main problem seems to be internal. The restaurant doesn’t seem to know quite what kind of place it wants to be now. On one hand, it has revamped part of its menu to include smoothies, salads, and healthier sandwiches — just the kind of changes that McDonald’s has made. Officials have made it clear that they want to reach out to the health-conscious.
On the other hand, it’s still called “Burger King!” How many people are going to pick a restaurant with a huge hamburger as its logo when they are looking for a light salad? To make matters worse, Burger King inexplicably added another new menu item alongside those healthy choices: bacon ice cream. Apparently, they haven’t quite given up on those “Subway is for sissies” customers.
Can Burger King survive today’s tightened competition among fast food restaurants? Not with its current marketing campaign. Jack in the Box and Hardee’s have locked down the customers that want a burger bigger than their face, and McDonald’s and Subway already have the corner on the salad/healthy sandwich audience. The Burger King (or, as I like to call him now, the “Burger Guy”), is left stranded in the middle. The only Burger King restaurants that will see thriving business now are probably the ones that are not located within sight of a competitor.
copyhubwriters has no positions in the stocks mentioned above. The Motley Fool owns shares of McDonald's. Motley Fool newsletter services recommend Burger King Worldwide, Jack in the Box, and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
