McDonald’s enjoyed higher than expected sales in November thanks to an emphasis on the Dollar and Extra Value Menus.
Sales at restaurants open at least 13 months were up 2.5 percent in November, an improvement over analysts’ expectations, and October’s disappointing earnings.
Analysts predict volatile sales in the fast food industry around the world over the upcoming months. Economic difficulties and high unemployment worldwide will impact sales for all brands. McDonald’s largest market is Europe, where same-restaurant sales rose 1.4 percent, an improvement over analysts’ expectations.
Asia/Pacific, Middle East and Africa turned in a 0.6 percent increase, compared to the forecasted expectations of 0.9 percent decline. The company has said it will add “dollar” or “extra value” menus in other countries, too, after seeing positive results from in the U.S., Australia, France and Japan.
In the U.S. fast food restaurant rivals, such as Wendy’s and Burger King have also put a focus on value products, as well as premium products. Technically, Wendy’s is McDonald’s chief competition in the U.S., although the comparison at times seems unfair.
In 2011, Wendy’s surpassed Burger King as the second largest burger chain by restaurant sales volume in the States. Wendy’s operates 6,500 restaurants in the U.S. and 27 countries and U.S. territories worldwide. Burger King operates 12,600 locations worldwide, and McDonald’s has 34,000 locations.
Wendy's, Burger King, Starbucks, and even Taco Bell have increased premium products on their menus. Taco Bell now features a "cantina" menu designed by a chef. Starbucks offers a $7 drink. Hardee's and Carl's Jr proudly feature the "Six Dollar Thickburger," they claim rivals a higher priced restaurant in taste and quality. McDonald's may be putting an emphasis on the Dollar Menu, but it has also added premium products with McCafe, which has helped raise per receipt averages.
Wendy's enjoyed $8.5 billion in 2011 sales compared with $8.4 billion for Burger King. McDonald’s strutted its stuff with $34.2 billion in sales, or roughly $11 billion from the US. Wendy’s 2012 third quarter consolidated revenues were $636.3 million. Comparatively, McDonald’s saw 2012 third quarter consolidated revenues of $7.2 billion.
Burger King's net income fell 83 percent in the third quarter as the chain sold off more of its restaurants to franchisees as part of a turnaround push since changing ownership and going public in 2012.
McDonald’s is not suffering from fierce competition. It does not appear to be losing business to the competition either. The main challenges McDonald’s and the other brands face are bringing in customers as consumers become more health conscious, and a challenging economy.
Each of the major brands has turned both to value menus and more premium products to meet these challenges. Additionally, these brands are seeing more competition from “fast casual” restaurants such as Panera and Chipotle, which offer higher-quality food for a little more money.
Notably, while Wendy’s and McDonald’s have put more emphasis on their value menus, Burger King blamed slower growth in the third quarter over the year ago period on a decrease in the number of "value-focused" customers.
McDonald’s will continue to put more focus on the Dollar Menu...
