OAKBROOK, IL – While the economic downturn prompted consumers to “trade down” from more expensive restaurants to quick service restaurants, the sustained high unemployment rate has many large QSR chains struggling, with McDonald’s the lone profit leader, BusinessWeek reports.
"We have a price war going on," said Morningstar analyst R.J. Hottovy, adding that Burger King, McDonald's, and Wendy's continue to offer promotions with the intent of securing market share.
The results are starting to trickle in. Earlier this week, McDonald’s reported February global sales that rose 11.2%, with U.S. stores reporting a 0.65% increase. The favorable news came despite rough winter weather that eliminated roughly 2% of U.S. sales, according to a McDonald’s spokesperson.
While Burger King and Wendy’s haven’t reported their February sales figures, Wendy’s said that Arby’s same-store sales fell 7.4% (Wendy’s owns Arby’s), modestly better than its 12.6% drop from the fourth quarter of 2009.
Overall, though, analysts remain bullish on the Golden Arches.
"We remain confident [McDonald's] will continue to gain share in the U.S.," said Morgan Stanley analyst John Glass, citing the company's McCafé line of beverages and its upcoming nationwide introduction of fruit smoothies as growth catalysts.
McDonald’s strength also rests with its size. With 57% of its restaurants located outside of North America, it capitalized on global marketing opportunities such as the Olympics. Chicken McNuggets ads linked to the Winter Games helped boost sales last month, according to McDonald’s.
“[McDonald's] is using its marketing scale to emphasize its existing value message," Oppenheimer analyst Matthew DiFrisco said, adding that strong cash flow was helping fuel its growth.
Despite an apparent lead by McDonald’s, Burger King and Wendy’s are fighting back. Executives at both companies said that they foresee growth opportunities internationally along with value menu success. Additionally, Burger King is making a strong push to heat up the coffee wars with the introduction of Starbucks-owned Seattle’s Best, replacing the current BK Joe coffee program.