Daily Ticker

How Wendy’s Caught Up To Burger King

Follow The Daily Ticker on Facebook here!

There's been a disturbance in the natural order of things. In many important realms, competition has historically been dominated by a pair of competitors, the market leader and the long-running runner-up. Coke and Pepsi. Avis and Hertz. General Motors and Ford. McDonald's and. . . Wendy's?

Yep.

As Time reported last week, Techonomic, Inc.,, the restaurant industry consulting firm, is set to report in April that Wendy's has surpassed Burger King, which has been the Red Sox to McDonald's Yankees for nearly 40 years, as the second largest burger chain in the U.S. by restaurant sales volume. "Wendy's had sales of $8.5 billion in 2011, compared with $8.4 billion for Burger King." Wendy's overtook Burger King even though it has significantly fewer restaurants in the U.S. than Burger King does.

How did the perennial third-place burger joint managed to pull this off? As Aaron Task and I discuss (and taste) in the accompanying video, several factors help explain this surprising reversal.

Burger King, which underwent an ownership transition in 2010 and inexplicably retired the awesome King from its ad campaigns, has become less popular. As the company reported, same-store sales fell 4.4 percent in 2010 and another 3.4 percent in 2011. The chain is simply getting fewer dollars out of each outlet than it was a few years ago, either because traffic is down or because Burger King has held the line on prices to compete with McDonald's.

Wendy's has chosen a different path. Wendy's is aiming to occupy the ground in between cheap, quasi-nasty burger joints like McDonald's and Burger King and the rapidly proliferating high-quality burger chains like Five Guys. And it seems to be succeeding, to a degree. I made my first Wendy's visit in several years earlier this week. The Single, now served wrapped in paper in a cardboard stand, would have fared decently in a blind test with a burger from the Shake Shack. The menu is stocked with premium gut bombs, like the Baconator, that cost $4 and $5. More expensive burgers lead to greater sales. According to Wendy's recent earnings, same-store sales at Wendy's company-operated restaurants in North America rose 2 percent in 2011, and average unit volume in the U.S. "grew to an all-time high of $1.46 million."

There's a second factor at work. Burger King may no longer care as much about the U.S. market as Wendy's does. Burger King is much more of a global brand. It's owned by a Brazilian private equity firm, and has thousands of outlets outside the U.S. At the end of 2011, there were 7,500 Burger Kings in the U.S. and Canada, and another 5,012 planted around the world. Like Yum Brands, which owns KFC, Taco Bell, and Pizza Hut, Burger King is clearly staking its future on growth in rapidly growing emerging markets.

By contrast, Wendy's remains largely tethered to the U.S. As the company's 10-K shows (see page 26), Wendy's has 5,876 restaurants in the U. S., and only 718 outside the U.S., with most of those in Canada. So if the company can't get it right in the U.S., it doesn't have much of a future. As a result, Wendy's is investing in large-scale renovations, or what it calls "image activation," to make its U.S. restaurants more appealing. The company has focused on improving operations, and squeezing more dollars out of existing stores by adding breakfast. The breakfast menu includes Cinna-Middles, a brilliant innovation in junk food. Cinna-Middles have all the congealed sugar and frosting we've come to expect from airport cinnamon roll joints without the annoying dry and dusty outer layers.

Finally, it's also possible that Burger King got caught out it because it never took Wendy's seriously as a competitor. With its folksy ads, self-deprecating sense of humor, and unwillingness to engage in massive overbuilding, Wendy's never seemed to be all that much of a threat to Burger King and McDonald's. The gains it has registered in the past few years have come without any flashy marketing campaign.

A generation ago, Wendy's got under the skin of its competitors with its long-running "Where's the Beef" ad series. Now it's unsettling Burger King's crown simply by delivering more beef.

Daniel Gross is economics editor at Yahoo! Finance

Follow him on twitter @grossdm; email him at grossdaniel11@yahoo.com

His next book, Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy will be published in May and is available for pre-order.

  • ECB needs help from other policy areas as 'lower bound' looms Reuters - 3 minutes 51 seconds ago

    FRANKFURT (Reuters) - The European Central Bank's monetary stimulus needs to be complemented by action in other policy areas as the ECB is already operating near a "lower bound" where interest ... … More »

  • Malaysia's SapuraKencana posts quarterly profit on forex gain Reuters - 4 minutes 57 seconds ago

    Net profit rose nearly 8 percent to 112.3 million ringgit ($27.16 million) in its second quarter ended July 31 from 104.1 million ringgit a year earlier, the company said in a filing with the stock exchange. Revenue, however, fell to 1.68 billion … More »

  • Brewer AB InBev shareholders approve takeover of rival SABMiller
    Brewer AB InBev shareholders approve takeover of rival SABMiller AFP News - 12 minutes ago

    Shareholders of brewing giant Anheuser-Busch InBev approved the blockbuster takeover of rival SABMiller, the brewer said on Wednesday, clearing a major hurdle towards one of the biggest mergers ever attempted. … More »

  • Asian markets down, energy firms hit by oil deal woes
    Asian markets down, energy firms hit by oil deal woes AFP News - 15 minutes ago

    Tokyo stocks led a broad retreat in Asian markets Wednesday as the yen recovered, while regional energy firms struggled with crude prices on concern about the chances of success at an upcoming producers' meeting. Standard Chartered Bank fell two … More »

  • AB InBev to retain its name after SABMiller takeover Reuters - 34 minutes ago

    BRUSSELS (Reuters) - Anheuser-Busch InBev said on Wednesday that it would retain its existing name after a planned $100-billion-plus (76.89 billion pounds) takeover of rival SABMiller. SABMiller shareholders ... … More »

  • UK's Phoenix to buy Deutsche Bank's Abbey Life for $1.22 billion Reuters - 1 hour 1 minute ago

    (Reuters) - Phoenix Group Holdings, Britain's largest owner of life assurance funds closed to new customers, said it would buy Deutsche Bank AG's British insurance business Abbey Life Assurance Co for ... … More »

  • Two new tsars to be created as Airbus reorganisation takes shape
    Two new tsars to be created as Airbus reorganisation takes shape Reuters - 1 hour 6 minutes ago

    Airbus Group Chief Executive Tom Enders plans to expand a shake-up of Europe’s largest aerospace group by promoting two executives to oversee engineering and programmes as he forces through more "integration" to prepare for future competition. … More »

  • JTC launches Tuas site for sale
    JTC launches Tuas site for sale The Edge Property - 1 hour 9 minutes ago

    JTC has launced a confirmed-list site at Tuas South Link 2 (Plot 11) for sale by public tender. It is the third of the seven confirmed-list sites for the 2H2016 Industrial Government Land Sales Programme.The 53,997 sq ft site is zoned for business 2 … More »

  • Oil stages tepid rebound as hopes ease for output deal AFP - 1 hour 9 minutes ago

    Oil prices posted marginal gains in Asia Wednesday as an industry report showing a decline in US stockpiles was offset by worries about the chances of this week's key producers meeting ending with a deal ... … More »

  • Gold hits one-week low as dollar firms
    Gold hits one-week low as dollar firms Reuters - 1 hour 9 minutes ago

    Gold prices slipped on Wednesday to touch a one-week low, after suffering its biggest single-day loss in nearly a month in the previous session, on a firmer dollar. The safe haven asset slid nearly 1 percent on Tuesday, its biggest single session … More »

  • Motoring group AA posts first half revenue rise, sees no Brexit impact Reuters - 1 hour 13 minutes ago

    The results strip out any contribution from AA Ireland, which AA agreed to sell to a Carlyle Group fund and financial services buyout team in June for 156.6 million euros. The firm said it had not seen any impact of Brexit-related issues on its … More »

  • World Bank releases $300 mn for Syrian refugees in Jordan
    World Bank releases $300 mn for Syrian refugees in Jordan AFP News - 1 hour 13 minutes ago

    The World Bank announced it will release $300 million in loans to help facilitate the labor market for Syrian refugees in Jordan. The funds will be used to attract investors and create reforms that will help grant access to the Syrian labor force, … More »

  • European stocks climb at open AFP - 1 hour 14 minutes ago

    Europe's main stock markets rose at the open of trading on Wednesday, with London's benchmark FTSE 100 index climbing 0.3 percent to 6,826.28 points. In the eurozone, Frankfurt's DAX 30 grew 0.6 percent ... … More »

  • Zuckerberg initiative poaches AstraZeneca board member Reuters - 1 hour 14 minutes ago

    The $3 billion (2.3 billion pounds) health initiative set up by Facebook co-founder Mark Zuckerberg and his wife Priscilla Chan has hired one of AstraZeneca's non-executive directors to head up its science drive. The British drugmaker said on … More »

  • Yellen likely to face questions about Wells Fargo
    Yellen likely to face questions about Wells Fargo Associated Press - 1 hour 15 minutes ago

    Federal Reserve Chair Janet Yellen, who has been in the hot seat over the central bank's interest-rate policy, now has another headache: Wells Fargo. Yellen is likely to face sharp questions from a House ... … More »

  • Rolls-Royce appoints new strategy and digital executives Reuters - 1 hour 17 minutes ago

    British engineer Rolls-Royce appointed veteran M&A banker Ben Story to oversee its strategy and marketing, and Neil Crockett to develop its digital affairs, completing its new-look senior line up on Wednesday. Rolls-Royce, in the middle of a major … More »

  • BELOW $1 MILLION: Freehold one-bedder near Dhoby Ghaut
    BELOW $1 MILLION: Freehold one-bedder near Dhoby Ghaut The Edge Property - 1 hour 18 minutes ago

    A 474 sq ft one-bedroom unit at Parc Sophia has been listed on TheEdgeProperty.com at $898,000 or $1,895 psf.Parc Sophia is a freehold apartment on Adis Road. Completed in 2011, the 152-unit development is within 300m from Dhoby Ghaut MRT … More »

  • Trump has turned over tax returns _ for lawsuits and loans
    Trump has turned over tax returns _ for lawsuits and loans Associated Press - 1 hour 26 minutes ago

    While Donald Trump won't publicly release his income tax returns, the New York businessman has turned them over when it suited his needs — if he stood to make a profit, needed a loan or when a judge forced ... … More »

  • US fines RBS bank $1.1 bn over pre-crisis mortgages
    US fines RBS bank $1.1 bn over pre-crisis mortgages AFP News - 1 hour 29 minutes ago

    Royal Bank of Scotland on Wednesday said it had agreed a fine of $1.1 billion (982 million euros) with US authorities over the alleged mis-selling of mortgage securities ahead of the 2008 financial crisis. It comes a week after US authorities said … More »

  • Asian stock markets turn lower after Wall Street gains
    Asian stock markets turn lower after Wall Street gains Associated Press - 1 hour 36 minutes ago

    Major Asian stock markets were lower Wednesday after investors were reassured by trade-friendly Hillary Clinton's performance in a U.S. presidential debate with rival Donald Trump. KEEPING SCORE: Tokyo's ... … More »

  • Travel firm TUI Group nudges up full-year profit outlook
    Travel firm TUI Group nudges up full-year profit outlook Reuters - 1 hour 40 minutes ago

    Holiday company TUI Group lifted its 2015/16 core profit guidance on Wednesday, helped by strong demand from British tourists and a lower exposure than its biggest rival to Turkey which has been hit by security fears. TUI said on Wednesday that it … More »

  • Shareholders vote on AB Inbev-SABMiller beer megamerger
    Shareholders vote on AB Inbev-SABMiller beer megamerger AFP News - 1 hour 41 minutes ago

    Shareholders of brewing giants Anheuser-Busch InBev and rival SABMiller will vote on Wednesday on a blockbuster merger that would create the biggest beer company in the world. Belgium-based AB InBev, the brewer of Budweiser and Stella Artois, is … More »

  • Oil climbs after industry data shows U.S. inventory draw
    Oil climbs after industry data shows U.S. inventory draw Reuters - 1 hour 42 minutes ago

    Oil prices rose in mixed trading on Wednesday, after sharp losses in the previous session, as industry data showed a surprise draw in U.S. crude stocks, although worries over a lack of agreement among producers to curb output kept a lid on gains. … More »

  • 10 things in tech you need to know today
    10 things in tech you need to know today Business Insider - 1 hour 43 minutes ago

    Reuters/Beck Diefenbach Good morning! Here’s the tech news … Continued The post 10 things in tech you need to know today appeared first on Business Insider. … More »

  • Canada approves $36 bn LNG project, eyes Asia
    Canada approves $36 bn LNG project, eyes Asia AFP News - 1 hour 46 minutes ago

    Canada approved a massive Can$36 billion ($27 billion USD) project by Malaysia's Petronas to build a liquefied natural gas pipeline along its Pacific Northwest coast, targeting Asian markets. The project is the first deal by Canada's year-old … More »

Editors' Picks

Subscribe and RSS

[X]

How to subscribe

Roll over each section to subscribe using Add to My Yahoo or RSS Feed feeds.

Yahoo News offers dozens of RSS feeds you can read on My Yahoo or using a third-party RSS news reader software. Click here to find out more about RSS and how you can use it with Yahoo News.
 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.