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.

  • Grenade attack on home of Kosovo TV chief over border deal
    Grenade attack on home of Kosovo TV chief over border deal AFP News - 15 minutes ago

    A shadowy activist group in Kosovo claimed responsibility Monday for an attack on the home of Kosovo's public broadcast chief, in protest over a controversial border deal. "An explosive device was thrown into the backyard" of Mentor Shala, general … More »

  • 'IS suicide bomber' kills 71 army recruits in Yemen
    'IS suicide bomber' kills 71 army recruits in Yemen AFP News - 24 minutes ago

    An Islamic State group militant rammed his explosives-laden car into an army recruiting centre in Aden Monday, killing 71 people in the deadliest jihadist attack on the Yemeni city in over a year. The army, supported by a Saudi-led coalition, is … More »

  • Brussels crime lab attacked to 'destroy evidence'
    Brussels crime lab attacked to 'destroy evidence' 35 minutes ago

    Attackers rammed a car through the gates of Belgium's national crime laboratory on Monday in Brussels and then started a fire in what officials said may have been an attempt to destroy evidence. The incident comes as Belgium remains on high alert … More »

  • Cyber threat grows for bitcoin exchanges Reuters - 1 hour 52 minutes ago

    When hackers penetrated a secure authentication system at a bitcoin exchange called Bitfinex earlier this month, they stole about $70 million worth of the virtual currency. The latest survey of 46 securities exchanges released three years ago by … More »

  • Dollar at three-week high, bonds and stocks sell off on hawkish Fed
    Dollar at three-week high, bonds and stocks sell off on hawkish Fed 2 hours 8 minutes ago

    The dollar rose to a three-week high against the yen on Monday, while bond yields surged to their highest since June and stocks sold off after senior Federal Reserve officials indicated a U.S. interest rate increase was on the cards soon. In the … More »

  • Greek economy grows in second quarter but strong rebound elusive
    Greek economy grows in second quarter but strong rebound elusive 2 hours 27 minutes ago

    Greece's economy grew modestly in the second quarter but weak demand and scant investment mean a strong rebound after years of recession remains elusive a year after the country nearly crashed out of the euro. Rating agencies Moody's and S&P are … More »

  • Global from Day One co-invests in New Zealand firm’s US$5M Series A round
    Global from Day One co-invests in New Zealand firm’s US$5M Series A round 2 hours 54 minutes ago

    Global from Day One is a cross-border technology fund with the majority of capital to be invested in New Zealand and Taiwanese startups Spotlight Reporting, a Wellington-based cloud software company, has secured US$5 million in Series A funding from … More »

  • Oil falls towards $49 on high output, strong dollar
    Oil falls towards $49 on high output, strong dollar 3 hours ago

    Oil fell towards $49 a barrel on Monday, pressured by high output from Middle East OPEC members and as a stronger U.S. dollar weighed on commodities. Iraq, which has exported more crude from its southern ports in August, will continue ramping up … More »

  • New suspected MH370 debris found in Mozambique
    New suspected MH370 debris found in Mozambique AFP News - 3 hours ago

    A South African hotelier said Monday he had picked up a piece of aircraft wreckage off the Mozambican coast in the latest possible find of debris from the missing MH370 flight. Mozambique's aviation authorities in Maputo said they had been informed … More »

  • Unbiased New Launch Review – Lake Grande
    Unbiased New Launch Review – Lake Grande Propwise.sg - 3 hours ago

    By KK Tong (guest contributor) 23 July 2016 was the official launch date of Lake Grande, a 99-year leasehold development (lease starting from 9 June 2015) in Jurong West. On the launch weekend, 436 units out of a total of 710 units were sold. The … More »

  • Australia's richest woman considers bid for country's largest ranch - source Reuters - 4 hours ago

    Australia's richest woman Gina Rinehart is partnering with Chinese developer Shanghai CRED to bid for S. Kidman & Co, the country's largest private land holding, a source close to the sales process said on Monday. Rinehart's participation in a bid … More »

  • iPhone spyware spotlights Israel's secretive surveillance industry
    iPhone spyware spotlights Israel's secretive surveillance industry AFP News - 4 hours ago

    The discovery of sophisticated spyware to infiltrate and remotely take control of iPhones without leaving a trace has put a spotlight on Israel's secretive surveillance industry, considered among the world's most advanced. Apple rushed out a … More »

  • China Stock Traders Feel Heat With 774 Probes in Two Months (3) Bloomberg - 4 hours ago

    Liu Shiyu, who was appointed chairman of the China Securities Regulatory Commission in February, has emphasized the need for a tough stance on market excesses. The moves come amid signs China’s policy makers are also looking to cool gains in the … More »

  • SE Asia Stocks-Fall as Fed rate hike signals get louder Reuters - 4 hours ago

    By Aparajita Saxena Aug 29 (Reuters) - Most Southeast Asian stock markets closed lower on Monday after comments from U.S. Federal Reserve Chair Janet Yellen hinting at an interest rate hike weighed on ... … More »

  • US rate guesswork weighs on stock markets
    US rate guesswork weighs on stock markets AFP News - 4 hours ago

    Stock markets across the world dipped Monday as investors tried to second-guess the US Federal Reserve on the timing of its next interest rate hike. In a much-scrutinized speech, Fed chief Janet Yellen on Friday hinted at a US interest rate rise by … More »

  • Yuan Trades Near Five-Week Low as Fed Signals Renew Pressure Bloomberg - 4 hours ago

    China’s exchange rate fell as much as 0.24 percent as a gauge of dollar strength extended gains. The odds of a Fed rate increase in September shot up to 42 percent following comments from Chair Janet Yellen that the case to raise U.S. borrowing … More »

  • Marilyn Monroe’s Tokyo Honeymoon Spot Worries About Yen Rise (2) Bloomberg - 4 hours ago

    (Bloomberg) -- Tokyo’s Imperial Hotel, the luxury inn that counts Marilyn Monroe among past guests, raised room rates last year to levels it last charged before Japan’s bubble burst in the early 1990s. A surging yen now threatens those gains. … More »

  • Gold hits near 5-week low after Fed strikes hawkish note
    Gold hits near 5-week low after Fed strikes hawkish note Reuters - 4 hours ago

    Gold slid to a near five-week low on Monday after comments from top Federal Reserve officials fuelled speculation that U.S. interest rates would rise sooner rather than later, weighing on the dollar. Speaking at a meeting of leading central bankers … More »

  • Dollar at 3-week high, bonds and stocks sell off on hawkish Fed
    Dollar at 3-week high, bonds and stocks sell off on hawkish Fed Reuters - 4 hours ago

    The dollar rose to a three-week high against the yen on Monday, while bond yields surged to their highest since June and stocks sold off after senior Federal Reserve officials indicated a U.S. interest rate increase was on the cards in the near … More »

  • GIC Said to Pay Less Than $400 Million for Vietcombank Holding Bloomberg - 5 hours ago

    The Singapore sovereign fund will buy Vietcombank stock at a discount to the current market price, the people said, asking not to be identified because the information is private. GIC, which manages Singapore’s foreign reserves, said in July that … More »

  • Malaysia's closing tin prices for Aug 29 Reuters - 5 hours ago

    KUALA LUMPUR, Aug 29 (Reuters) - Following is a table of Kuala Lumpur tin market prices provided by a Malaysian trader. (Prices in $/tonne, and volumes in tonnes unless stated) Date KL Premium/ Spot Bid ... … More »

  • Suicide attack kills 18 in Iraq oasis town
    Suicide attack kills 18 in Iraq oasis town AFP News - 5 hours ago

    Attackers armed with suicide vests, rifles and grenades killed 18 people in the Iraqi oasis town of Ain al-Tamer, many of them guests at a wedding party, local officials said Monday. One of them blew himself up and the others were killed by the … More »

  • A sneak-peek into an upcoming billion dollar fund to bridge SEA and China
    A sneak-peek into an upcoming billion dollar fund to bridge SEA and China e27 - 5 hours ago

    As Chinese companies invest more in Southeast Asia, CC Zhuang’s fund is likely to be an important building block in constructing the bridge We now have an idea of what CC Zhuang is up to after leaving Qunar, the largest online travel booking company … More »

  • Singapore's GIC to take 7.7 percent stake in Vietnam's Vietcombank
    Singapore's GIC to take 7.7 percent stake in Vietnam's Vietcombank Reuters - 5 hours ago

    Singapore sovereign wealth GIC Pte Ltd said on Monday it will acquire a 7.73 percent stake in Vietcombank (VCB.HM), Vietnam's biggest lender by market capitalisation. GIC will purchase 305,810,895 new shares in Vietcombank as part of the deal, it … More »

  • Prada Shares Surge as Chairman Forecasts Improvement in 2017 (1) Bloomberg - 5 hours ago

    This year “is a turning point and we are now firmly on the path to sustainable growth in revenues and earnings from as early as 2017,” Mazzi said on an Aug. 26 conference call after the Hong Kong market closed. First-half earnings before interest, … 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.