Posted on: Saturday, July 10, 2004
OTHER BUSINESS
Wendy's, Burger King in dead heat
By Sara Thorson
Associated Press
COLUMBUS, Ohio — The burger wars aren't being fought with hamburgers, but with salads.
Wendy's is neck-and-neck with rival Burger King, poised to take over as the nation's No. 2 restaurant chain behind McDonald's, analysts said yesterday.
Associated Press But its burgers aren't what put the company there. Analysts say the chain's salads and atmosphere attract adult fast-food eaters, a market not covered by McDonald's often kid-focused strategies.
Since introducing its Garden Sensations salads in 2002, Wendy's sales have been fast catching up to Burger King. The chain offers six specialty salads, ranging from Taco Supremo to Mandarin Chicken. Burger King's menu has just two — Fire-Grilled Garden and caesar salads.
U.S. sales at Wendy's hamburger stores last year were about $7.3 billion, while Miami-based Burger King had sales of about $7.9 billion during the same period, according to estimates by Technomic, a Chicago company that tracks food service industry trends.
But Peter Oakes, a restaurant analyst with Piper Jaffray, said his estimates showed Wendy's and Burger King in a dead heat for 2003 sales — at $7.3 billion each.
Oakes predicted Wendy's sales would exceed Burger King's by about $200 million in 2004.
Either way, analysts agree Wendy's, based in suburban Columbus, is quickly closing the gap. Technomic estimates show that Wendy's was $1.5 billion behind Burger King in U.S. sales in 2002, compared with $600 million in 2003.
"It's highly likely that Wendy's will overtake Burger King in 2004," said Bob Goldin, executive vice president of Technomic. "A lot of that depends on how many units Burger King closes."
According to Burger King's Web site, it has 225 fewer stores now than it did in 2003, leaving it with 7,679. Meanwhile, Wendy's has set a goal to expand further into New England and California, building its U.S. store base to 8,500 to 9,500 stores by 2015. The chain now has 5,761 U.S. stores.
Burger King recently reported its fifth straight month of increased sales for stores open more than a year, but Morningstar Inc. analyst Carl Sibilski said that's still not encouraging.
"I highly doubt that this is a turnaround for them," he said. "Their CEO has departed and they seemed confused over their marketing strategy. I don't even know what they stand for anymore."
Burger King chief executive Brad Blum left earlier this month over strategic differences with its board of directors. Before Blum left, Burger King had changed its marketing strategy for the fifth time since 2001.
Recent plans have included promoting fire-grilled or bun-less burgers and introducing chicken baguette sandwiches, but Sibilski said the constant changes are confusing to customers. Although the company said last month that sales of its new salads were higher than expected, analysts have said that several of Burger King's plans, including introducing the salads, largely have fallen flat.
Wendy's has found success by promoting a mature atmosphere, Sibilski said. By emphasizing the late-night hours of its playground-free restaurants, the chain has attracted adult diners along with families.
Bob Bertini, a Wendy's spokesman, said the restaurant wasn't concerned about muscling out competitors.
"Our focus is on our customers and not passing Burger King," he said. "We want to give them the best possible food, service and experience."
Burger King and McDonald's officials did not return calls seeking comment yesterday.
Though neither Burger King nor Wendy's appears to be gaining on Oak Brook, Ill.-based McDonald's — the fast-food giant had U.S. sales of $22.1 billion in 2003, according to the Nation's Restaurant News magazine — its market isn't guaranteed, Sibilski said.
"The biggest problem in fast food is the customer can walk across the street to the competition," he said.
A Wendy's restaurant sign stands near a neighboring Burger King restaurant in Cold Spring, Ky. Wendy's is neck-and-neck with rival Burger King, behind McDonald's, analysts say.
