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Fast food chains have historically been the industry standard for value seekers, but that perception is changing, as we discussed in our latest Big Pizza post.
The price of a McDonald's Quarter Pounder with Cheese meal more than doubled in price from $5.39 in 2014 to $11.99 this year, according to FinanceBuzz. And an $18 Big Mac combo recently went so viral on social media that McDonald’s executives responded with an open letter to clarify their price hikes.
As inflation-weary Americans increasingly cut back on eating out, chains like McDonald’s, Burger King, and Wendy’s are battling fiercely over fewer consumer dollars.
But each of these brands are taking alternate paths. McDonald’s—relying on its global scale and deep marketing and innovation budgets—is looking to significantly increase its digital penetration. By having more data on their guests, they expect they can more quickly adapt to changes in their behavior and the broader environment. On the other hand, Burger King and Wendy’s are relying on more traditional approaches, including leaning further into value, aggressively expanding into new dayparts, or modernizing their store experience.
Here’s a deep dive into how the burger giants are navigating rising inflation and a more discretionary consumer environment.
McDonald’s prices grew 10% in 2023, contributing to weaker demand over the past two quarters. The brand saw its most notable traffic declines with lower-income consumers (those making less than $45K a year). “Consumers continue to be even more discriminating with every dollar that they spend as they face elevated prices in their day-to-day,” CEO Chris Kempczinski said during McDonald’s Q1 earnings call. The brand’s 2.5% same-store sales growth in the U.S., which missed analysts’ expectations, was largely due to pricing, while traffic was flat to down.
For the remainder of 2024, McDonald’s hopes to lure in more guests by maximizing the competitive strengths outlined in its Accelerating the Arches growth strategy. The all-encompassing strategy revolves around its three key pillars— maximizing marketing, committing to the core, and doubling down on the four Ds (delivery, digital, drive-thru, and development).
To maximize marketing, the chain plans to shift to a national value platform in the U.S. over “doing it in 50 different ways with local value,” and use its media muscle to drive awareness of the platform.
While the U.S. isn’t lacking value—in fact, 90% of the system is offering bundles for $4 and below—McDonald’s believes they need to do a better job of breaking through the noise in an increasingly competitive, value-driven environment. “We have a lot of great value out there in the market. We’re just doing it in a very fragmented way,” Kempczinski said.
As McDonald’s continues to see rapid growth in its digital channels, with a 40% digital mix in its top six markets, Kempczinski believes the chain’s “biggest” opportunity to acquire new customers, build more valuable customer interactions, and drive frequency is through “aggressive investments” in its digital business.
Beginning in 2025, U.S. franchisees will contribute to a new Digital Marketing Fund that will funnel “hundreds of millions of dollars” into accelerating digital initiatives. Goals include expanding the loyalty program by 100 million global members, doubling the system-wide sales attributable to those users, and growing mobile app orders to 30% of system-wide sales.
MyMcDonald’s Rewards, the chain’s loyalty program and “single biggest driver of digital adoption,” grew its membership over 45%, generating $6 billion in sales in Q1. “As we continue to attract millions of new loyalty members, we can get even smarter with our pricing methodology and tailor our digital offers to our fans, making them even more personalized,” Kempczinski said during McDonald’s Q1 earnings call.
Similarly, as we approach a cookie-less marketing world, data from first-party channels will enable McDonald’s to better market to its customers with the right message and the right offer at the right moment, driving profitability. “Maintaining our leadership position requires modernizing our marketing model to personalize how we reach, serve, and connect with our fans,” the company said in a memo.
As the largest restaurant chain in the world by unit, McDonald’s is banking on leveraging its substantial resources to achieve technological dominance. With more data, the brand can understand its customers on a level far outpacing its competitors and leverage personalization to adapt to changes in the broader market. "We strongly believe that technology and digital are a scale game,” CFO Ian Borden said. “We can invest more than anyone in our industry, because of our size and level of resources that we have.”
Q1 marked the second consecutive quarter that Burger King reported stronger U.S. same-store sales growth than McDonald’s. The chain’s quarterly U.S. comparable sales increased 3.9% with revenues of $350 million, helping parent company Restaurant Brands International (RBI) beat investor estimates for earnings and revenue. First-quarter traffic also remained positive and “outperformed the industry,” said RBI CEO Joshua Kobza during the company’s earnings call.
Kobza attributes these results to the brand’s Reclaim the Flame strategy, which was launched in September 2022 to accelerate sales growth and drive franchisee profitability. The plan centers around a sweeping modernization program, with a $300 million investment toward modernizing up to 90% of Burger King restaurants by 2028.
Central to the chain’s modernization goals is the next-generation “Sizzle” design. Featuring kiosks, double-lane drive-thrus, and efficient in-store mobile order and pickup options, “Sizzle” isn’t just a design overhaul—it’s a strategic move to enhance the guest experience and adapt to evolving consumer preferences. According to an analysis, the 608 Burger Kings that underwent a remodel to the modern image standards in 2023 saw a 13% sales lift and an 11.7% boost in traffic. “We are committed to giving our guests the very best experience in all our restaurants and that includes a modern, exciting restaurant image and digital experience that exceeds their expectations,” Burger King president of North America Tom Curtis said in a statement.
The Reclaim the Flame plan also outlines an increase in advertising firepower, with $150 million set aside for marketing and digital investments, as the chain looks to draw budget-conscious customers to its value-driven menu items. While McDonald’s is focused on a national value plan, Burger King has several existing budget products—like its $5 Duos and $2.99 wraps—that have effectively driven sales while “having a balanced margin profile for franchisees,” according to Kobza. Alongside a recently launched $5 “Your Way Meal,” Burger King also plans to introduce two other value platforms over the remainder of the year, according to a report. “Burger King is accelerating its value offers after three quarters of leading the industry in value traffic,” a spokesperson told TODAY.com.
Burger King’s Q1 sales lift and traffic gains from price-sensitive consumers demonstrate that the chain’s attention to operations and solid value proposition is yielding positive results. “Our priority is to continue enhancing our value proposition through our quality food and beverages at attractive price points, improved operations and delivering a modern convenient experience for our guests,” said Kobza.
While McDonald’s expands its digital investments to learn more about its guests and build a data advantage, Burger King remains in “reclaim” mode, reminding guests of their traditional reliance on value, while improving core operations. These are two drastically different approaches to serving guests in a tougher environment. It’ll be fascinating to see how these investments will pay off in the long-run.
Wendy’s reported a modest 0.9% same-store sales increase year-over-year in the first quarter, driven by pricing. Like other QSRs, Wendy's is facing challenges stemming from consumer spending pressure, with traffic declining among low-income households, defined as those making $75,000 or less. On a brighter note, the company witnessed high-single-digit year-over-year U.S. breakfast sales growth and an over 30% year-over-year increase in digital sales, reaching a global digital sales mix of nearly 17% in Q1.
Introduced four years ago, Wendy's breakfast daypart now represents around a third of same-store sales growth and is “one of the most compelling levers when considering sales growth and margin acceleration opportunities,” according to Tanner. In February, the burger giant announced a $55 million investment toward breakfast advertising in the U.S. and Canada, split evenly in 2024 and 2025. Alongside a ramp-up in marketing, the chain is betting on its value-driven breakfast items, such as the 2-for-$3 Biggie bundle, and innovative new products, like the partnership-sponsored Cinnabon Pull-Apart, to continue driving morning sales.
The breakfast category remains compelling for both its consumer value prop and cost profile. Not only does breakfast require low staffing needs, but it has cheaper inventory costs (bread and eggs are cheaper than beef patties).
Breakfast diners are also more habitual, which can boost digital sales and result in higher loyalty program participation. “[Breakfast] has the highest level of loyalty,” former CEO Emil Brolick told Nation’s Restaurant News. “You get up in the morning and you have a routine. You follow that routine. Once you get embedded in that routine, it’s hard to change people from that.” While McDonald’s is currently the dominant player in the breakfast space, with 30% of sales deriving from its morning business, Wendy’s hopes its investments in the category will yield a 50% bump in its breakfast business. This growth would put it on par with Burger King, which gets 15% of its total sales from breakfast.
Another key investment for Wendy’s is digital infrastructure, with the brand pouring in $15 million this year to enhance its mobile app and loyalty capabilities. In the past 5 years, the chain’s digital sales have swelled from $250 million in 2019 to nearly $2 billion last year. For Tanner, the impact is clear: digital orders are larger and more profitable. “We are clearly seeing the benefits of the higher frequency and checks that digital drives,” he said. “There’s a massive opportunity to benefit even more from the margin expansion these channels can generate.”
With store traffic pressured as consumers tighten their wallets, Wendy's is banking on its compelling value and investments in breakfast marketing and digital upgrades to accelerate its growth and remain competitive.
Amid inflationary pressures, fast food brands are adopting what McDonald’s CFO Ian Border coined “a street-fighting mentality” to compete for fewer consumer dollars.
One shared focus for the three burger giants is a need to put the guest first—whether that means offering exceptional value, modern and customized digital journeys, or targeted marketing efforts.
The large brands are investing hundreds of millions of dollars to remain relevant and competitive in the current operational environment. For the many others that lack the same resources, they rely on Bikky for the same level of insight and to guide their strategic decision-making.
To learn more about how Bikky can help your brand understand your guests and how your own digital and operational changes impact traffic, frequency, attachment, and lifetime value, click here.
The customer data platform built exclusively for multi-unit restaurants.