RESOLVING THE LEDGER
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See the full story · 1 sourcesSome diners are turning away from McDonald's and toward rivals. Mike Kemp/In Pictures via Getty Images
McDonald's reported slowing sales growth for its second quarter.
Some customers are looking elsewhere for cheap meals, from Burger King to gas stations.
It's the latest evidence that the burger wars are heating up.
Peter Lauwers used to swing by McDonald's to buy dinner for his family on busy weeknights.
A few years ago, though, the Michigan-based father, who runs a mobile app development company, noticed rising prices for Big Macs and Quarter Pounders. The chain also offered fewer deals he liked, such as McDonald's former buy one, get one for $1 deal on burgers. He even started keeping a spreadsheet to track price changes at his local McDonald's.
These days, Lauwers said, he and his family don't go as often.
"It's got to be a special thing," Lauwers said, adding that his family's McDonald's visits are "maybe a quarter of what we used to do."
Lauwers is among the diners looking for other places other than McDonald's to get their burger fix. The chain's most recent quarterly sales growth slowed, while rivals like Restaurant Brands International's Burger King are gaining momentum.
This reordering of the burger hierarchy is happening as the economy has turned K-shaped in recent years, a situation where higher earners are spending consistently while lower earners are cutting back. That scenario has sent diners looking for value, and fast food chains that provide it are seeing the benefits.
McDonald's is still the largest fast-food chain by far, with systemwide sales of $139 billion last year. Burger King, meanwhile, had sales of $29 billion over the same period, and Wendy's reported $14 billion.
McDonald's CEO Chris Kempczinski said on an earnings call last week that the chain "simply didn't execute at the level we needed to," especially when it came to rolling out its latest value menu focused on items that cost under $3 each.
McDonald's declined to comment beyond the CEO's recent remarks.
The economy is also playing a role, said R.J. Hottovy, head of analytical research at location analytics firm Placer.ai. McDonald's customers skew lower-income than many other restaurant chains, Hottovy said, meaning that many have cut back their visits as gas prices have shot up and the lingering effects of inflation have hit their budgets.
"It is a tough background environment," he said, "particularly in the burger space."
All that is causing hungry Americans to wonder: Is there a better place to get a burger?
'I'd rather go to Burger King'
McDonald's stumble comes amid the rise of its historical rival Burger King, which has been investing heavily in its turnaround with restaurant revamps, technology, and value-oriented deals. In February, it projected spending $700 million on the improvements through the end of 2028.
Marketing has been part of that push, too. During the Oscars in March, Burger King ran multiple commercials admitting its mistakes, firing its King mascot , and touting an improved Whopper recipe .
A Burger King restaurant in London John Keeble/Getty Images
Burger King has also benefited from the stumbles at Wendy's, which cut its dividend last week to support turnaround efforts. The Ohio-based chain reported that U.S. same-restaurant sales dropped 7% in the second quarter.
Meanwhile, Burger King's second-quarter US sales increased 8.5% — a faster clip than the 0.8% growth that McDonald's posted. Whopper sales have increased 20% since the chain unveiled the new version in February.
"We're selling a lot more full-priced whoppers, and it's a great value on a standalone basis," Sami Siddiqui, CFO of Restaurant Brands International, Burger King's parent company, said on the company's earnings call last week.
Burger King also saw a boost from its $5 Duos and $7 Trios menu, which allows customers to pick two- or three-item meals from offerings like a Whopper Jr. and chicken fries.
"Providing great value across the menu with the right mix is really the formula," Siddiqui said.
That strategy contrasted with McDonald's approach, which attracted customers for years with its dollar menu. Even after eliminating it in 2013, the chain used other promotions to draw in diners, from the buy one, get one for $1 deal or meals marketed with celebrities such as Travis Scott .
A recent Business Insider survey of McDonald's customers, which attracted almost 600 responses, shows that many are frustrated with the offerings now and are looking elsewhere for their next burger.
"What was a $6 lunch is now a $10 lunch," one respondent wrote, adding that they "skip Mickey's now" in favor of other options nearby, including Wendy's and Taco Bell.
"I'd rather go to Burger King," another wrote. "The prices are the same, more or less, but it tastes better, it's faster, and the burgers are bigger."
Chili's is making headway in the burger wars : Jeffrey Greenberg/Education Images/Universal Images Group via Getty Images
Chili's and Buc-ee's join the burger wars
McDonald's isn't just competing with other fast-food chains these days.
There's Chili's, the sit-down restaurant chain that has turned around its financial results over the last two years. Part of its strategy: Offer burgers and other menu items that compete on ingredients and price with McDonald's, such as the Big QP Burger , which looks suspiciously like a Quarter Pounder.
"The fact that you even put Chili's as a rival to McDonald's — we would've never said that before," said Mike Perry, founder and chief creative officer at Tavern, an agency that works with restaurant and hospitality clients.
Many convenience stores , such as Sheetz, Wawa, and Buc-ee's, have also become more reputable for their fast food, Placer.ai's Hottovy said. "The stigma with some of these convenience store operators has gone by the wayside," he said.
Lauwers, the father in Michigan, said he's cooking more at home instead of g...
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