The most important meal
Breakfast is one of the only product segments in the quick-service industry that continues to grow, but Burger King is under-penetrated compared with McDonald’s, Mizuho’s Scott says. Only 14 percent of the restaurant’s sales are in breakfast items, compared with 25 percent for McDonald’s, he says (though it’s worth noting McDonald’s serves breakfast all day, while Burger King does not).
Burger King is now trying to drive up that part of the business. For example, the company introduced limited-time double-meat breakfast sandwiches and cheesy bacon tots. But Powell says this innovation is more reactionary than anything. “McDonald’s now has cheesy bacon fries available nationwide, so it’s not surprising that Burger King would get in on the act,” he says. “RBI should leverage their knowledge of the breakfast category from Tim Hortons’ successes to better compete with McDonald’s, Starbucks, and Dunkin’ rather than be the ‘me too’ mover playing catch-up.”
Burger King is also investing in coffee. In March, the company rebranded its coffee platform from BK Joe to BK Café. That same month, it started offering a coffee subscription service where users who sign up on the app can enjoy a hot coffee every day for $5 per month. And in March 2019, Tim Hortons introduced its own program for breakfast lovers: After every seventh visit, guests can enjoy a free coffee, hot tea, or baked good (with the exception of Timbits and bagels). Five weeks later, about a fifth of Canada’s population had signed on.
When it comes to coffee, Scott points out, Burger King has an opportunity to profit from a soon-to-be-underserved market. Dunkin’ is moving upmarket with its coffee products, leaving room on the value end of the spectrum. This means Burger King could move into that space, complementing it with a lineup of breakfast sandwiches—such as the Croissant Breakfast Sandwich, which is the restaurant’s second-most popular entrée item.
To keep pace with the rest of the quick-serve industry, RBI has been working on mobile ordering, payment, and delivery, along with other off-premises business enhancements, for each of its core brands. For example, Burger King has been investing in outdoor menuboards, kiosks, and mobile pickup stations, and Popeyes went from zero restaurants that deliver in April 2018 to 1,300 restaurants that deliver as of this April.
“It’s all part of the process to link up the online/offline world that’s becoming increasingly disruptive with delivery,” Scott says. “They’re attaching it to new development agreements that they’re signing with franchises, so they can feel pretty confident that they’re going to get a lot of that upgrade pipeline filled in the next couple of years.”
Double drive thrus are another advancement Burger King is working on to compete in an industry where fast service is table stakes. The chain was already crowned the fastest drive-thru restaurant in the U.S. last year in QSR’s Drive-Thru Performance Study, and the double drive thrus and other enhancements, which were announced in late 2018, should boost the speed even more.
Marketing with wings
Seventy-nine percent of millennials say they spend money “eating at the hot restaurant in town,” according to a CNBC report, so it makes sense that the generation is greatly influencing quick serves’ marketing efforts. For the last two years, Cil has been hiring engineering students who are familiar with social media and creating apps, Powell says—and looking to young brands as examples to inspire RBI’s own branding.
Burger King’s unconventional advertising that pokes fun at its competitors is one example of how it’s marketing to a more youthful crowd. “I think they’ve gone after McDonald’s fairly specifically with a tongue-in-cheek approach,” Powell says.
Take the chain’s 2018 Whopper Detour stunt, where consumers who downloaded the upgraded Burger King app could buy a Whopper for just one penny—but they had to be within 600 feet of a McDonald’s to activate the offer. This initiative generated 1.5 million app downloads and a lot of press. And the latest marketing response to the Happy Meal is Burger King’s Real Meal, where customers can order a meal that matches their anything-but-happy mood, from “YAAS” to “DGAF.”
“That has turned out to be controversial, but it has brought attention to Burger King in a quirky manner,” Powell says. “But quirky marketing is hit or miss. While it might bring a lapsed user back for a promotion or LTO, it could also drive consumers toward McDonald’s, as the chain is top of mind during these marketing campaigns.”
Powell believes that while Burger King has made a solid effort at differentiation, it’s not a sustainable path for future promotions in the quick-service space. For example, it’s easy for competitors to undermine the advertising by scooping the chain on food or service. This does happen: When Burger King ran a commercial about how it’s the only major chain to offer spicy chicken nuggets, Wendy’s announced soon afterward that it’s bringing back that same menu item.
Overall, though, the menu experiments, stunt marketing, and technology improvements are just part of the foodservice business these days—and RBI is working to stay on top of the current of change. “This is a space that’s rapidly evolving, and right now, we’re undergoing a period of change in the [quick-serve] space that we haven’t really seen in several decades,” Hottovy says.