We should get the official Top 500 data from our sister company any moment now. But let me offer you this one, bold prediction: McDonald’s will remain the country’s largest restaurant chain.
The Chicago-based burger giant generated about $55.1 billion in system sales last year. It is the same size as the next two biggest restaurant chains, Starbucks and Chick-fil-A, combined. And it is a full five times as big as Burger King, McDonald’s longtime rival, which generated $11.1 billion in sales last year.
All of which made us curious when executives with Burger King said that the Miami-based chain can one day claim the crown as the nation’s largest burger chain, according to my NRN colleague Alicia Kelso. “It’s the right aspirational objective for the system,” Tom Curtis, Burger King’s president, said at parent company Restaurant Brands International’s February investor day.
It’s certainly a good goal to have. Good executives give their people something to shoot for, even if that goal seems insurmountable. That can energize teams and gives them focus. And it gives us something to write about, so I would like to encourage this sort of behavior.
And there is some precedent. In 2004, for instance, KFC was nearly triple the size of Chick-fil-A. By 2012, Chick-fil-A had surpassed KFC, in just eight years. Today, Chick-fil-A is about five times the size of KFC.
The example that Burger King uses is Domino’s versus Pizza Hut. In 2008, Pizza Hut was 74% larger than Domino’s. By 2017, Domino’s overtook Pizza Hut to be the largest pizza chain in the U.S. and today Domino’s is twice the size of its longtime rival.
Yet it’s also worth putting this goal into context to understand just what kind of goal Burger King is setting here.
It’s a big one.
It would likely take some combination of elite growth from Burger King in the coming years, coupled with stumbles by McDonald’s, for that goal to be reached.
In both of the above examples, one growth chain overtook a leader that had fallen on hard times.
If McDonald’s sales flattens, Burger King would need to average 17.3% domestic system sales growth to overtake its larger rival by 2035.
To get there by 2046, Burger King would need to average 8.3% growth.
Yet both scenarios require McDonald’s to stop doing what it’s done for pretty much its entire existence: grow. And the brand doesn’t appear to be cooperating on that front.
McDonald’s grew system sales by 3% last year and has averaged 3.6% growth over the past 15 years. So let’s assume the brand keeps growing sales by 3% a year.
If Burger King grew by 10% a year, it would take the 25 years to overtake a 3%-a-year McDonald’s.
<If Burger King grew by 15% per year, it would take 15 years to overtake McDonald’s growing at 3% per year.
Any of these scenarios would require an extended run of elite growth. Chick-fil-A over the past 15 years averaged 13.5% annual system sales growth. Domino’s has averaged 7.6%. Both have slowed down more recently, because that happens. Long runs of double-digit growth are difficult to sustain for very long.
Burger King would need to become a hot chain with high-performing, consistent management, great franchisees and amazing marketing. It would need to expand into new dayparts, and breakfast would need to become a powerhouse, and the real estate would too. And it would need to do this for a long time.
We also looked at a more moderate and realistic scenario, in which the chain generates 5% annual sales growth.
If McDonald’s stays flat, it would take Burger King until 2059 to overtake its larger rival.
If McDonald’s grows by 3%, it would be No. 1 by 2109. The sun will probably supernova by then or maybe we’ll be underwater because of global warming or perhaps Taco Bell will win the fast-food wars.