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Chick-fil-A, not Burger King or Wendy’s, is McDonald’s biggest competitor

The chicken sandwich chain, which will soon be the country’s third-biggest restaurant, caters to the same customers, says RB’s The Bottom Line.
Photograph: Shutterstock

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When we think of McDonald’s primary competitors, most of us—myself included—automatically think of Burger King and Wendy’s, the other two in what is considered the “big three” fast-food burger chains.

But, as of today, neither stands as McDonald’s largest competitor.

That mantle goes to Chick-fil-A.

As it is, based on recent growth projections, the Atlanta-based chicken chain’s U.S. system sales will likely leapfrog sales at Wendy’s and Burger King this year. Absent a dramatic slowdown next year, it should surpass Subway to become the country’s third-largest restaurant chain, based on the Technomic Top 500 Chain Restaurant Report.

In 2017, according to Technomic data, Chick-fil-A increased its system sales by $1.1 billion—twice the growth of Wendy’s and Burger King combined. Based on Technomic Transaction Insights data, this year’s growth rate appears similar.

The only chain last year to generate more system sales growth than Chick-fil-A was McDonald’s.

It’s important to note that Chick-fil-A will not overtake McDonald’s total U.S. market share anytime soon. If Chick-fil-A were to grow at the same rate it did last year (14.2%) and McDonald’s simply stood still, it would take Chick-fil-A 21 years to surpass the Chicago-based giant. McDonald’s is very big.

But McDonald’s is clearly paying Chick-fil-A a lot of attention. While the company started making fresh beef burgers earlier this year, it has probably focused even more intently on its chicken products. It removed antibiotics from its chicken and improved the quality of its Chicken McNuggets.

The chain added a Buttermilk Crispy Chicken Sandwich, then a tenders version late last year that proved to be so popular operators ran out quickly. The company is testing made-to-order chicken and earlier this year signaled strongly that it would be a bigger player in the chicken business, a clear shot at Chick-fil-A.

Chick-fil-A might not sell burgers like Burger King and Wendy’s and McDonald’s do, but its menu is nevertheless competitive with all three chains. It sells breakfast, for instance, along with sandwiches, wraps, nuggets and chicken strips, including grilled options.

It also targets families, which has long been McDonald’s bread and butter. And Chick-fil-A’s strength with that group stands as a major competitive challenge for McDonald’s going forward, if it hasn’t been one already.

And it’s notable that Chick-fil-A has done this without resorting to the massive discounts or constant new product offers—the company expects to finish 2018 without a new product for the first time in years, for instance. And any new product has to come along with a reduction in overall complexity, Chick-fil-A CFO Brent Ragsdale said during the Restaurant Finance & Development Conference last month.

Nor does Chick-fil-A over-store itself.

The chain generated its system sales last year with incredible, $4 million average unit volumes in just more than 2,200 locations. That’s less than half the number of Wendy’s and a third of the units of Burger King. Both of those chains are focused on unit count growth—pushing operators who wish to buy new units to agree to development schedules.

Chick-fil-A’s focus on service has won it a stellar reputation that has enabled the chain to remain competitive even in a period of overall weakness for the fast-food business. It should serve as a lesson to its fellow competitors that service and quality remain the two best elements to ensure a chain’s long-term success.

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