The discounting at Full Service chains is having an impact on QSR!
BKC failure to be irreverent in its advertising strategy has put the company in panic mode. In a business where you are in competition with a company like McDonald's, that out spends you by a multiple of three and can currently do no wrong, any misstep is painful.
Apparently, Burger King plans to focus more of its advertising message on value items. The value message has been working for a year at MCD and more than six months at Wendy's and now the marketing department at BKC have determined that "The current marketplace is demanding value and the company is being responsive to that consumer-driven demand." This is embarrassing!
Burger King focused on premium products; trying to capture market share from casual dining chains was a mistake from the beginning. In a difficult economy, a concept highlighting premium products in a segment of the restaurant industry that has a perceived value bent has proven very difficult to achieve.
The aggressive value message being put forth by the casual dining chains cannot be ignored, and courtesy of Burger King we now have proof of the fact.
While the increased discounting can negatively impact margins if not handled properly, declining food can mitigate some of the margin pressure. On the margin, the increased discounting definitely takes away any potential upside there may have been and increases the risk to the downside.
The news on Burger King only confirms my negative thesis on CKE Restaurant (CKR) as it continues to try holding the line on discounting. The continued decline in traffic at the core Carl's Jr. will ultimately force the company to give up some margin to get more people in the door!
Was anyone really going to buy an "Angry Whopper" with an Ad like this.....?