Some people like to bash fast-food chains – or more specifically, what they offer. It seems these people believe they’re the arbiters of what everyone should eat. They have a beef with companies such as McDonald’s Corporation (NYSE:MCD), Burger King Worldwide Inc (NYSE:BKW), Jack in the Box Inc. (NASDAQ:JACK), and others of their ilk.
Despite all the negativity, most people will make their own choices of what, when, and where they’ll eat. I guess that’s good old American freedom of choice. Some people hate these companies, while others enjoy fast-food dishes and the companies that provide them.
Do the jabs at these companies by “holier than thou” special interest groups hurt? They might be a bit of a nuisance – all the way to the bank. These companies are here to stay, and here’s why investors should consider them.
Consumers Truly Want What they Offer
The proof is in the sales. According to a report on March 11, 2013, at BurgerBusiness (burgerbusiness.com), “Now it’s possible to assemble a snapshot of the Top 7 chains (with estimated numbers for Wendy’s and Jack in the Box Inc. (NASDAQ:JACK); others’ numbers are from company filings). Combined domestic sales for these chains last year were $63.57 billion.”
For the full year 2012, McDonald’s Corporation (NYSE:MCD) global comparable sales increased 3.1%. Sales in the United States were up 3.3%. Yes, McDonald’s reported recently that global comparable sales decreased in February 2013 by 1.5%, and that their U.S. sales decreased 3.3%. However, the company noted that February of the prior year had one extra day due to the leap year. Considering this, McDonald’s global comparable sales were actually up 1.7%.
The above-mentioned $63.57 billion is a significant sales number (that’s just domestic sales); even a major increase in tofu and quinoa restaurants wouldn’t put too much of a dent in these sales in the coming years. Try asking your kids if they’d like a nice Friday night tofu burger and a salad next time they’re hungry. You know what the answer’s going to be… and so do the burger chains. Whether you like that fact or not, it’s something you, as an investor, should consider.
For the first quarter of fiscal 2013, Jack in the Box Inc. (NASDAQ:JACK) Chairman and CEO, Linda A. Lang, said, “Jack in the Box company same-store sales increased 2.1 percent and system same-store sales increased 1.9 percent in the first quarter. Jack in the Box system same-store sales growth for the quarter exceeded that of the QSR sandwich segment for the comparable period, according to The NPD Group’s SalesTrack Weekly for the 16-week time period ended Jan. 20, 2013. Included in this segment are the top 15 sandwich and QSR burger chain competitors.”
Jack in the Box recently reported their FY2013 guidance. The company expects same-store sales to increase roughly 1.5 to 2.5 percent at Jack in the Box Inc. (NASDAQ:JACK) company restaurants. The company also has their Qdoba restaurants. They expect same-store sales to increase about 1.0 to 2.0 percent at Qdoba restaurants. This might not be gangbusters growth, but it is growth nonetheless in a very competitive market.
Burger King recently reported fourth quarter and full year 2012 results. For the fourth quarter, system-wide comparable sales increased 2.7%. System-wide sales increased 6.7% (on a constant currency basis). Meanwhile, for the full year 2012, system-wide comparable sales increased 3.2%. System-wide sales increased 5.9% (again, on a constant currency basis).
Burger King experienced U.S. and Canada, Europe, the Middle East and Africa (EMEA), Latin America and the Caribbean (LAC), and Asia Pacific (APAC) comparable sales growth, to varying degrees. Investors should consider investing in companies with broad-based geographical footholds with expanding sales in each region. Burger King is also experiencing surprisingly strong performance in their growing Russian marketplace.
They’re Always on Trend Concerning Menus
Hot trends aren’t exclusive to the health foods sector. Consumers want new taste sensations, and they’re getting them from fast-food burger chains. For example, Burger King has a new Avocado and Swiss Whopper. They also have new Bacon Gouda Sandwiches, and new Philly Chicken and Italian Chicken Sandwiches. They’ve even tossed in new Cheesy Tots for good measure. The company’s also expanded their specialty coffee menu.
Concerning Burger King’s 2012 full year results, investors should note this statement from the company in their Feb. 15, 2013 press release: “Successful new menu additions such as the Chicken Parmesan sandwich, Cinnabon Minibon Rolls, and our holiday sweets menu, including sweet potato curly fries and gingerbread desserts, helped drive comparable sales growth.”
While beef is core to the company, they’re also growing sales from offering “trendy foods” as well. For instance, McDonald’s Corporation (NYSE:MCD) is set to offer a yolk-free version of their popular Egg McMuffin. Additionally, Jack in the Box has their new Hot Mess Burger, which includes sliced jalapeños on sourdough bread. Investors should consider burger chains that continually energize their product mix to suit consumers’ taste buds.
They Have Strength in Numbers
McDonald’s has over 34,000 locations in 119 countries. Burger King operates close to 13,000 locations in 86 countries and territories. Jack in the Box’s system total (at Jan. 20, 2013) consisted of 2,255 Jack in the Box restaurants and 636 Qdoba (Mexican Grill) restaurants. Jack in the Box opened 16 new restaurants in the first quarter of fiscal 2012 and 9 new restaurants in the first quarter fiscal 2013.
They’re Always Strategizing
In December 2012, Burger King announced that in the Latin America and Caribbean region, they launched a new Facebook page, mobile portal, and a guest relations tool. This is all part of the company’s digital marketing strategy to connect with their customers.
Recently, McDonald’s Corporation (NYSE:MCD) reported that their priority in Europe continues to be growing customer traffic through concentrating on innovative premium menu offerings and strong value. They are also focusing on the expansion of their breakfast in Europe and restaurant operating hours as well.
In their fiscal 2013 guidance, Jack in the Box Inc. (NASDAQ:JACK) reported their Qdoba Mexican Grill strategy. They expect to open 70- 85 new Qdoba restaurants, and they expect roughly 40- 45 to be company locations. Their strategy is to embrace consumers’ penchant for Mexican menu offerings.
What caveat is in place concerning companies who compete in the fast-food burger arena? More recently, it’s the press concerning horsemeat being an element of some burger patty offerings. It’s all a matter of perception and image. The scandal is taking place in Europe. Reports center on beef burgers containing some horsemeat and other non-beef elements such as pork, while being advertised as beef burgers. Eating horsemeat is not an anathema in some European countries; it is in North America, the UK, Ireland, and many other nations.
Fast-food chains are well advised to get the word out on what their burgers contain – and they had better be 100 percent beef, at least here in North America. A public relations campaign by burger chains in the U.S. and Canada highlighting the quality of their offerings is necessary to keep their customers and investors salivating.
So, this is where the beef is, in many ways. You probably don’t have too far to go in your community to find one or more of the popular burger chains. You don’t have too look too far to find some of them on the major indices either, where they’re grilling sales and building their businesses in an array of ways.
The article Here’s the Beef originally appeared on Fool.com and is written by Michael Ugulini.
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