The Wendy’s Company (WEN), McDonald’s Corporation (MCD), Burger King Worldwide Inc (BKW): Investors, Beware This Growing Fast Food Trend

So what is a good ratio of company-owned stores to franchisees? There is no single formula due to the differences in business models. Burger King Worldwide Inc (NYSE:BKW) may succeed in a 100% franchise model as it is setting up joint ventures with franchisees around the world, thus retaining a modicum of control. McDonald’s Corporation (NYSE:MCD) ratio of one out of every five system restaurants seems a balanced number. It’s hard to predict how much lower than this proportion McDonald’s can go and still retain its famous edge of consistency of product. This is why I am personally skeptical of The Wendy’s Company (NASDAQ:WEN) drive to reduce its company-owned stores all the way down to 15%.

Watch this trend going forward
In some ways, the push toward refranchising can be seen (somewhat) as taking the easy way out. The traditional fast food burger franchises have struggled for some years with competition from higher-grade, healthier dining options. Refranchising presents a novel way to achieve to bump up shareholder returns as it relieves companies of overhead. But in taking very important operational skin out of the game, the giant fast food chains may be further diminishing their ability to discern the appropriate mix of value, ambience, menu, and price to compete long-term with an ever-growing number of affordable dining options.

The article Investors, Beware This Growing Fast Food Trend originally appeared on Fool.com.

Fool contributor Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide (NYSE:BKW) and McDonald’s. The Motley Fool owns shares of McDonald’s.

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