How America's Upstart Burger Chains Will Help McDonald's

Photo credit: jkbrooks85

Quick: What’s the best chain burger in America?
This is not a McDonald’s vs Burger King question. Neither of those chains even made the top 10 in a recent poll of more than 7,000 burger lovers by customer-research firm Market Force Information.

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The winner was Five Guys Burgers & Fries, followed by California-based regional cult-fave In-N-Out Burger. Rounding out the top five: Fuddruckers, A&W Restaurants, and up-and-comer Smashburger (see chart below for the full list).
McDonald’s, Wendy’s, and Burger King clearly aren’t the biggest burger chains because America craves their burgers most. Only two old-time chains, Carl’s Jr. and Wendy’s, managed to sneak into the lower ranks of the top ten in terms of burger taste.
The success of these top chains hinges on four factors:

• Habit — Many older diners have decades of established patterns of grabbing a McDonald’s burger. They grew up with and trust the McDonald’s brand.
• Real estate — Diners flock to McDonald’s in large part because with more than 14,000 locations, it’s nearby.
• Price — Those $1 menus really bring value-driven customers in. This is the only place McDonald’s scored well in the survey.
• Advertising — These chains advertise relentlessly, constantly putting their name in front of diners.

Over the next couple of decades, much of the advantage will swing to the better-burger upstarts, setting up an increasingly pitched battle for the shrinking value-burger audience. As Five Guys and other quality burger upstarts expand, that may further weaken the position of the old-time burger also-rans.
Several of the upstart better-burger chains are growing fast, including Five Guys. Soon, for many diners, a Five Guys or Smashburger might be just as easy to visit.
Also, these chains tend to rely, as In-N-Out always has, on word of mouth as their primary form of advertising. They cultivate an under-the-radar, cultish fandom rather than trying to be the brand with mass appeal.

Source: Market Force

The lack of big, national TV ad campaigns gives the new chains a distinct cost advantage. Combine that with above-average typical unit sales — Whataburger‘s $1.8 million per unit is higher than any top-10 competitor by sales except McDonald’s — and you have a formula for higher profits.
The growth of the foodie movement means more people are switching to better-quality food, shrinking the audience for the lowest-common-denominator burger. The habit of eating the nearest cheap burger is fading and, as the survey put it, more and more customers are “voting with their palates rather than their wallets.”