F i n a l P r o j e c t :B u r g e r K i n g W h o p p e r v s .

M c D o n a l d ’ s B i g M a c

Navdeep MannKanika SainiFatema KhatibDavid LoureiroAdrian D’Andrea

Although the concept of fast food has been around for centuries, the fast food industry has become one of the fastest growing sectors in North America. Today, the term fast food has often been referred to as unhealthy, cheap and ready to go meals. With the growth of multinational fast food chains, consumers have grown accustom to receive food on demand without having to wait or resort to cooking. The image and influence of the fast food industry has now become part of modern day living.

We chose this particular category due to the image that the fast food companies have developed in the media and conflicting perceptions of the general population. The two companies that we chose to analyze and compare are Burger King vs. McDonald’s.

Market: Quick Service Restaurants (Appendix B)

Product Category (Appendix A): Mid-Tier Ham Burger specifically Big Mac vs. Whopper. The product category is Mid-tier Ham Burger as it is not a premium burger such as the Angus burger at McDonalds or the Steakhouse XT at Burger King. At the same time it is not a value burger such as the junior whopper or a Mc Double.

Functions and Needs:The product aims to satisfy hunger while creating a sense of comfort. This image is created through the brand recognition that the two companies have built over the last few decades. The iconic products inspire a nostalgic feeling for their customers, by associating products with consumers’ identity. The products offered by the fast food industry are to serve the busy consumers who are looking to satisfy their hunger in a quick and economically efficient manner. Over the years both companies have expanded their reach globally to gain market share and profitability. As the market has stabilized, there is less room for expansion, thus the need for profitability and remaining market leaders have become more dire than ever before.

Where can it be purchased?McDonald and Burger King Restaurant location’s (Appendix C)

How often customers re-purchase it?The Whopper and The Big Mac are often repurchased, as these products are not high-ticket items. Both companies promote economies of scale in majority, if not all of their products. In the fast food industry, the target consumers are looking for a quick, cheap, satisfying meal. The most important factor consumers’ value for repurchase is convenience, they aim to purchase at the closest location. Often the franchisee located near to the target market wins, or the one that out numbers with locations.

Product Attributes: (Rating Scale 7 highest, 1 lowest level of importance)Customization- Allows for customers to have their burgers their way (high customization) or made by default (low customization); most customers enjoy having higher customization. Rating: 1

Size- Total size of the sandwich (width, height, etc.); customers preference generally differs here; height may be caused by bread in between two patties, while width is usually determined by size of the patty. Rating: 7

Heating Method- Flame Broiled or fried; Flame broiled is often seen as a healthier choice, fried often raises health concerns due to type of oil used for customers. Rating: 5

Number of Patties- one or two, can signify if one has more meat or less meat Rating: 2

Quality of Beef – The FDA requires minimum standards but some products exceed these standards. Rating: 4

Unique sauce- Ketchup + Mayo vs. Mac Sauce; which gives the burger that extra kick of flavour that always sticks with the customer. Rating: 6

Icon Packaging – The standard box for the Big Mac symbolizes the product, or a simple standard paper wrap for the Whopper. Rating: 3

MDS DimensionsManliness – size, flame broiled/firedExperience – icon packaging, uniquenessQuality – beef, customization

Relative Position in terms of each attributesCustomization: Whopper over Big MacSize: Whopper over Big MacHeating Method: Whopper over Big MacNumber of Patties: Big Mac over WhopperSauce: Big Mac over WhopperQuality of Beef: Whopper over Big MacIcon Packaging: Big Mac over Whopper

From the above analysis, we can determine that Whopper should have a relatively higher competitive positioning then McDonald’s but in reality that is not the case. To analyze this further, we looked at both companies advertisements to analyze how two very similar products are positioned very differently.

Both the Big Mac and the Whopper are well known hamburgers distributed through large quick service restaurant chains. The two print ads are from the 2007-2008 period and the video advertisements are both from the 2009-2010 period and are the most recent ones currently being used by the companies. The print ads could be found on billboards, buses, and various other physical mediums while the video ads were used primarily on television and radio (to a smaller degree)

Video Advertisement Analysis

Attributes  One of the attributes that are displayed in the Big Mac ad includes Iconic

packaging. This is showcased in the ad through the characters, as they enjoy the product in every frame, from the first bite to the last. The ad is also able to exhibit international adaptations of the iconic packaging, by displaying North American characters enjoying the product in Japan as the product is presented in packaging with Japanese writing. The ad also illustrates attributes such as size, special sauce and number of patties (two). The first frame of the ad focuses solely on the product and the product remains prominent in every successive frame, ensuring the focus of attention on the products size from various angles. Some characters are even shown stopping all current activity in order to simply handle and enjoy the product, regardless of how messy they get in the process, as pieces of lettuce routinely fall out and the special sauce drips on clothing.

The Whopper ad displays attributes such as quality of beef, size, and number of patties. This is done through multiple shots of the Big Mac placed next to the Whopper, thus exaggerating the size of the Whopper compared to the Big Mac. As the taste test is conducted, the samplers are shown struggling to grab bites out of the Whopper compared to the Big Mac, displaying the greater size of the Whopper. The “unbiased” approval of the “Whopper Virgins”, for the Whopper compared to the Big Mac accentuates the idea of the Whopper as a product of better quality, one that is more delicious when compared to the competition.  Frame of reference and differentiation

The frame of reference for the Big Mac is represented as a symbolic experience and traditional product, while the frame of reference for the whopper is size and quality. The points of parity for both products are a beef patty and burger buns as these are the two most essential and basic ingredients of a hamburger. These are the essentials that a competitor must encompass in order to be a contender.

The points of differentiation for the Big Mac include the special sauce, the two patties and its iconic packaging. The brand recognition using the red and yellow colour motif for the unique carton differentiates the product from the competitor. Lastly, the special sauce used on the Big Mac can be found on no other hamburger which makes it an essential point of difference   The points of differentiation for the Whopper include quality of beef, size, and flame broiled. The method of heat or the meat being flame broiled is a distinguishable point of difference for the Whopper. Although not overtly stated in the ad, the concept of being flame broiled is synonymous with the Burger King brand and therefore is implied in the ad as it contributes to its superior taste and is one of the main distinguishable factors of the product.  The quality of beef is another POD that is touched upon in the ad, through taste testing, with the “unbiased approvals” used as a guarantee.

Main perceptual objectivesThe main perceptual objectives of the Big Mac ad were convenience and

experience (tradition). Convenience is easily visible in the ad as every character is shown to be enjoying themselves, whether at work, at a Frisbee game, hanging with friends, or travelling around the world (In Japan). It is available worldwide, for multiple people and

locations. The diversity of the people in the ad, combined with the numerous differing situations, depicts the good moments and enjoyable times that people of all ages have when sharing a Big Mac.

The main perceptual objectives of the Whopper ad were awareness and taste. The ad illustrates the idea that the Whopper is a quality product that speaks for itself, even in remote places such as Romania, etc. By displaying indigenous, rural people approving the Whopper over the Big Mac during the taste test, the ad aims to authentically support the product as superior tasting, through the means of “unbiased opinions”. The ad portrays greater awareness of the product by promoting it in remote places and introducing it to ignored markets by traditional QSR’s*.  Discrepancies and Similarities

The Big Mac commercial gives the audience a sense of familiarity as the events unfolding remind the consumers of their own lives. Through its advertisement McDonalds creates a connection with the viewer’s culture and tradition, whereas the Whopper focuses solely on taste and taking the audience to remote ends of the world, thus loosing that connection and familiarity. This connection is deemed very important in McDonald’s advertising strategy as the audience always remains connected with the characters portrayed in the commercial. The Whopper ad however is able to get their message of a better tasting burger across, but at the cost the personal connection with its audience as most will be unable to connect with the characters on screen.

 Positioning and StrategyThe Big Mac commercial is intended to re-introduce the tried and true, classic

product. Whether the product is present when friends come together, flirtatious glances in social events, vacationing with family, or just self enjoyment over a delicious burger during a quick lunch break at work, it all comes together to create experiences and become a part of memories that are forever remembered. It also illustrates the products attributes such as size, number of patties and iconic packaging. Therefore it is a generic positioning aiming to remind people of all the reasons, physical and or emotional, they love this product and will continue to do so.

The Whopper commercial on the other hand focuses on only one attribute, quality. It aims to position itself as a bigger, better tasting product compared to its main competitor as it attempts to target consumers who are concerned with taste above all else. Therefore both commercials have very different messages. McDonalds focus is very broad while Burger King has a narrow positioning. The Whopper overtly differentiates itself by naming the competitor in the ad, and focusing on quality only. The Big Mac from McDonalds has a more well rounded strategy, which is targeted and created for its consumers. The company stays true to its core competencies and therefore is able to deliver a stronger message and will experience a higher rate of success than Burger King’s Whopper.  Print Advertisements Analysis  

Attributes

            There are multiple attributes represented by each ad. The Big Mac ad depicts the burger's two patties and special sauce as they are physically visible in the ad and justify the ad’s text. The quality of the meat is also addressed as the advertisement directly calls attention to the burger patty itself by emphasizing the word “meat”. Lastly, the burger is made to appear bigger than it actually is by placing it on a stage.             The Whopper advertisement clearly shows size as an attribute as the burger is unable to fit inside a Big Mac box. The single patty and char broiled heating method (grill marks) are also visible in the ad, which make the burger visually appealing.Furtherrmore, the ad draws attention to the whoppers wrapper based packaging as it is shown to be far too big to be confined within a box.

Frame of reference and Differentiation            The frame of reference for both burgers is size in this case. This actually works better for the Whopper as they have traditionally used size as a major selling point whereas the Big Mac has not. The reason Burger King makes frequent references to the Whopper’s size is because it is in fact the larger of the two burgers. The points of parity for both products are the same as all that is required to be classified as a hamburger is two halves of a bun and a beef patty. In terms of differentiation, the points of difference for the Big Mac are its two patties and special sauce and; while the Whopper is able to differentiate itself by means of size and the fact that it is char broiled instead of fried.  Main perceptual objectives

The main perceptual objectives for the Big Mac ad are manliness and performance (taste).  The ad is asking whether or not you are "Mac" enough to eat the burger and even portrays it in a feminine way by using the velvet drape background in combination with the text. Performance is also a prominent message as the burger is depicted as too good to resist.            Like the Big Mac, the whopper ad uses the performance and manliness perceptual objectives. The large size of the burger is a clear indication of manliness, and the char marks that exist on the side of the burger (char marks cannot normally occur here) are a clear indication that the burger does in fact have a distinct char broiled taste.    Discrepancies and Similarities        There is a high degree similarity between the two ads as they both attempt to use humor and manliness to get their message across. As noted earlier however, the Big Mac strays from its traditional focus of the "experience" of the burger and it seems to imitate the traditionally manly Whopper ads. The Big Mac ad does however incorporate sexuality to a low degree which creates an easily identifiable discrepancy between the two ads. The use of Sexuality, like size, is also inconsistent with McDonald’s recent marketing efforts. This inconsistency may in fact be evidence of a fault in the McDonalds marketing campaign. 

Positioning and Strategy            Both of these ads position the products towards men. The Big Mac uses size and the personification of the burger as a woman, while the Whopper also emphasizes size while using its char broiled attribute to further appeal to men. These ads can be considered to be head-to-head as they both use the same major perceptual objectives and focus on the same audience.             After reviewing the ads, the Whopper advertising strategy appears to be superior. The reason for this is because the ad is consistent with previous marketing strategies and it is far less cluttered. It is also more humorous and does not resort to the use of puns in its message. Finally, the picture on the ad itself is a very simple and easy to understand method of showing that the Whopper is in fact a significantly larger hamburger.

Future Trends The QSR industry has reached a metaphorical hump as growth has slowed and

new entry on a significant level is next to impossible due to the strong brand equity of the current players. Based on sheer size, McDonalds is far larger and has a much broader global reach which leaves the company in a better position to cut its losses in failing markets or take advantage of growing ones. It is likely that both competitors will continue with their existing marketing strategies for the foreseeable future as Burger King quite literally has a better product in terms of size, quality of beef and heating method and they will use this advantage to continue competing in the quality oriented American market (their strongest market). McDonalds, on-the-other hand, will continue to market their Big Mac as an experience instead of a mere hamburger for the simple reason that they know they cannot compete directly on quality.

Furthermore, Burger King simply is not a threatening competitor in many of McDonalds’ markets which makes the issue of inferior quality largely irrelevant for McDonalds on a global scale. If the Industry ever does begin to drastically decline, it is probable that McDonalds will emerge as the victor.

Table of Contents (appendix)

Appendix A Product and Background

Appendix B Market SizeMarket Assessment

Appendix C Channels of distribution

Appendix D Advertising Strategies

Appendix E McDonalds’Concept (Table 1)StrategyVision/Mission

Appendix F Burger KingConcept (Table 2)Strategy

Appendix G Market Share for FFHR in 2008

Appendix H What is the Big Mac Index? Figure 1

Appendix I Consumer food service Canada (Tables)

Appendix A

Product and Background

In 1954, James Mc Lamore and David Edgerton opened their first Burger King restaurant in Miami Florida. The vision of the company was to offer reasonably priced quality food, served quickly, in attractive, clean surroundings1. Their signature sandwich became the Whopper, which has been a menu staple since it was introduced across all their locations. As a result of changing strategies, this may have contributed to the decrease in awareness of the firm in comparison to McDonalds. Russ Klein, the Chief Marketing Officer of Burger King agrees to the above-mentioned statement and adds that Burger King’s strategy currently is to differentiate the brand and make their customers knowledgeable of the products2. In 2009, Burger King has launched a new marketing campaign to revamp their positioning and target the adolescent population. They have also made their marketing campaigns more relevant to current trends in the market. As of 2009, Burger King teamed with Microsoft and started offering a Windows 7 Whopper to its customers in Japan in order to market the release of the Windows 7 operating system. This was a seven-patty burger weighing more than 1.4 lbs. and had a calorie count of 2,1203.

Ray Kroc opened Des Plaines, Illinois restaurant in 1955 after pitching the idea of opening up restaurants to the McDonald brothers. In 1968 the Big Mac sandwich was introduced.4 As a result of the "Big Mac Attack" ad campaign of 1975, millions of Americans came to know the ingredients by heart: two all-beef patties, special sauce, lettuce, cheese, pickles, onions--on a sesame-seed bun.5 It's an icon to many, even if it has a negative image among quite a few. It should be pointed out, however, that the Big Mac (540 calories, 29g fat) compares almost favorably against a Whopper with cheese and all the trimmings (760 calories, 47g fat). As the Big Mac celebrates forty-plus years of sales, it remains a multi-faceted symbol of America: capitalism, commercialism, and cholesterol. In fact, The Economist created the " Big Mac Index” as a means to illustrate currency exchange theory.6 Over the years, McDonald's has developed TV advertising campaigns that have become, like McDonald's, a part of our lives and culture. McDonald's commercials have focused not only on product; but rather on the overall McDonald's experience, portraying warmth and a real slice of ever day life. This "image" or "reputation" advertising has become a trademark of the company and created many memorable television moments and themes.7

1 Burger King (Canada) website. <www.burgerking.ca/companyhistory>

2 Swearingen, Wendy Guild; “Can Burger King Rekindle the Sizzle?”; Harvard Business 3 School, Working Knowledge Archives, May 3rd, 2004.

4 http://www.mcdonalds.ca/en/aboutus/history.aspx5 http://www.associatedcontent.com/article/593619/fat_facts_about_the_mcdonalds_big_mac.html?cat=516 IBID7 http://www.mcdonalds.ca/en/aboutus/marketing_themes.aspx

Appendix B

Market sizeAccording to Consumer Foodservice, the fast food market in Canada is estimated

to be $19 Billion (as per Table 12)8. The market has been growing and the analyst forecast the sales in units to grow by 3.1% in the next 5 years (as per Table 11)9. Many analysts are under the assumption that the market has matured and is at a point of stagnate growth. Comparing this to U.S, analyst estimates indicate a market size of $68 billion as per the results in 200810. Nevertheless, growth of health consciousness, rising food prices and slowing economy has caused the fast food industry to not grow as rapidly as it had in the past11.

Currently, Burger King has 1.1% of market share of the Canadian fast food industry (as per Table 9)12. Burger King has been losing its market share over the last 4 years whereas, its direct competitor, McDonald’s has been maintaining its market share approximately 10%13. Recently, Burger King Holdings Inc. reported a 6.4% drop in its fiscal first quarter earnings because consumer spending has declined due to stiff price competition between fast-food chains14. However, Burger King has formulated a strategy to focus on premium burgers. Also, the company is starting to offer healthier products in its menu. These new strategies are geared to take advantage of the growing fast food market and a method to differentiate from fierce competition.

In regards to the market segmentation, the market can be divided into two basic types of markets: generic market & product market. Generic market can be defined in terms of fulfilling the need of an appetite, in other words, food. However, for the purpose of this project, segmentation is defined by using product market, and thus, Big Mac vs. the whopper.

Market assessment

The total global market share Burger King has in the fast food industry is 4%15, while McDonalds has a 90% global market share. Burger King has a market share in Canada, of 1.1% whereas McDonalds has a 10.7%16.

8 Consumer Food Service – Canadian Restaurant and Food Association9 Consumer Food Service – Canadian Restaurant and Food Association10 http://www.1888pressrelease.com/us-fast-food-industry-to-cross-us-170-billion-by-2010-pr-149886.html

11 http://www.wikinvest.com/industry/Fast_Food_Restaurants_(QSR)

12 Consumer Food Service – Canadian Restaurant and Food Association13 Consumer Food Service - Canadian Restaurant and Food Association14 Anonymous. Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 30, 2009. pg. B.4 15

16 Consumer Food Service – Canadian Food and Restaurant Association

McDonald's Corp. has accelerated its U.S. market-share growth by selling new products and promoting old standbys through the recession, even as consumers eat out less, chief financial officer Peter Bensen says.17 The world's largest restaurant chain introduced iced coffees and a larger $3.99 (U.S.) Angus beef burger, and advertised its Big Macs to win sales. McDonald's accounted for 46.8 per cent of the U.S. hamburger market last year, up 10 basis points from 2007, according to food-industry researcher Technomic Inc. Burger King was second with 14.2 per cent. McDonald's says it has raised its share of the U.S. fast-food market by 20 basis points in 2007, 30 basis points last year and 50 basis points this year through May.18

Also, over 38% of Burger Kings franchises are International (outside US and Canada)19. This is significant because it shows how diversified Burger King has become; they do not have all their business centralized in one area. Also, sales growth has been the highest in three years in 2008, at 5.4%. In the previous two years, they were at 3.9% and 1.9% respectfully20. These are overall sales growth, opposed to growth in Canada which has been stagnated. Revenue in the US and Canada in 2008 was $318million, $284 million and $264 million in the previous year’s respectfully21. Although, majority of that revenue was made in the United States, it shows the possibility of future revenues in Canada if there is more expansion and development in cities. There are 7,512 Burger King Restaurants in Canada and the US. In Canada alone, there are 303 Burger King’s in Canada, which leaves more than 7500 Burger King Restaurants in the United States alone. The US population is roughly ten times larger than Canada’s yet they have a disproportionate amount of Burger Kings comparative to Canada. There is definite market available in Canada as indicated above. It would be highly beneficial to Burger King to compete with rival McDonald’s who holds an overwhelming 90% of market share in fast foods around the world. The question then remains what are the appropriate strategic tactics to win market share along with its customers. For starters, by analyzing only the number of locations, it is quite evident Burger King needs to increase relative real estate to gain competitiveness.

Appendix C

Channels of distributionThe channels of distribution utilized by Burger King and McDonald’s are

primarily their franchises and restaurants. They rely on having the physical locations established in order to be recognized by the public within the surrounding environment.

17 http://www.wtgmarketingsummit.com/2009/06/burger-king-concedes-defeat-on-marketing-initiative/18 http://www.wtgmarketingsummit.com/2009/06/burger-king-concedes-defeat-on-marketing-initiative/19 UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANNUAL REPORT PURSUANT TO SECTION 13BURGER KING HOLDINGS, INC., Fiscal 2008 year 20 UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANNUAL REPORT PURSUANT TO SECTION 13BURGER KING HOLDINGS, INC., Fiscal 2008 year 21 UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANNUAL REPORT PURSUANT TO SECTION 13BURGER KING HOLDINGS, INC., Fiscal 2008 year

Also, their ads and promotions are a big part of their channel of distribution. By promoting products such as The Whopper and the Big Mac as their signature dishes, these products have become a symbol of the companies that are recognizable worldwide. Within the last 5 years, a major ad war has started between McDonalds and Burger King. Usually whoever has the more effective ad campaign, receives a larger portion of the relative market share.

“In the first quarter of fiscal 2008, our U.S. television advertisements were among the top five that were recalled and the top five best liked new restaurant ads airing nationally”, according to advertising industry researcher Nielson IAG at Burger King. In addition, the television advertising made IAG’s monthly “Top 10 New Ads” list (published by the magazine Ad Age) a total of five times in calendar year 2007, one of less than a dozen national advertisers across all categories to have that many mentions.”22

It is evident that advertisements and television and radio channels are very important to gaining market share. It is a very large determinant of how well a company will grow and can dictate how much sales can be achieved during the fiscal year.

Advertising Strategies

Burger King has managed to find alternative marketing strategies to continually bring their name to the forefront, even when you skip through the commercials."The King" ad campaigns brought about attention when a strange oversized plastic King could be found in bed next to an unsuspecting person or just outside of their window to the catchphrase of, "Wake up with the King." The commercials were a bit odd, but definitely catchy. Burger King’s actual products remained in the commercials, but weren’t necessarily the main piece to the ad.

In November 2009 Burger King began offering Burger King Xbox and Xbox 360 games with their value meals in three different genres; action, fighting and racing. A few days before Christmas, it was reported that 20 million BK Xbox games had been sold; for only being on the market exactly one month. Of course, it could’ve been the $4 price tag when compared to the usual cost of $60-$70 for an Xbox/Xbox 360 game. Since the games could only be purchased with a value meal, it means that BK brought a lot of people through their doors while pocketing a nice amount of change from the promotion.

While McDonald’s is only putting Nintendo mascot toys in their Happy Meals, BK has learned how to reach a demographic, especially when many times that demographic has their own money to spend.

There have been many McDonald's advertising campaigns and slogans over the years. The company is one of the most prevalent fast food advertisers. McDonald's Canada's corporate website states that the commercial campaigns have always focused on the "overall McDonald's experience", rather than just product.” The purpose of the image has always been "portraying warmth and a real slice of every-day life.” Its TV ads, showing various people engaging in popular activities, usually reflect the season and

22 UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANNUAL REPORT PURSUANT TO SECTION 13BURGER KING HOLDINGS, INC., Fiscal 2008 year

time period. Finally, rarely in their advertising history have they used negative or comparison ads pertaining to any of their competitors; the ads have always focused on McDonald's alone, one exception being a 2009 billboard advertising the new Mc Cafe espresso. The billboard read "four bucks is dumb", a shot at competitor Starbucks. 23

McDonald's 

McDonald's is the largest and best-known global foodservice retailer with more than 30,000 restaurants in 121 countries. McDonald's has global brand recognition, experienced management, site development expertise and advanced operational systems that enable the group to pursue its global opportunities.

McDonald's concept

McDonald's operates in the foodservice industry and primarily operates quick-service restaurant businesses under the McDonald's brand. To capture additional meal occasions, the company also operates other restaurant concepts under its partner brands: Boston Market, Chipotle Donatos Pizzeria and (soon to be) Fazoli's. In addition, McDonald's has a minority ownership in Prét A Manger.

The number of restaurants operated by the company is illustrated in Table 7.8 , below.

T7.8 McDonald's restaurants, 1996-2001

No. Restaurants 1996 2001 Change

France 540 913 373Germany 743 1,152 409Italy 147 320 173Netherlands 151 212 61Spain 121 309 188Sweden 129 240 111UK 737 1,182 445US 12,094 13,099 1,005

SOURCE: http://www.mcdonalds.com

23 ^ McDonald's publication. "Corporate FAQ". McDonald's Corporation. http://www.mcdonalds.ca/en/aboutus/faq.aspx. Retrieved 2007-11-24.

^ Overview of McDonald's key financial metrics via Wikinvest, retrieved 9/28/2009

^ Joe Bramhall. "McDonald's Corporation". Hoovers. http://www.hoovers.com/mcdonald's/--ID__10974--/free-co-factsheet.xhtml. Retrieved 2009-03-25.

McDonald's strategy

McDonald's vision is to be the world's best quick service restaurant experience, offering convenient snack and meal products in convenient locations.

The company operates several partner brands and is committed to growing these brands carefully. They intend to scale a brand whenever it demonstrates broad consumer appeal. The intent is to give consumers a variety of tastes and dining experiences.

To further build the business and extend the reach of the McDonald's brand, the company is committed to innovating. Some of the most recent innovations include the McCafés, which are now established in more than 15 countries; dessert kiosks, which are primarily in Latin America; and the McTreat Spot, McSnack Spot and McDonald's with the Diner Inside tests in the United States.

Outside of the core brand the company operates several partner brands. These are Boston Market, Chipotle, Donatos Pizzeria and Prét A Manger (in which McDonald's has a minority share), which collectively generate approximately $1 billion in annual sales. McDonald's is quick to point out that only 12 quick-service restaurant chains generate sales of that much or more.

On April 24, 2002, McDonald's Corporation and Fazoli's, a fast-casual Italian restaurant concept based in Kentucky, announced their intention to form a joint venture to develop 20 to 30 Fazoli's restaurants in three US markets. McDonald's will also have an option to purchase the entire company at a later date. The Fazoli's chain operates about 400 restaurants in 32 states and their menu focuses primarily on pasta and also offers panini sandwiches and salads.

The minority interest in UK-based Prét A Manger, a quick service food concept that serves mainly sandwiches, snacks and drinks at lunchtime was acquired in January 2001. The stated aim was to support Prét A Manger's plans for international growth, extending its reach in the US and Asia. At the end of 2001, McDonald's approved a plan to dispose of its Aroma Café business in the UK, which was completed in March 2002.

Globally, the company aims to add between 1,300 and 1,400 new McDonald's restaurants in 2002.

McDonald's vision McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.

McDonald's Missions

Be the best employer for our people in each community around the world

Deliver operational excellence to our customers in each of our restaurants; and

Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology.

Burger King

Burger King Corporation is a wholly-owned subsidiary of Diageo, the international food and drinks company, headquartered in the UK. However, Diageo has announced its intention to spin off the company to concentrate on its core activities.

Burger King's concept

Burger King is the world's second largest burger fast-food chain (after McDonald's). The company's restaurants are located in each US State and nearly 60 other countries. In 2001, Burger King recorded system-wide sales of US$11.20billion/€12.36billion.

The number of restaurants operated by the Burger King Corporation is illustrated in Table 7.9 , below. In the US, 7% of restaurants are company-owned, whilst on an international basis, the figure rises to 15%. In 2001, approximately 56.7% of business was drive-thru and a further 20.4% is served as take-away.

T7.9 Burger King restaurants, 2001

As at 31stDec, 2001 Company Owned Franchised Total

US 574 7,674 8,248International 477 2,712 3,189

Total 1,051 10,386 11,437

SOURCE: http://www.burgerking.com

Burger King's strategy

The success and size of Burger King are based in such areas as product development, expertise in restaurant operation, decor, service and advertising. However, a major factor that has helped to increase the company's expansion and growth has been the franchising of restaurants to individuals.

Burger King's strategy in 2000 focused on investing in facility enhancements as the first step toward revenue growth, followed by a focus on speed of service, accelerated product innovation and superior marketing. Throughout 2001, Burger King pushed ahead with its focus on strategic alliances and partnerships.

However, in a change in strategy towards the end of 2001, Burger King announced it was to increase its activities towards attracting potential new franchisees. In previous years Burger King had focused most of its growth with existing franchisees. 92% of the more than 11,400 Burger King restaurants operating around the world are owned and operated by independent franchisees. For many years, Burger King has enjoyed a large franchisee community that had grown the brand almost exclusively from within. Supported by Burger King, these franchisees have driven growth in many markets, but the company's focus has now turned to attracting new franchisees.

In recent months the corporation has made a series of organisational changes, designed to improve US company operations and further consolidate the company's international business.

A new corporate structure, removing a number of division barriers was also introduced. A key element of the new structure is the elimination of division barriers that made North America, which accounts for 85% of the company's business, a separate unit. Simultaneously, a series of new direct reporting positions that will be functionally, rather than geographically aligned, were introduced.

What is the Big Mac Index?

The Economist uses the price of the ubiquitous McDonald's meal to calculate the "Big Mac Index", a guide showing how far from fair value different world currencies are. The Big Mac theory (a.k.a. purchasing-power parity, or PPP) says that exchange rates should even out the prices of Big Macs sold across the world.

The implied PPP shown in the table is the exchange rate that would make a Big Mac cost the same abroad as it does in the USA. When you compare actual exchange rates with the implied PPP rate, you will see that most currencies are trading way above or below the US dollar, meaning that they are over- or undervalued. Keep in mind that PPP is a long-term indicator, pointing to where currencies ought to go in the future. (It's also best to use it only to measure currencies between countries that are at a similar stage of development.)24

24 http://www.oanda.com/currency/big-mac-index

Country Big Mac Price

Implied PPP rate +

Today'sExchange Rate1 USD =

Over(+) / Under(-) Valuation against the USD, % ++

in Local Currency

in US dollars

United States $ 3.57 3.5700 --- 1.0000 ---Argentina Peso 11.5 2.9191 3.22 3.9396 -18.2658Australia A$ 4.34 3.7940 1.22 1.1439 6.6527Brazil Real 8.03 4.5239 2.25 1.7750 26.7606Britain £ 2.29 3.5177 0.64 0.6510 -1.6897Canada C$ 3.89 3.7125 1.09 1.0478 4.0275Chile Peso 1750 3.2407 490 540.002 -9.2596China Yuan 12.5 1.8424 3.50 6.7846 -48.4126Colombia Peso 7000 3.6911 1961 1896.44 3.4043Costa Rica Colones 2000 3.8010 560 526.178 6.4279Czech Republic

Koruna 67.92 3.4533 19.0 19.6684 -3.3983

Denmark DK 29.5 5.1225 8.26 5.7589 43.4302Estonia Kroon 32.0 2.6439 8.96 12.1033 -25.9706Eygpt Pound 13.0 2.2677 3.64 5.7327 -36.5046Euro area € 3.31 4.2837 0.93 0.7727 20.3572Hong Kong HK$ 13.3 1.7109 3.73 7.7738 -52.0183Hungary Forint 720 3.3106 202 217.481 -7.1183Iceland Kronur 640 4.9612 179 129.000 38.7597Indonesia Rupiah

209002.3115 5854 9041.59 -35.2548

Israel Shekel 15.0 3.8839 4.20 3.8621 8.7491Japan ¥ 320 3.6843 89.6 86.8560 3.1593Latvia Lats 1.55 2.8249 0.43 0.5487 -21.6330Lithuania Litas 7.1 2.6602 1.99 2.6690 -25.4402Malaysia Ringgit 6.77 2.1104 1.90 3.2079 -40.7712Mexico Peso 33.0 2.5688 9.24 12.8467 -28.0749New Zealand NZ$ 4.90 3.5020 1.37 1.3992 -2.0869Norway Kroner 40.0 6.4289 11.2 6.2219 80.0093Pakistan Rupee 190 2.2064 53.2 86.1131 -38.2208Peru New Sol

8.0562.8196 2.26 2.8571 -20.8988

Philippines Peso 99.39 2.1408 27.8 46.4269 -40.1209Poland Zloty 7.6 2.4004 2.13 3.1662 -32.7269Russia Rouble 67.0 2.1999 18.8 30.4563 -38.2722Saudi Arabia Riyal 11.00 2.9290 3.08 3.7555 -17.9870Singapore S\$ 4.22 3.0651 1.18 1.3768 -14.2940South Africa Rand 17.95 2.3655 5.03 7.5884 -33.7146South Korea Won 3400 2.8213 952 1205.11 -21.0031Sri Lanka Rupee 210 1.8595 58.8 112.933 -47.9337Sweden SKr 39.0 5.3274 10.9 7.3206 48.8949Switzerland SFr 6.50 6.2141 1.82 1.0460 73.9962Taiwan NT$ 75.0 2.3346 21.0 32.1250 -34.6304Thailand Baht 64.49 1.9937 18.1 32.3472 -44.0446Turkey Lire 5.65 3.6748 1.58 1.5375 2.7642UAE Dirhams 10.0 2.7221 2.80 3.6737 -23.7826Ukraine Hryvnia 14.0 1.7544 3.92 7.9801 -50.8778Uruguay Peso 61.0 2.8745 17.1 21.2209 -19.4191