Third-quarter sales recently came in for the big three in the fast-food world, and things aren't looking too good for any of them. Last week Burger King announced a dramatic drop in net income of 83 percent compared to the same quarter last year; McDonald's admitted this week that a key sales figure (global revenue at restaurants open at least thirteen months) had dropped for the first time in a decade; and Wendy's, which deposed Burger King for the first time this year to take the No. 2 burger spot in the nation, is operating at a widening loss, though their revenues seem to be on the rise. So why is all this happening to the fast-food giants? Allow us to posit a few major reasons.
1. Competition: The fast-food sphere isn't just burgers and fries anymore. Subway has more U.S. locations than any of the big three burger chains, and chains like Taco Bell, Chipotle, Panera Bread, and yes, Chick-fil-A, are only growing. And in related news, sit-down chains like Denny's and Marie Callender's have been struggling all over.
2. People Are Slowly Learning How Not to Be Fat: While everyone may still eat a McRib or a Big Mac as a guilty pleasure, more of America may finally be catching on, via The Biggest Loser or Dr. Oz or what have you, that eating fast food four times a week is not good for you. Of course, IHOP has already figured out that no one orders off the healthy section of their menu anyway.
3. The Global Economy: A primary reason cited for McDonald's recent losses is the weak dollar, as well as the "pervasive challenges of today's global marketplace." They may be everywhere, but they're essentially operating entirely different models, based on different tastes and economic situations, in different countries.
4. Pink Slime: The same PR nightmare that affected industrial beef producers and beef consumption in general had to have impacted these chains this year. Wendy's was quick to claim they'd never used pink slime, but everyone's pretty sure, and pretty grossed out, that we've all consumed mountains of the stuff in our lives, and now we know. It kind of turns us off of craving a burger we didn't make ourselves, or didn't pay $15 for, right?
5. Food Inc., Morgan Spurlock, etc.: Super Size Me came out in 2004, and Food Inc. came out in 2008, but maybe, just maybe, the ripple affect of these films on consumer thinking is finally having an impact. In addition to this year's pink slime crisis, you've got McDonald's and their egg supplier Sparboe getting exposed for disgusting acts of animal cruelty a year ago, and subsequently the chain dropped Sparboe and furthermore promised to pressure their pork suppliers to be more humane. Then you have Burger King following suit two months later, making their own promises to institute more humane practices over the next five years. Don't think that all this has been lost on at least the more educated segment of their consumers, which has to translate to some lost revenue. All the apple slices and salads in the world don't wipe away those pictures.
McDonald's Sales Drop For First Time Since 2003 [HuffPo]
Burger King earnings drop a whopping 83 percent in 3rd quarter [AP]
Earlier: Which Restaurant Chain Will Go Bankrupt Next?
Burger King Will Go Humane ... In Half a Decade