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McDonald's is taking a shot at Chick-fil-A

The rapidly growing chicken concept could be its biggest threat, says RB's The Bottom Line.

The Bottom Line

According to Bloomberg, McDonald’s is planning a big push with its chicken, telling its franchisees that it could be a “credible chicken player.”

It’s been evident for some time. The soon-to-be-Chicago-based burger giant has been big on the bird for the past couple of years, since its successful introduction of the Buttermilk Crispy Chicken Sandwich.

The company has since rapidly removed antibiotics from its chicken, upgraded its Chicken McNuggets and last year introduced Buttermilk Crispy Chicken Tenders—a product that required more effort on the part of operators but sold out far faster than the company anticipated.

None of this has phased Chick-fil-A, at least so far. The Atlanta-based quick-service chain is the hottest restaurant chain in the country at the moment, and nothing seems to be getting in its way.

Last year, according to Technomic’s 2018 Top 500 Chain Restaurant Advance Report, Chick-fil-A’s system sales rose 14.2% last year, while unit count grew 7.6%. Nobody in the top 25 not recovering from foodborne safety incidents boasted better numbers. Chick-fil-A is now the eighth largest restaurant chain in the country. Its unit volumes are now over $3.5 million, based on Technomic figures, and it’s not open on Sundays.

A single Chick-fil-A now does about $1 million more in revenue per year than a McDonald’s location, which has an average unit volume of just over $2.5 million.

It’s important to note that McDonald’s remains miles ahead of Chick-fil-A—McDonald’s is four times its size in terms of overall system sales. The company’s success is based on its ability to generate strong unit volumes while being so prevalent. No restaurant company in the world has been able to combine the two nearly as effectively.

But Chick-fil-A is arguably McDonald’s biggest long-term threat, because the two chains are targeting the same core market: families.

The two biggest elements to McDonald’s success are breakfast and families. We talked about the chain’s breakfast success last week. But its ability to target parents with children is unmatched in the restaurant business. The Happy Meal is arguably the single most important thing on the chain’s menu, as anybody with young children knows.

In 2016, for instance, the data firm Sense360 noted that McDonald’s generates about $10 million in Happy Meal sales a day—not counting sales of other items along with those meals.

But Chick-fil-A typically performs well with that demographic, and the chain has been winning over customers with exceptional customer service ratings. It routinely finishes at or near the top in numerous customer service rankings. It was by far the top performer among fast-food chains in the American Customer Satisfaction Index last year, for instance.

To be sure, chicken might be the most hotly competitive subsector in the restaurant business today. Some of the top performers in the business include smaller chicken chains, such as Raising Cane’s and Zaxby’s. Neither of those chains have felt much from McDonald’s foray into chicken, at least so far.

But it appears McDonald’s is just getting started in its efforts to push more chicken.

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