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McDonald’s has a Chick-fil-A problem

Operators are asking the company to develop a better chicken sandwich as its traffic in the Southeast stalls.
Photograph courtesy of McDonald's Corp.

McDonald’s operators in the Southeast, who have watched rival Chick-fil-A take more of their business in recent years, are asking the company to develop a better chicken sandwich to solve the problem.

In a letter to its members sent Wednesday, operators’ newly created independent association said the company needs to develop a better chicken sandwich to better compete with the growing Atlanta-based chain.

“Chick-fil-A’s results demonstrate the power of chicken,” the board of the National Owners Association (NOA) wrote. “Yes, we have great Chicken McNuggets and our McChicken is a very good product. But we do not compete in the premium chicken sandwich category, either grilled or crispy.”

The letter highlights perhaps the chain’s biggest challenge: fending off its growing chicken-focused rival.

McDonald’s has been grappling with a frustrating traffic problem in recent years that doesn’t appear to be easing so far in 2019, despite numerous efforts to the contrary. NOA’s letter says the problems are worse in the Southeast.

“We are finding ways to drive profitable growth,” the letter said. “Yet, we are still losing guest counts. This continues to be a concern.

“Yes, there are some changes in how our guests are using us. Larger orders serving more customers, but the magnitude of the loss in transaction counts is greater than what can be explained in order aggregation (especially in the Southeast U.S.).”

That would suggest the problem lies with the growing threat from Chick-fil-A.

Chick-fil-A is now McDonald’s biggest competitor. Its sales have exploded in recent years, vaulting the fast-food concept into a spot among the five largest U.S. restaurant concepts.

While it serves only chicken-based products, its menu is relatively similar to McDonald’s—without the burgers. The two chains also target families.

The Southeast is ground zero for the chains’ growing battle. Two-thirds of Chick-fil-A’s nearly 2,400 locations, as of the end of 2018, were in the Southeast, according to Technomic Ignite data. Technomic is a sister company of Restaurant Business.

McDonald’s is no slouch there, either. It operates more than 5,500 locations in the Southeast, and Florida is one of its biggest markets.

It’s not just chicken sandwiches, incidentally. Southeast markets have also cited the company’s shift away from foam cups as a major traffic challenge. Many of those operators have jumped on board with a test of more environmentally friendly insulated cups.

Chick-fil-A, not coincidentally, uses foam, which is better than paper at keeping drinks cold and preventing them from sweating during hot weather.

Still, the NOA’s request for a chicken sandwich demonstrates Chick-fil-A’s growing impact on McDonald’s. The chain’s growth, particularly in the Southeast, has taken it into smaller markets and into more of the Chicago-based giant’s territories.

And the NOA ominously notes that Chick-fil-A is not just a Southern chain anymore.

“Our U.S. Southeast markets’ results should concern everyone,” the board wrote. “You may not have Chick-fil-As in your market, or to the degree they have them in the Southeast, but they are coming, and they don’t discount.”

“A chicken sandwich at McDonald’s should be our top priority.”

McDonald’s has been working on bolstering its chicken offerings in recent years to better compete with Chick-fil-A, as well as a generation of growing chains that specialize in boneless chicken. (Indeed: Don’t forget about Raising Cane’s Chicken Fingers and Zaxby’s, two such concepts that also happen to call the Southeast home and are growing fast.)

McDonald’s removed antibiotics from its McNuggets in 2016 and saw sales of the product explode. In 2017, it introduced Buttermilk Crispy Tenders, which sold so well that the company ran out of supply. And it has introduced other chicken products, with varying degrees of success.

It’s not enough, according to operators—particularly in the Southeast, where chicken is a dietary staple and Chick-fil-A’s presence is causing major problems.

“Chick-fil-A invented the chicken sandwich, but we can do one better,” NOA said. “Our Southern Style Chicken sandwich was very close to category-leading. It needs some tweaks. We need to serve it in a foil bag and we need to butter the bun. But the patty recipe was excellent. It can be served in our existing kitchens within our existing service times.”

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