McDonald’s (MCD) is probably the biggest name in the fast-food industry. It has a lengthy history of innovation and offers quick meals that are relatively inexpensive. Thanks to extensive marketing, McDonald’s is also one of the most recognizable brands in the world.
As consumer tastes evolve, restaurants like McDonald's find themselves fighting to keep up with changes in customer demands. Other players made their way into the market by offering healthier food and different choices to fast-food consumers. In this article, we look at McDonald's and its biggest competitors in both the fast-food and fast-casual markets.
Key Takeaways
- McDonald's is one of the largest and most well-known fast-food chains in the world.
- Privately-owned Burger King is McDonald's closest competitor.
- Yum Brands operates Taco Bell, KFC, and Pizza Hut.
- Subway is the largest restaurant chain in the world in terms of size, but sales have been sliding since 2012.
- Chipotle was formed as a spinoff from McDonald’s with a 2006 IPO and offers a range of Mexican-inspired menu items.
McDonald's: An Overview
The first McDonald's restaurant was opened in San Bernardino, California, in 1948 by two brothers, Maurice and Richard McDonald. They sold their first hamburgers for 15 cents each. This concept of fast food, which eliminated the need for wait staff, worked out so well that it developed into a franchise system. In 1955, salesman Ray Kroc entered into a partnership with the McDonald brothers and helped build the corporation.
Kroc bought the company from Maurice and Richard McDonald in 1961. The next year, the chain's popularity increased when the company introduced the famous golden arches as its logo. In 1963, the company introduced corporate mascot Ronald McDonald, and McDonald's as we know it was born. Since then, the firm has expanded, with more than 39,000 locations in more than 100 countries.
McDonald's reported revenue of $19.2 billion for the full year ending 2020. As of July 30, 2021, the company's market capitalization was around $181 billion, with MCD stock trading at about $243 per share. The average trading volume was roughly two million shares.
The burger giant continues to make changes aimed at increasing its market share. In September 2018, for example, the chain cut out artificial ingredients from its seven classic burgers. However, it faces significant competition from other quick-service brands, such as Burger King, Wendy’s (WEN), Taco Bell, KFC, and Subway. Fast-casual restaurants are also close competitors, with names like Chipotle Mexican Grill (CMG), and Panera Bread Company. Starbucks (SBUX) is a specialty quick-service brand that has some offerings that overlap with McDonald’s.
As the food and beverage sector grows, McDonald's must face an increasing number of competitors.
Burger King
Burger King is probably the most direct competitor for McDonald's, with its staple Whopper challenging the Big Mac in the burger war. Burger King recorded over $20 billion in revenue for the full year ending 2020 worldwide.
As of the end of 2020, Burger King had more than 18,000 locations in more than 100 countries, with roughly 11 million daily visitors worldwide. Independent franchisees own nearly all of those restaurants. Once a publicly-traded company, Burger King became private after it was purchased by 3G Capital in 2010 for $4 billion. Burger King is owned by parent company Restaurant Brands International, which also owns Tim Hortons and Popeyes.
Wendy’s
Wendy’s is a fast-food restaurant chain with more than 6,800 locations worldwide. Like Burger King and McDonald's, Wendy's focuses on burgers, fries, and other classic American food.
As of July 30, 2021, Wendy's had a market cap of $5.1 billion, with the stock trading around $23 per share. The average trading volume was about 4.8 million shares per day. The company reported revenue of $1.71 billion in 2020. However, total system sales were higher because sales at franchised locations are not included in consolidated revenues.
Yum Brands
Yum Brands (YUM) operates several large quick-service restaurant chains, including Taco Bell, KFC (Kentucky Fried Chicken), and Pizza Hut. The 2020 annual report notes that the company had more than 50,000 restaurants with 290 country-brand combinations; more than 98% of them were franchised.
The company's stock was trading around $131 per share and had a market cap of $39 billion as of July 29, 2021. The company's revenue exceeded $5.6 billion for the full year in 2020.
Subway
Subway is one of the largest restaurant chains in the world in terms of size, with over 37,000 locations in nearly 100 countries, as of Aug 2021. The company’s menu consists primarily of sandwiches and salads.
Since Subway is a privately-held company, exact revenues are not publicly available. Per Restaurant Business, Subway 2019 sales was reportedly $10.2 billion in the U.S.
Chipotle
Chipotle is a fast-casual restaurant chain serving tacos, burritos, bowls, and salads. The company was formed as a small local chain which earned significant investment from McDonald’s before its 2006 initial public offering (IPO). Chipotle operates more than 2,800 locations in the U.S., Canada, the United Kingdom, Germany, and France—none of which are franchised. The company has a higher price point than its fast-food competitors, and its slogan is "food with integrity."
Chipotle reported revenue of $6.0 billion in 2020. As of July 30, 2021, Chipotle’s market cap was $52.3 billion, and its share price was about $1863.
Starbucks
Starbucks is the world’s largest coffeehouse chain. As of December 2020, the company operated more than 32,000 stores in 76 countries, including more than 18,000 in the United States. Starbucks serves coffee, espresso, cappuccino, tea, pastries, sandwiches, and other foods. The chain markets itself as a high-quality option at a high price point.
The company reported net revenue of $23.5 billion for 2020. As of July 30, 2021, Starbucks’ share price was about $121, and the firm's market cap was $143 billion.
