Have We Reached Peak Burger?

http://www.businessweek.com/articles/2014-09-04/fast-food-chains-growth-in-u-dot-s-dot-may-have-peaked



Have We Reached Peak Burger?
By Leslie Patton
September 04, 2014

For most of its history, the fast-food business in the U.S. has been characterized by rapid and dependable growth. From founder Ray Kroc’s first restaurant in Des Plaines, Ill., in 1955, McDonald’s (MCD) became a chain of more than 700 stores in the U.S. within 10 years. By 1983 there were 6,000, and for the next two decades the company opened about 360 U.S. outlets every year on average. Smaller rivals Burger King Worldwide (BKW) and Wendy’s (WEN) had impressive early growth stories of their own.

In recent years, however, the companies that made Big Macs and Whoppers into icons of American pop culture have seen robust domestic expansion disappear from their menus. Sales at restaurants open for at least 13 months slipped 0.2 percent last year in the U.S. at McDonald’s and 0.9 percent at Burger King for the U.S. and Canada. Even including newly opened locations, which experience rapid growth rates in their early months, sales at the major fast-food chains grew only 1.1 percent last year, compared with 4 percent in 2012, according to Euromonitor International.

Slower sales growth has many industry watchers forecasting the once unthinkable: the peaking of burger joint growth in the U.S. “Traditional fast food—McDonald’s, Sonic (SONC), Wendy’s, KFC, Taco Bell—are fairly well-saturated in this country with not a lot more room left for growth,” says Peter Saleh, senior research analyst at brokerage Telsey Advisory Group.

The big chains already may be reacting to the shift in a surprising way: by selling more of their company-owned U.S. outlets to franchisees. In 2013, Wendy’s said it was selling more than 400. Yum! Brands (YUM), which owns KFC and Taco Bell, got rid of 214 restaurants last year and 468 in 2012. McDonald’s offloaded 200 stores this year, including an undisclosed number in the U.S. Burger King owns less than 1 percent of its U.S. locations.