BURGER KING SIZZLES IN WAKE OF ARCH DELUXE

WHOPPER DEAL, ADS THAT TAKE ON MCD'S FIRE UP RESTAURANT TRAFFIC

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A month after McDonald's Corp. launched its $150 million Arch Deluxe marketing blitz, store traffic is up briskly -- at arch-rival Burger King Corp.

Burger King franchisees are crowing that traffic jumped anywhere from 10% to 13% in the four weeks after McDonald's new signature burger bowed May 9.

The No. 2 burger chain's traffic and resultant sales rise can be traced to a number of factors, including a stepped-up national ad schedule; competitive creative targeting McDonald's; a 99 cents Whopper promotion; and the general hoopla over fast-food burgers generated by both competitors' heavy marketing spending in recent weeks.

DOUBLE-DIGIT GAINS

"Sales are up by double-digit levels," said Dan Fitzpatrick, a franchisee and chairman of Burger King's marketing and advertising committee. "It's because we are executing our strategy of focusing on burgers, burgers, burgers."

Burger King had planned to highlight breakfast in its $20 million spring/summer ad campaign from Ammirati Puris Lintas, New York. But the company added new burger executions targeted directly against Arch Deluxe and, since May, another $8 million to $10 million in incremental spending.

In one spot, set to the song "Still the One," Burger King says that "McDonald's may try to romance you with new burgers ... but nothing beats an old flame." Another uses Patsy Cline's "Crazy" and calls the Whopper deal "temporary insanity."

Additional spots do focus on breakfast, with one comparing the size of Burger King's breakfast sandwich to that of McDonald's.

SPILLOVER EFFECT?

Dennis Lombardi, exec VP at restaurant consultancy Technomic, said Burger King's sales could be up because of a "spillover affect" caused by Arch Deluxe advertising from Fallon McElligott, Minneapolis.

McDonald's maintains Arch Deluxe has "exceeded expectations" by more than 30%, and that the product is among the most successful in its history, with more than 100 million served to date.

An executive close to the No. 1 fast-feeder said: "For the first time, Burger King reacted to McDonald's as opposed to the other way around. And Burger King is selling 99 cents burgers," which have lower margins than the $2.99 Arch Deluxe.

What McDonald's won't say is what its expectations were, how much of the total served included discounted or free burgers-one report put the number at 20%-or whether Arch Deluxe is cannibalizing its other burgers.

"Is [Arch Deluxe] more successful than the McDLT? It better be," said Prudential Securities analyst Janice Meyer. "Is it more successful than McLean? It better be." Both were discontinued for poor sales.

Ms. Meyer said she believes McDonald's store traffic actually declined since the Arch Deluxe introduction, while Burger King built sales with the discounted Whopper. "You can use value pricing offensively or defensively. BK used it offensively and did it very well," she said.

Gary Langstaff, a former Burger King marketing executive and now an independent consultant, doubted Burger King's traffic could be up as much as 10%. But he said if McDonald's is selling 200 Arch Deluxes per store per day-the rate one Burger King franchisee estimated from the 100 million figure McDonald's provided-the product is doing pretty well.

"Two hundred of an item per day is a respectable number," Mr. Langstaff said. "The problem is at what expense is it coming? How much cannibalization is there?"

A McDonald's franchisee in New York state said Arch Deluxe "hasn't taken away sales [from other sandwiches] as much as I thought it would."

Mr. Lombardi said: "The question is how will the product do once the advertising ends?"

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