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Archrivals McDonald's Corp. and Burger King Corp. are finding the burger wars intensifying as revitalized regional players Carl's Jr. and Jack in the Box flex their marketing muscle.

The battle could become even more heated if No. 4 player Hardee's Food Systems reverses a continuing decline under new owner CKE Restaurants, also parent of Carl's Jr. The chain, with some 3,000 outlets, was acquired last year.

In an industry with a recognizable finite market of burger customers, one chain's gain tends to be another's loss.


"Competition is at its peak level, both in terms of direct competition and because you have a rejuvenated Hardee's likely to come into play," says Ron Paul, president of Technomic, a foodservice consultancy. "The stronger Hardee's [becomes], it is going to be at somebody's expense. It is not going to be all new business."

CKE hasn't yet come up with a winning recipe for Hardee's. The company is still studying ways to boost sales, including dual-branding with Carl's Jr. It is testing a new format called Star Hardee's that uses the same burger cooking methods as Carl's Jr. Regional ads will support the format this fall.

For the most recent quarter ended Aug. 10, same-store sales at Hardee's were down 9.7% compared with the prior year. Carl's Jr., meanwhile, posted its 13th straight quarter of same-store sales increases, reflecting the strength of that brand's turnaround from a poorly focused concept to one known for its big juicy burgers and amusing slogan, "If it doesn't get all over the place, it doesn't belong in your face."


According to Technomic, sales of the top 10 U.S. burger chains grew a collective 4.5% last year. The 10 claim 95.1% of the burger market. U.S. sales at McDonald's grew 4.6% and Burger King advanced 5%.

McDonald's posted $17.1 billion in U.S. systemwide sales last year, giving it 42.2% of market, up 0.3 share points, to Burger King's 21.4%, up 0.5 points. Wendy's International rose to 11.9%, up 0.4 points; Hardee's slipped 1.3 points to 8.8%; Jack in the Box rose 0.1 points to 3.3%. In such a large market, a 1% share equals $406 million in sales.

The battle remains fiercest between McDonald's and Burger King, with Burger King using taste -- considered McDonald's weak point -- as its major weapon.

Burger King launched the Big King salvo last September with a campaign touting the sandwich as beefier than a Big Mac. That was followed with new french fries, and a claim that consumers in taste tests preferred them over McDonald's prided fries. To cap off those moves, the company last spring introduced a new menu called "Great Tastes," along with a new slogan, "It just tastes better."

This comes as McDonald's takes major steps to fortify its U.S. business, afflicted in 1996 and 1997 by marketing missteps and overly rapid expansion. There is new corporate leadership with Jack Greenberg as chairman-CEO, a new structure splitting the chain from one national giant into five regions and a new custom-order cooking system, dubbed "Made for You."


The system, designed to provide fresher, better-tasting fare, will be chainwide by the end of next year. The company is so keen to install the system that it is splitting equipment costs with franchisees, providing up to $12,500 per restaurant.

As part of a separate streamlining move, in July the company trimmed its headquarter's staff by 23%, its first major layoff.

McDonald's moves, targeted at getting closer to customers at the 12,380-unit chain, are being reinforced with a shift of about half of its $600 million in national advertising (largely network TV) to local media. This will place McDonald's TV budget at about $300 million, for the first time capped by Burger King, at an estimated $425 million.


"We are in a share-of-stomach game and we are in a share-of-voice game," says James Watkins, senior VP-North American marketing for Burger King. "The efficiency of a national television buy is significant compared to an amalgamation of a lot of local buys."

Few would bet, though, that McDonald's remaining $300 million local media purse will be benign.

McDonald's may have one less weapon than its rivals: It is approaching location saturation. McDonald's boosted its U.S. restaurant base by 2.4% in '97; Burger King grew by 6.8%, to 7,539 units. "McDonald's can't put too many more restaurants in without cannibalizing existing stores," Mr. Paul says.

Part of McDonald's recent problems, franchisees contend, stem from overly rapid site expansion that has cut into sales of existing units. New growth for all chains stands to come from non-traditional locations -- convenience stores, college campuses, airports and sports venues. Convenience still drives the market, says Mr. Paul.

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