McDonald’s wants a Southern fried chicken sandwich to call its own.
Reflecting the competitive urgency for this sandwich, the National Owners Association of McDonald’s franchisees likens its importance to the U.S. landing on the moon.
“JFK called for a man on the moon, our call should be a category-leading chicken sandwich,” reads a Wednesday email from NOA’s board to fellow McDonald’s operators, according to CNBC.
At issue is McDonald’s having a premium chicken sandwich that can compete with Chick-fil-A, the chain of chicken sandwich joints that are seeing massive growth in Southern markets, particularly the Southeast.
According to a 2018 report from Kalinowski Equity Research, Chick-fil-A recently became the third-largest fast food chain in the United States, behind McDonald’s and Starbucks, according to the Washington Post. The Georgia-based chicken chain reported $10 billion in 2018 sales across 2,700 stores in 47 states and Washington, D.C.
“We have long pointed out that Chick-fil-A is the restaurant competition with which McDonald’s U.S. should most concern itself – and by extension, investors should too,” Kalinowski said, according to MarketWatch. “But this goes beyond McDonald’s.”
A report from Mizuho Securities shows that Chick-fil-A’s store productivity is “unmatched” and its “unique operating playbook, relationship with its franchisees, and simplified menu yields consistently higher service and satisfaction scores.”
Other chicken-driven regional fast food chains such as Raising Cane’s, Zaxby’s, and Wingstop are also growing. Moreover, while fast food chicken is one-third the size of the burger market, “it was an equal contributor to total industry growth in 2018,” according to Technomic data.”
McDonald’s has been experiencing a steady revenue decline since 2017, according to Yahoo! Finance. In the first quarter of 2019, revenue decreased 4% year over year.
According to the NOA email, McDonald’s price-first approach in the U.S. is no longer helping it compete against premium fast food joints like Shake Shack, In-N-Out Burger, and Chick-fil-A. “There is opportunity for [deals] at the national level, but should be used sparingly,” the board wrote. “We must find more sustainable growth opportunities. Price is not the answer, especially in today’s economic environment.”
“Chick-fil-A’s results demonstrate the power of chicken,” the NOA email said. “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.”
To further bolster its chicken selection, McDonald’s is reportedly launching two spicy menu items in September, the Spicy BBQ Sandwich and Spicy BBQ Glazed Tenders, according to leaked documents shared with Business Insider.
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