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34 PART 1 • OVERVIEW OF STRATEGIC MANAGEMENT

Wendy’s directly competes with MCD in this industry, Wendy’s is currently owned by a private
holding company, the Wendy’s/Arby’s Group. A brief summary of competitor financial highlights is
provided in Exhibit 8.

Burger King (BKC)
Founded in Miami, Florida, in 1954 under the name “Insta Burger King” by James McLamore and
David Edgerton, Burger King Corporation (BKC), a subsidiary of Burger King Holdings, Inc.,
owns or franchises about 11,500 restaurants in the United States and 70 foreign countries, including
Canada, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. Even though it is
considered the second largest burger chain in the world, it ranks third in size in the food service
industry. With a market capitalization of $2.46 billion, revenues of $2.55 billion, and 41,000 full-
time employees, BKC trails behind McDonald’s in several categories in the fast-food industry,
including operating margins, earnings per share (EPS), and P/E ratio.
In addition to its famous “Whopper sandwich,” BKC offers a variety of burgers, chicken sand-
wiches, breakfast items, and salads that compete directly with MCD. BKC, since the 1980s, has a
long-standing contract with the Army and Air Force Exchange Service. As such, every major army
and air force location worldwide has a Burger King restaurant on its premises.

Yum! Brands (YUM)
Yum! Brands, Inc., formerly known as TRICON Global Restaurants, Inc., was founded in 1997
and changed its name to Yum! Brands, Inc. in 2002. Yum! operates over 36,000 restaurants in 110
countries. Yum! owns prominent restaurant chains, such as Kentucky Fried Chicken (KFC), Pizza
Hut, Taco Bell, Long John Silver’s, and A&W. Headquartered in Louisville, Kentucky, it has a
market cap of $15.56 billion, has 50,400 employees as of May 7, 2009, and is the closest
competitor in size to McDonald’s. Headquartered in Louisville, Kentucky, Yum! is considered the
second largest in the global fast-food service industry. Offering more than one brand at a single
location has helped Yum! increase traffic at a single real estate location. Each of its flagship
brands also dominates the segment. For example, Taco Bell holds 60% of the Mexican fast-food
segment, KFC holds a respectable 45% of the fast-food chicken business, and Pizza Hut leads the
pizza business with a 15% market share in the pizza business segment. In addition to seeking
growth through acquisition of prominent brands, since its restructuring in 2006, Yum! has been
pursuing aggressive expansion overseas by expanding at the rate of 700 new locations for the
seventh consecutive year since 1999. In China alone, it has more than 2,600 restaurants, account-
ing for 15% of its revenues.

EXHIBIT 8 McDonald’s versus Rivals, Year-end 2008
(B = $billion; M = $million)

(Fast) Food Specialty
Service Eateries
MCD YUM BKC Industry SBUX Industry
Market Cap 61.17 B 15.57 B 2.45 B 161.69 M 10.1 B 1.64 B
Employees 400,000 50,400 41,000 5,700 176,000 2,140
Revenue 22.99 B 11.08 B 2.55 B 403.14 M 10.04 B 1.31 B
Gross Margin 37.09% 24.53% 33.13% 21.51% 54.24% 32.2%
Net Income 4.35 B 928 M 192 M N/A 88 M N/A
EPS 3.827 1.914 1.402 0.09 0.119 0.12
P/E 14.35 17.65 13.01 17.91 114.79 22.33

MCD = McDonald’s Corporation
BKC = Burger King Holdings, Inc.
YUM = Yum! Brands, Inc.
SBUX = Starbucks
Source: Based on http://finance.yahoo.com.