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McDonald's Has a Secret Edge Over Burger King, Wendy's

The creator of the Big Mac has an answer for the Whopper and even the Baconator that may surprise you.

Fast-food fans see the battle between the burger chains play out on their menus. When Restaurant Brands International's (QSR) - Get Free Report Burger King adds a new version of its iconic Whopper to its menu or Wendy's rolls out its latest Frosty flavor, that's customer-facing and an obvious attempt to win business.

Menu changes, however, are the short-term skirmishes in a longer-range war. Yes, finding a new way to add even more bacon to a burger or adding a variant of the chicken sandwich nobody has ever seen before might get people through the door, but that's only a minor victory.

The real win comes when a fast-food chain captures a customer's info and can then market to them free of charge. That's why McDonald's (MCD) - Get Free Report, Burger King, and Wendy's use discounts and digital exclusive offers to get customers to download their apps.

As Starbucks (SBUX) - Get Free Report has shown, building out an app-based loyalty program allows a restaurant chain to drive behavior. The coffee chain might, for example, offer buy one, get one beverage in the mid-afternoon or offer a deal on bakery items in the early evening.

That's a powerful tool that lets Starbucks bring in business during slower periods, drive more business from existing customers, and bring back lapsed ones. That's something that McDonald's, Burger King, and Wendy's desperately want to do, but McDonald's has built up a clear edge in that space.

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McDonald's Has an App Advantage   

While Burger King and Wendy's have arguably been more inventive with their menus and limited-time offers, McDonald's has been laser-focused on using promotions to get people to register for (and download) its app. That was evident when the company made "Camp McDonald's" its core summer marketing plan.

Instead of offering new burgers or other unique menu items, the fast-food giant offered in-app concerts, menu hacks that could only be purchased digitally, and special deals designed to drive people to the app. That program -- and other digital efforts by McDonald's -- have clearly paid off.

The fast-food giant led all its rivals in 2022 with a fairly stunning amount of app downloads, according to data from QSR Magazine.

"McDonald’s continues to create new top performance months for itself. It put together an enticing December with 4.24 million new installs, good for its fourth-largest month ever. McDonald’s is also the landslide leader in full-year 2022 quick-service restaurant app downloads with 40 million, 194 percent more than its next closest competitor," the digital magazine shared.

When you look at downloads solely for fast-food chains, McDonald's took the top spot globally with 40 million downloads. Wendy's took seventh place with 7.2 million downloads while Burger King came in 8th with 7.1 million.

McDonald's Gains a Huge Digital Edge      

Customer loyalty (which is really just another way to say digital) was a huge driver for McDonald's in the third quarter, specifically in the U.S., according to remarks CFO Ian Borden made during the chain's third-quarter earnings call.

"Loyalty remained a significant growth driver for the quarter, in part fueled by the camp McDonald's promotion. A year after the launch of MyMcDonald's rewards in the U.S. we continue to increase digital customer frequency quarter-after-quarter of the customers that have engaged with the app over the last year, about two-thirds have been active in the last 90 days," the CFO shared.

That's powerful proof that McDonald's strategy -- while not as sexy or as fun as adding wacky new menu items -- has paid off for the chain. Having a bigger base of loyalty members using its app gives McDonald's a clear edge over Burger King and Wendy's, which have been trying to catch up using deals and discounts to entice people into downloading their apps.

CEO Chris Kempczinski shared more insights on the company's digital efforts during his comments on the earnings call.

"Digital is a primary driver to improve the customer experience, reduce complexity and drive profitability. In our top six markets, it now represents over one-third of system-wide sales, fueled by over 43 million active customers on our app in the third quarter," he shared.

"Loyalty remained a significant growth driver for the quarter, in part fueled by the camp McDonald's promotion. A year after the launch of MyMcDonald's rewards in the U.S. we continue to increase digital customer frequency quarter-after-quarter of the customers that have engaged with the app over the last year, about two thirds have been active in the last 90 days."