Burger King, McDonald's Go Head-to-Head Amid Restaurant Recession

In a Halloween prank that is sure to live on in Internet infamy, a Queens, N.Y., Burger King sign was photographed disguised as the ghost of McDonald's (MCD) .

Although this is a stunt calculated to go viral thus achieving cheap marketing, it highlights an old feud between fast-food rivals, as well as indicating that the competition is heating up amid what some are calling a restaurant recession.

Burger King, which is owned and operated by Restaurant Brands International (QSR) , and McDonald's have long been rivals in the fast-food sector. Both offer American classic food such as burgers and fries with fast service and at low prices.

McDonald's, which practically invented the concept of fast food, has long been the industry leader. It is a classic legacy company that has delighted investors for decades.

But that doesn't mean that Burger King hasn't done well.

In fact, the company said that it has outperformed McDonald's when it comes to volumes sold, with an average 2.1 billion Whopper sandwiches each year, while the Golden Arches reports a more modest 550 million Big Macs sold annually.

However, in terms of customers served and revenue generated, McDonald's is the largest restaurant company in the world.

A report from research firm IBISWorld estimated that in 2014, McDonald's held an 18.6% market share of the world's fast-food industry, while Burger King controlled 4.6%.

However, the entire U.S. restaurant industry is in trouble. Some analysts are even predicting that it is on the cusp or already experiencing a restaurant recession that will result in the industry hitting lows next year.

Stifel Financial's Paul Westra has gone so far as to downgrade 11 of the country's most popular restaurant stocks, from beleaguered Chipotle Mexican Grill to Panera Bread, which is the leader in the fast-casual sector.

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Americans just aren't eating out like they used to. There are a variety of factors at play, everything from anxiety concerning next week's presidential election to lower prices for consumers at grocery stores, versus higher prices for restaurants from produce suppliers.

And both Burger King and McDonald's are showing signs of wear.

On Oct. 21, McDonald's reported third-quarter earnings of $1.28 billion or $1.50 a share, on revenue of $6.42 billion. But analysts had been expecting earnings of $1.48 a share on $6.27 billion in revenue, and the revenue figures marked a 3% decline from a year earlier.

Meanwhile, Restaurant Brands International last week reported third-quarter earnings of $1.54 billion or 36 cents a share, beating analysts' forecasts. However, sales growth at Burger King was slow, rising just 1.7%, compared with a 6.2% increase a year earlier, and revenue came in at $1.08 billion, a far cry from the $1.39 billion analysts had expected.

For the long term, however, both McDonald's and Restaurant Brands International are smart investments. Even amid a restaurant recession, these companies will recoup their losses and show signs of growth once the worst of times are over.

But those looking for short-term gains who aren't willing to depend on shares of McDonald's for their retirement portfolios should check out pizza delivery chain Domino's Pizza, as well coffee and doughnut giant Dunkin' Donuts, which is owned by Dunkin' Brands. These two companies have proven themselves immune to the woes of the restaurant chain industry.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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