Fast-food companies are facing a lot of challenges to stay relevant among consumers, but one heavyweight is poised to continue its dominance, according to a new survey.
UBS Evidence Lab conducted a survey of 2,029 adult consumers who visited a fast-casual restaurant at least once a month. It found that McDonald’s (MCD) is the best positioned among its peers to continue delivering strong same-store sales and traffic. “Consumers continue to have particularly favorable perceptions of the brand and are inclined to increase visits going forward, w/ MCD focused on sales drivers that should resonate with consumers,” analyst Dennis Geiger wrote in a note to clients Tuesday. Geiger maintained his Neutral rating on the stock but bumped up his price target to $203 from $185.
The survey revealed that among the different fast-food brands, McDonald’s was the favorite by a wide margin in several different categories. “McDonald’s U.S. brand strength remains robust, with MCD outperforming peers across a number of important customer perception metrics. We note MCD performed favorably in value, promotion, and speed of service attributes – all of which are areas of focus for MCD and the QSR industry in general,” Geiger said.
Wendy’s (WEN) came in second place, while Burger King, part of the Restaurant Brands (QSR) family, placed third. Subway was fourth, Taco Bell, whose parent company is Yum Brands (YUM), came in fifth and KFC, also under Yum Brands, was sixth.
McDonald’s has been able to deliver strong domestic same-store sales growth over the past nine consecutive quarters, and UBS believes that the trend and momentum will continue. However, the number of guests visiting has recently declined and remains a challenge for the company and a focal point among investors. The survey illustrated that over half (57%) of the respondents indicated that they already visit McDonald’s at least two to three times a month. UBS noted that there was an increase in those that were planning on visiting over the next 12 months.
So what is driving customers to McDonald’s? According to the survey, the most commonly cited reasons are good value and promotions. “When asked what factors would cause increased visitation to MCD, lower prices and more promotions were among the most frequently cited reasons,” Geiger noted. Only 18% of respondents said that nothing would make them go more.
McDonald’s has been facing tough competition, but in response ramped up its tech initiatives, value menu and service, and UBS expects the efforts to pay off.
“MCD appears to be well positioned, with local value (including breakfast) and optionality on the $1, $2, $3 dollar menu at the co-op level, in addition to continued pulsing of national deals like the 2 for $5 mix and match. We note that in the UBS Evidence Lab survey, MCD continued to receive high recognition/scores for both value and promotions.”
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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