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Burger King, Wendy's Spar Over Claim To No. 2 As Existential Threats Loom

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For at least the past year, there's been some dispute about the identity of the second-biggest U.S. fast food burger chain.

In March of 2012, industry research firm Technomic reported that Wendy's had higher sales than Burger King (and every other burger chain, save McDonald's) for the first time, giving it a strong claim for the silver medal. Yet Burger King owned "far more locations" than Wendy's, so in terms of geographic spread, it still had an edge. Since then, the two fast food chains have been doing everything they can to shore up their positions, releasing new menu items, revamping restaurant decor and tweaking value menus.

The latest news about the two chains suggests that Burger King is winning the arms race. Burger King this week unveiled a flashy new ad campaign, while Wendy's announced it would close 130 stores in the coming year.

But to take a longer view of the situation, both Burger King and Wendy's are, frankly, screwed. Neither chain is ready for the future of American dining. The country's palate has evolved faster than they have. Americans who have tasted Shake Shack burgers and Chipotle burritos or who have been inspired by "Top Chef" or "The Chew" to take up serious home cooking, aren't, for the most part, interested in eating stale burgers and fries, which still comprise the bulk of the menu at the two chains.

For that reason, watching Burger King and Wendy's scramble for second place is a little like watching polar bears wrestling on a melting chunk of ice. They're spending way too much effort biting and scratching one another and not nearly enough swimming to shore.

By the way, McDonald's and Darden Restaurants aren't in any better long-term positions. Both have outdated menus as well, which may be why their sales have been falling. But their gigantic sales and number of outlets place them on bigger chunks of ice. Yum! Brands, on the other hand, found a route to shore -- just not American shore. A much larger share of its revenue comes from abroad, especially from China, than any of its rivals.

While Burger King seems to blithely ignore the threat, Wendy's showed an awarenessin its 2012 annual report, released last week.

"We believe that the growth of fast casual chains and other in-line competitors causes some fast food customers to 'trade up' to a more traditional dining out experience while keeping the benefits of quick service dining," the report reads.

In that vein, Wendy's has already done more than most rivals to try and become more like a fast-casual chain. Its new logo and restaurant design are relatively spare and fresh. And its 2010 move into salads has been, by all accounts, succesful. So if Wendy's would just stop fighting Burger King for turf in the American burger market, it might have a chance of avoiding extinction.

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