Fast-food chains: come for the coffee, stay for the cheeseburgers and French fries

Burger King debuts $5 monthly coffee subscription service to compete with McDonald’s, Starbucks and Dunkin’

On Friday, Burger King QSR QSR, +0.98% announced a new $5 coffee subscription, allowing customers to get one small cup of hot brewed coffee everyday for a month. To access the Burger King Cafe Coffee subscription deal, customers can download the Burger King app. The service only applies to a small hot coffee and cannot be paired with a delivery order. 

A small cup of coffee at Burger King without the subscription service varies between $1 and $1.29 depending on the market, however the Miami-based chain announced it would drop the price of a small cup of coffee to 50 cents for those who don’t participate in the subscription service from Monday onwards. A small coffee at Starbucks SBUX, +1.32% to compare, is $1.85; and a small coffee at McDonald’s MCD, +0.43% is $1.00. “The competition between Starbucks and McDonald’s and Burger King will continue to intensify,” said Tyler Higgins, managing director and retail practice lead at AArete, a global consultancy. 

Starbucks is all about coffee, while McDonald’s and Burger King are using coffee to increase traffic, he said. The hope is that people come for the coffee and stay for the cheeseburgers and French fries. 

The discount coffee comes at a time when America is facing an obesity epidemic that some say is fuelled by easy access to junk food. In fact, a recent study showed that portion size, calorie count and salt in entrées, sides and desserts increased significantly at 10 of the top fast-food restaurants in the US. That study, published in the peer-reviewed Journal of the Academy of Nutrition and Dietetics, said the findings show menus overall are less healthy than they were 30 years ago, despite the addition of healthier options like veggie burgers, salads and apple slices. 

The number of customers visiting quick-service restaurants increased by just 1% in 2018, according to market research firm NPD Group. However, cafes are among the quickest-growing segment in the fast-food sector, according to restaurant consultancy Technomic. Coffee house sales grew 41% to $23.4 billion from 2011 to 2017. Mintel predicts sales will reach $28.7 billion by 2021. A number of other fast-food restaurants have implemented rewards programmes for their coffee programmes. McDonald’s – which beat Starbucks, Burger King and Dunkin’ DNKN, -0.53% coffee in a blind taste test by Consumer Reports Magazine – offers customers a free medium McCafe hot beverage when theybuy seven hot drinks. Last year, the chain announced it was testing out cold brew, one of the hottest beverages in the coffee sector, in its San Diego market, to presumably compete with giants like Dunkin’ and Starbucks. And it added three new espresso drinks to its coffee menu in 2017, the first addition to the coffee menu since 2009. 

Other chains are making coffee the main event. Dunkin’ recently dropped the “Donuts” from its name last year. Consumers can earn five points for every $1 spent using the Dunkin’ Perks app and redeem any size free drink for every 200 points earned. Customers can also sign up for the coffee subscription service which features a choice of ground coffee or K-Cups available for at-home delivery. To capitalise on the growing demand for delivery, earlier this year Starbucks announced its partnership with UberEats to deliver coffee, snacks and other items in six major US cities including New York, San Francisco, Boston, Chicago, Los Angeles and Washington D.C. via the UberEats app. 

Shares of Burger King QSR, +0.98% are up 21% year-to-date, while the Dow Jones Industrial Average DJIA, +0.29% is up 10.8% and the S&P 500 IndexSPX, +0.45% is up 12.6%. Shares of Starbucks SBUX, +1.32% are up 9.7% year to date, while McDonald’s is up 4.4%.