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Fast-food wars: Taco Bell takes on McDonald’s and Chick-fil-A takes on Millennials

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Taco Bell (YUM) is launching phase two of its onslaught against McDonald’s (MCD). The company is releasing a second commercial that takes direct aim at McDonald’s for being out of touch when it comes to fast-food breakfast. The ad paints McDonald’s classic items like the Egg McMuffin as relics of the eighties. The ad shows a guy in full 1980s style singing to the tune of “Old MacDonald Had a Farm” about how he’s been eating Egg McMuffins since 1984. Then he gets hip, loses the Don Johnson haircut and the shoulder pads and starts eating Taco Bell’s new Waffle Taco for breakfast.

This ad follows a previous spot from Taco Bell that featured customers named Ronald McDonald who preferred Taco Bell’s breakfast to McDonald’s. The new campaign has garnered a lot of attention for Taco Bell, but McDonald’s is still the dominant force in the $50 billion fast-food market.

Yahoo Finance Senior Columnist Michael Santoli said Taco Bell has no choice but to take direct aim at McDonald’s if it hopes to chip away at its dominance in the breakfast market. “Taco Bell has to do this because McDonald’s is by far the biggest presence in this area,” he said. “What it shows is that breakfast on the fast-food side is kind of a zero-sum game and you have to take it from someone else because you’re not going to just persuade more people to stop for breakfast.”

However, there is also a mixed message in the Taco Bell campaign that has some upside for McDonald’s, according to Santoli. “On the one hand it’s actually kind of effective; it’s getting attention; it’s putting Taco Bell on the map in terms of a morning decision of where you might stop, but it also kind of pays homage to McDonald’s as the reigning king of breakfast.”

McDonald’s has not commented on Taco Bell’s new ad, but the company did counter Taco Bell’s breakfast rollout by offering free coffee with breakfast orders for two weeks. While McDonald’s is still number one, there are only so many fast-food customers to go around. “It tells you that fast-food chains are scrounging for every last dollar from the people who already go,” said Santoli. “It’s not really a growing market overall.”

The New Face of Chick-fil-A

While Taco Bell and McDonald’s fight it out for the breakfast crowd, Chick-fil-A plans to expand nationwide. As part of the national strategy, the company is rolling out a new, healthier menu in an effort to target a younger, urban audience. Chick-fil-A is also crafting a new image for its CEO Dan Cathy after a well-publicized controversy over his comments on gay marriage drew a backlash in 2012. In an exclusive with USA Today, Cathy takes a more conciliatory tone on the issue, telling the paper “all of us become more wise as time goes by.”

As part of the company’s attempt to change its image, Chick-fil-A today will announce a new product-line that has been in the works for 12 years. The new menu includes a healthier grilled-chicken line that is aimed at Millennials.

“What is very interesting about this is that it shows that when a company gets defined by something besides their product, it causes a little bit of an existential crisis,” said Santoli. He said that leaves companies to ask: “do we want that to be what our brand means to most people: some kind of political stance by our founder and management?”

Chick-fil-A’s decision to shakeup its menu and take a softer public tone are evidence that the company realizes that is not a sustainable strategy, so it’s trying to rebrand itself and get ahead of the next trend in the market. By embracing healthier menu options and moving past political statements, Chick-fil-A hopes to position itself for a successful national expansion beyond its Southern market.

So far, fast-food chains have not had much success in launching healthy menu items, but they still have to do it or risk having mom veto the choice.

Santoli said it makes sense for Chick-fil-A to try to be ahead of the curve with healthier options. A recent example of just how quickly societal change can happen is the sudden, rapid decline in soda sales, many years after it was first predicted. “That’s just one sign that this stuff can happen fast and catch you by surprise, so you better try at least to get out in front of whatever these big societal moves are.”