Independent Pudgy Burger in Stead goes head to head with a fast-food giant
Tom McKinney is not a bad guy. He appears to be a bright, confident, energetic businessman who is excited about his new business venture. But, to Pat Maye, Tom McKinney could be death itself.
McKinney just opened his ninth McDonald’s fast-food restaurant. Luther Mack may be better known to northern Nevadans, but McKinney has just as many McDonald’s franchises as Mack does.
Unlike Maye, who owns the Pudgy Burger restaurant a few doors down, at 10555 Stead Blvd., Tom McKinney has the benefit of McDonald’s corporate office as a resource.
“They’re pretty sophisticated,” says McKinney. He’s not kidding: A computer program can tell an aspiring McDonald’s franchise owner how his new Golden Arches will fare in any given location. The computer and McKinney liked what they saw in Stead. “We see it as a great location, a growing area,” he says. “And we’ve had a very positive response from the community.”
Maye thought the same thing eight years ago when he opened Pudgy Burger on Stead Boulevard. The menu was small, and so were the profits. But, as the menu slowly expanded, so did Maye’s customer base. Today, he makes enough to pay his bills and to keep a roof over his head. He doesn’t make enough to do much more than that. And now, he doesn’t know if his business can withstand the competition in a relatively small area that now has three burger-serving restaurants, a mini-mart and a pizza place.
“With the grand opening, and it being a new place, people are naturally going to try it, and that takes away from existing businesses in the area,” Maye says. “Also, people who are new to the area and people just traveling through will recognize their name and not ours.”
Obviously, McDonald’s has better name recognition than Pudgy Burger. McKinney rather understates the point when he says, “I think McDonald’s is well branded.”
Still, McKinney is happy to give examples from California to western Michigan of newly opened McDonald’s restaurants increasing sales for other businesses and restaurants in the area.
“The first McDonald’s I opened, in Lawrenceburg, Ind., [other restaurants] came to us complaining that we were going to run them right out of business,” McKinney says. “We did impact them in the first month, but in a lot of cases we actually enhanced their business. And I went to them after a couple of weeks and asked them how they were doing. They were doing better than they had been doing when we moved in. I asked them, ‘Why do you think that it is,’ and they said, ‘Probably because more people are coming to the area.’ “
McKinney envisions that being the case with his new location. “I think he [Maye] has a very unique product, and there is niche for that. I don’t think we’ll hurt his business more than a couple of days.”
Maye hopes that’s the case.
“I’d actually like to see an increase in business … that customers who go through there will see us and give us a try and then see that our food is better,” Maye says. “I hope that we can still make enough money where I don’t have to have a second job all of the time.”
If Maye advertises more, can he stay competitive? Well, as the owner of a single business, it’s costly to advertise. It’s even costlier if you’re competing against the advertising co-op that includes McKinney and Mack.
“I know you need to advertise,” says Maye, “but you need to do a lot of it to get any kind of return on a regular basis.” And consider this: If the nine McDonald’s franchise owners in McKinney’s co-op get together and spend $1,000 on advertising, they’re paying $111.11 each. That advertising benefits all of the 34 McDonald’s restaurants they own. If Maye spends $1,000 on advertising, he’s paying $1,000 for advertising.
Maye knows he can’t compete in the name-recognition game or the advertising game, but he knows he can compete in the quality game.
“We make it fresh, we make it to order, and our food doesn’t sit around waiting for someone to order it because we make it when the customer wants it. Everything we buy is the best we can find. We buy one of the highest grades of French fries, because they taste better. We went through eight suppliers of onion rings before we found a supplier that gave me the quality product I wanted. We spend money on our food, so we know it’s as high in quality and is as fresh as possible.”
Maye goes on to say he tries out the competition from time to time to make sure he’s delivering the best food out there.
“I get tired of eating my own food three meals a day, every day, so I go out and try out the other guys, and I gotta be honest. [McDonald’s] sucks.”
McKinney doesn’t buy the notion that his restaurants are being out-classed in the quality department, and he vehemently denies he’s being out-spent for quality food. The difference, he says, between his prices and those at Pudgy Burger isn’t in the money being spent for food—"I bet he pays less than I do for beef"—but in this: “We can afford to charge what we charge [around a dollar less per value meal] because we sell a hell of a lot more of it. It’s as plain as that.”
With the new McDonald’s location, there is now a Li’l Caesars, a Port O’ Subs, a Winner’s Corner, The Hangar Bar and Pudgy Burger all within a short distance, and that, says McKinney, is a good thing.
“Maybe you want to go to one restaurant,” he says. “Your son or daughter wants to go somewhere else. The location with the most options is where you’ll go. We believe that we complement each other. The bottom line is: It doesn’t matter if you’re big or small. It matters if you have good food, good service and a great price. If you do that, you’re going to be successful.”
His competition hopes he’s right.