Photographer: Sarah Ashun/Getty Images

The Humble Sausage Roll Has a Valuable Lesson for McDonald's

  • Chain expects full-year sales growth to exceed its estimates
  • Shares have surged 58 percent this year as company rebounds

In the U.K., Greggs Plc is showing McDonald’s Corp. how it’s done.

In a bid to revamp its business to compete with newer, healthier fast-food chains, McDonald’s has identified the U.K. as one of five key international markets. There, Greggs will give the Big Mac maker stiff competition. Once known for being the place to grab a cheap bacon sandwich or meat-filled English pasty, Greggs is transitioning into a purveyor of fresh coffee and higher-quality fare.

“Greggs has become a Pret a Manger for the British working classes,” Sahill Shan, an analyst at N+1 Singer, said by phone, referring to the ubiquitous U.K. sandwich chain. “It’s now more female-friendly with seating and a huge emphasis on a nutritionally-balanced menu.”

Same-store sales at Greggs have grown 5.6 percent so far in 2015, up from 3.9 percent across the same period last year, and the company said Tuesday full-year growth will exceed its previous forecast slightly. That trumps the 1.2 percent uptick for McDonald’s European division in its most recent quarter. Greggs shares have risen 58 percent this year, compared with 8 percent for Oak Brook, Illinois-based McDonald’s.

Greggs has boosted sales by expanding into travel hubs and office parks, a departure from its traditional emphasis on town shopping centers, where foot traffic is declining. Greggs outnumbers McDonald’s across the U.K. with 1,660 outlets compared with 1,225 for the U.S. fast-food chain, according to researcher Mintel. The data tracker estimates that the market for dining out in the U.K. will grow by 3.1 percent to 34.5 billion pounds this year.

“We compete with the likes of McDonald’s and Subway, there’s no shortage of competition,” Chief Executive Officer Roger Whiteside said by phone. “But we’ve upped our game.”

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