McDonald's Corp missed profit expectations for the second quarter in a row as sales at established restaurants grew at their slowest pace in more than nine years because of stepped-up competition and a weak global economy.
The world's biggest fast food chain also said sales at existing restaurants have fallen so far in October.
Shares of McDonald's fell 3.4 percent to $89.71 in early Friday trading.
Competitors, such as Burger King Worldwide Inc, The Wendy's Co and Yum Brand Inc's Taco Bell, have overhauled menus to compete with McDonald's and benefited from lower commodity costs, which has helped them to lower prices, Morningstar analyst R.J. Hottovy said.
McDonald's has beefed up advertising to try to fend off the resurgent rivals.
"I think that competition has certainly gotten more aggressive the past several quarters," Hottovy said. "Between commodity costs coming in and companies being able to price more aggressively, but also consumers still being very fixated on value, it's led to a very cutthroat restaurant environment."
Shares in other restaurant operators also fell on Friday morning. Chipotle Mexican Grill Inc shed 15 percent to $243.22. Yum Brands was off 1.7 percent to $70.90. Starbucks Corp sank 2.7 percent to $46.12.
McDonald's global sales at restaurants open at least 13 months rose 1.9 percent, the first gain of less than 2 percent since the second quarter of 2003. Analysts polled by Consensus Metrix expected a 2 percent increase.
The sluggish U.S. economy and Europe's belt-tightening are squeezing even the most resilient restaurant operators, as diners spend cautiously.
Tougher comparisons, particularly in the United States, will likely weigh on comparable-sales trends from the fourth quarter of 2012 through the second quarter of 2013, said Janney analyst Mark Kalinowski, who has a "neutral" rating on McDonald's.
Income at McDonald's fell to $1.46 billion, or $1.43 per share, in the third quarter, from $1.51 billion, or $1.45 per share, a year earlier.
Analysts, on average, expected McDonald's to earn $1.47 per share, according to Thomson Reuters I/B/E/S.
The impact of the stronger dollar, which lessens the value of sales overseas for U.S. companies, trimmed earnings by 8 cents per share.
Total sales slipped to $7.15 billion from nearly $7.17 billion.
Comparable sales rose 1.9 percent in September, topping analysts' average estimate of 1.82 percent, according to Consensus Metrix.
During September, comparable sales were up 0.7 percent in the U.S., 3.0 percent in Europe and 0.1 percent for the Asia/Pacific, Middle East and Africa (APMEA) region.
Analysts expected a 2.05 percent gain in the U.S., a nearly 1 percent rise from Europe and a 1 percent increase from APMEA, according to Consensus Metrix.
Lazard Capital Markets analyst Matthew DiFrisco said he wants to hear more about the "increasingly competitive environment" in the U.S. and what pushed traffic to restaurants down in Europe and led to the weakness in Japan.
Still, he rated McDonald's stock as "buy," calling it the best-positioned restaurant chain to gain share with its strong brand equity, marketing, contemporary stores and value prices.