Strategic analysis Burger King

Strategic analysis Burger King

Strategic Hospitality Management -University of West London- Module Leader: Terry McCusker student ID: 21239704 Business bits: Burger King Burger King Worldwide Inc. reported the third quarter situation this morning. What has happened to profits comparing to last year? In the third quarter of this year, the reports are showing a profit of $68. 2 million or 19% a share comparing to $6. 6 million or 2% a share, an year earlier. Beside this, the per-share earnings rose from 17% to 23%. What about the revenue? As a result of the franchising many of our restaurants, the revenue fell to $275. illion with 40% comparing to last year, but excluding the currency movements and the impact of franchising, the total revenue rose 8. 1%. So what can you tell me about the franchising decision? Well, in the last year we franchised more than 500 restaurants. At this moment we have 74 company owned-restaurants, down from 595 in the prior year quarter. This decision was made in order to cut the costs and it really impacted on our overall results. Did the franchising decision impact on all the regions in which Burger King Restaurants are opened?

Yes and no in the same time. While in the Asia Pacific region the sales rise with 3. 7%, Africa and Middle East with 2. 4% and in the Europe the store-sales are the same, in the Northern America the results fell with 0. 3%. What’s something new about Burger King? Well, in addition to franchising, the chain is now focusing on acceleration the global development of new-restaurants, remodeling the already existing ones and on was Just released late in the quarter, but along with a value menu, it helped sales turning from negative to positive in October.

Word count: 286 The comeback of “The King” Burger King Worldwide, Inc. Just announced a few days ago the report’s results for the third quarter of the year. Burger’s King business dates back from 1954 when James McLamore and David Edgenton decided to open the first Burger King Restaurant in Miami, Florida. Because the fast food style restaurant had an enormous success, they decided to open two more restaurants in 1963, in Puerto Rico. The company became a fully owned one in 1967 when the Pilsbury Company acquired Burger King Corporation.

At that time, the Burger King system was comprised of 274 restaurants with over 8 000 employees all ver the US and abroad. After more than 2 decades, the company was acquired again by Grand Metropolitan and they were now focusing on the international growth and this drove to a numerous new country entries, such as: Italy, Bolivia, Turkey, Paraguay, New Zealand, Peru and many others. In 1997, the company merged with Guinness and Diageo Plc. was created but they decided to focus more on spirits and liquors business so Burger King was again sold to private equity Texas Pacific Group.

Even though the specialists say that the entire transition of the company helped them to tand were they are today, a person with direct knowledge about the company said that the most important move was made when 36 Capital Management took Burger King private and made them to appeal on a wider group of customers. Nowadays, 3G Officer Daniel Schwartz he said: “We saw more women and people over 50 come in to our stores, which is good because they tend to have higher average checks and trade up to more premium items” and this is the change 36 currently want to introduce into the chain.

Bit will the changes be enough for Burger King to reclaim the lost crown from Wendys Co. as the no. chain behind the leading and well-known McDonald’s? After a decrease in profits and a struggle through the recession period, Burger Kind is now adopting a new strategy idea in order to help them out to pop up with their results. Mr. Ackman, the hedge-fund manager, urged the Burger King Company to sell the corporate-owned restaurants to franchisees, in order to reduce the labor costs and to increase profits and revenue.

Burger King said that putting ownership to franchisees has encouraged the franchisees owners to re-think and re- model the dated stores. A Burger King Official said: “We are planning to sell nearly all f our restaurant to franchisees by the end of the year”. Until the 3rd quarter of this year, this strategy really bought some increases into the Burger King report and the statistics show that this year the net income raised to $117. 7 million or 34% per share on total revenue of $1. 97 billion, comparing to the last year’s results: $88. million or 25% per share, on revenue of $2. 34 billion. Anyw???ay, Burger King was not the only one affected by the recession and the soft economy… McDonald’s was a victim as well. The main competitor of Burger King reported a 3. 5% decline for the 3rd quarter earnings. Going more international with brand new products As it is known, the international fast food market becomes day by day more competitive. For this reason, Burger King is looking forward to go as international as possible, even though nearly half of its current locations are abroad.

A latest press speech inform us that Burger King will soon enter the Indian Market with a franchising partnership, headed by the present CEO of the I-JK majority-owned firm, Everstone Capital. “Unlike most such deals where only the franchisee invests in the business, Burger King will invest in the venture and hold a minority equity. The deal is more like a partnership, though the operations will be run entirely by Everstone Capital”. The arrival of Burger King in India, ironically, will happen in the same time with a bitter legal battle between the chains’s no 1 competitor, McDonald’s, and one of its franchise partners in the country.

Beside this, the Burger King team says that accelerating the international development is an integrated part of their global portofolio project and they are expecting to develop strategic partnership and Joint ventures. Also, they are currently focusing on maintaining a corporate-level cost tructure by maintaining the “Zero based budgeting” program, which is an annual planning designed to build a strong culture within the ownerships and Justify costs and expenditures from a “zero base”.

Besides entering the indian market, an announcement was made by Burger King about the fact that they signed a Joint venture also with the Kurdoglu Family, which is already the largest franchisee from China. The fast food giant is planning to open more than 1000 restaurants in the next five to seven years, currently being opened only 63 outlets in China, comparing to How they distribute? Similar to other fast food restaurants. Burger King requires from its franchisee to use the approval list because they have to guaranty for their product’s quality, packing, price and equipment.

Furthermore, the company does not own the distribution facilities and when speaking about the international restaurants many countries depend on one distributor. Also, the company operates a non-for-profit and independent purchase cooperative which is used to improve the power of purchasing. Burger King underperforms After the recession, Burger King posted a strong performance with a positive growth and a healthy growth in the US, both in terms of sales/outlet as well as the expansion f the units. In 2010 and 2011 the giant was affected by the unemployment of its main market segment, the young males, which faced a lack of disposable income.

But starting with 2011, the share growth pushed back Burger King on the fifth place in the global ranking of fast food restaurants, and since then the company got healthier by using different strategies and by changing the things they are focusing on. Revamped brand strategy After the focusing of Burger King on improving its brand positioning to a wider range of customers, especially women, families and seniors, from 2011 the giant is trying to lace itself as a healthier, higher quality and family-friendly brand. New menu strategies were implemented and a change in the advertising strategy has occur.

The chain separated from the advertising company, Crispin Porter+Bogusky, after a relationship of 7 years with the firm. The new vision is now focusing on the food itself and has the new tagline of “Taste is King”, through Burger King aims to fit all demographics positions. Word count: 1113 BBC News Business (2013) Burger King profits up as costs fall [online]. Available at: http://www. bbc. co. uk/news/business-24713668 [Accessed 30 oct 2013] BBC News Business (2012) Burger King to open 1 000 restaurants in China [online]. Available at: http://www. bbc. co. k/news/business-18466764 [Accessed 30 oct 2013] BBC News Business (2010) Burger King sold to buy-out firm for $3. 26 bn [online]. Available at: http://www. bbc. co. uk/news/business-11168720 [Accesed 31 oct 2013] Burger King Website: History of the company [online]. Available at: http:// [Accessed 01 nov 2013] Gassparo, A. (2013) Cost cuts help Burger King. [online] Available at: http:// search. proquest. com. ezproxy. uwl. ac. uk/docview/1346144364/abstract? accountid=14769 [Accessed 29 oct 2013] Grant, R. M. (2013) Contemporary Strategy Analysis, 8th edition.

Chichester: John Wiley and Sons Investor’s Business Daily (2013) Burger King Q3 earnings sizzle [online]. Available at: http://search. proquest. com. ezproxy. uwl. ac. uk/docview/ 1446053840/14185863984841 [Accessed 29 oct 2013] Nation’s Restaurant News (2013) Burger King 4Q profit nearly doubles, sales rise [online]. Available at: http://nrn. com/latest-headlines/burger-king-4q-profit-nearly- doubles-sales-rise [Accessed 02 nov 2013] Passport, (2013) Burger King Holdings Inc. in consumer foodservice(world). [online] Available at: https://www. ortal. euromonitor. om/Portal/Handlers/accessPDF. ashW Burger_King_Holdings_lnc_in_Consumer_Foodservice_(World). pdf? c=OOPDF =F-220709-22559300. pdf=Burger_King_Holdings_lnc_in_Consumer_Fo TRWnrmdNMrz4YW2A%3d [Accesed 29 oct 2013] Telegraph. co. uk (2013) Burger King profits Jump as costs halve [online]. Available at: The Economic Times (2013) Fast food chain Burger King to enter India with PE firm Everstone Capital [online]. Available at: http://articles. economictimes. indiatimes. com/ 2013-10-25/news/43395158_1 _everstone-capital-3g-capital-burger-king [Accessed 01 nov 2013]

The Daily Telegraph (2013) Cost-cutting drives Bruger King profits: News Bulletin [online]. Available at: http://search. proquest. com. ezproxy. uwl. ac. uk/docview/ 1446161 556/14185863984841 DD9C/41 [Accessed 29 oct 2013] The Wall Street Journal (2012) As profit sinks, Burger King notes sales improvement. [online]. Available at: http://online. ws]. com/news/articles/ SBI 0001424052970203335504578086363514686362 [Accessed 02 nov 2013] Wall Street Journal (2013) Burger’s King profit soars on decrease in costs [online]. Available at: http://search. proquest. com. ezproxy. uwl. ac. uk/docview/ 1445782271114185863984841 [Accessed 30 oct 2013]