2. The Industry
• Restaurant Fast Food (Limited Service Restaurants)
• Researchers defined fast-food restaurants
as chain restaurants that have two or
more of the following characteristics:
– expedited food service
– takeout business
– limited or no wait staff
– payment tendered prior to receiving food.
4. Spending Trends
As of the end of 2008
– Economic downturn, leading to lower consumer spending
• 2 opinions in relation to the future growth
– Fast food restaurants become alternatives to full service
restaurants because they are cheaper
– Senior trends manager for TRU says
• "I wouldn't expect people are going to stop going to fast-food
restaurants," he says. "They will curtail it to a degree, but
teens and twenty-somethings are already going to fast-food
restaurants quite a lot. You're going to see minimizing across
the board."
– Two of the four top categories young people plan to spend less
on are eating out, while 51 percent plan to spend less on
snacks.
5. Lifestyle Trends
• Home cooked meals are becoming less prevalent
• Changes in lifestyle such as divorce, late marriages, an
increase in single-parent households, homes with two working
parents, an aging population, increased hours spent working,
and an increase in commuting time are driving more
consumers into the restaurants.
6. Demographics Trends
• Demographic changes have been pushing consumers
towards fewer meals, a preference for less meal preparation
time, and more frequent snacking in lieu of sit-down meals.
• Low income neighborhoods have a higher density of fast-food
restaurants
• According to a British study,
lower socioecomic groups had
diets with less vegetables and fruit,
and more unhealthy foods (fast food)
compared to higher socioeconomic
groups.
Percent who say they eat at a meal from a fast food
restaurant at least weekly
7. Global Fast Food Forecasts
Market Value Forecast
In 2011, the global fast food
market is forecast to have a
value of $125.4 billion, an
increase of 22.2% since 2006.
Market Volume Forecast
In 2011, the global fast food
market is forecast to have a
volume of 86.4 billion
transactions, an increase of
7.6% since 2006.
8. Global Market Share Segmentation
United States compound annual growth
rate will increase by 3.7% to
$66.3 billion by 2011
European CAGRs will grow by 3.3% to
$22.9 billion by 2011.
9. SWOT Analysis Overview
Burger King
Strengths
• Strong market position
• Greater franchise mix
• Robust financial performance
Weaknesses
• Market concentration
• Scattered Marketing
Campaign
Opportunities
• New products development
• New opportunities in growing
economies
• Positive outlook for restaurant
industry in the US
Threats
• Intense competition
• Expiry of Franchise
Agreements
• Acrylamide in French fries
10. SWOT: Strengths
• Strong Market Position
– BKC is the world's second-largest FFHR chain as
measured by the total number of restaurants and
system-wide sales.
• Greater Franchise Mix
– As a result of its higher franchise mix, the company is
able to grow with minimal capital expenditure and is
assured of regular income in the form of fees and
royalties.
• Robust Financial Performance
– Revenues and Income have consistently grown
providing a platform for future growth.
11. SWOT: Weaknesses
• Market Concentration
– Though the company operates in 65 countries, its
operations are heavily concentrated in the US and
Canada. About 65% of its restaurants are located in
the US and Canada
– Concentration of operations in one geographic area
increases company's exposure to local factors such
as adverse economic situation, labor strikes and
changes in regulations that can affect its operations.
• Scattered Marketing Campaign
– Fail to efficiently promote products, because they are
too busy trying to promote “The King” character
12. SWOT: Opportunities
• New Products
– BK value menu featuring six items at less than $1,
breakfast sandwiches, and specialty burgers
• New Opportunities in Economy
– India, China, Singapore, and Malaysia
• Positive Outlook for US Industry
– The year 2009, would mark the 18th consecutive
year of sales growth in the restaurant industry.
– Well positioned companies will benefit from growing
foodservice sector
13. SWOT: Threats
• Intense Competition
• The company's competition in the broadest perspective
includes restaurants, quick service eating establishments,
pizza parlors, coffee shops, street vendors, convenience
food stores, delicatessens and supermarkets.
• Expiry of Franchise Agreements
• Of the 409 agreements that expired in fiscal 2006, only
47% were renewed and 28% were extended for similar
periods.
• Acrylamide in French fries
• Acrylamide has been shown to cause cancer in some
studies in experimental animals although further studies
are underway to better understand the significance of
these results in relation to human health.
14. Forces of Competition
• Threat of entry
– High cost of entry
– Highly established competitors
• Threat of substitutes
– Growing amount of “limited service restaurant”
companies
– Ex: Dominos, Subway, Dairy Queen, Taco Bell, KFC
• Industry Rivalry
– “Copycat industry”
– Large amount of competition, domestic and global
15. Forces of Competition
• Complimentary Products
• Power of Supplier
– Varies from region to region
– Usually large number of suppliers
• Power of Buyer
– Many choices in fast food industry
– Demand
17. Competitive Advantage:
Brand Names
• Burger King
• “It’s all in the name”
• Established since 1954
• Loyal following of patrons
• Whopper
-Known for quality
-One of best known brands in fast-food
-50th
anniversary
18. Competitive Advantage:
Highest Franchise Rate
• Pros:
– Low capital
expenditure
– Allows for high cash
flow/ reinvestment
– Quicker expansion into
new markets
• Cons:
– Limited control
– Inability to influence
changes in ownership
– Only 75% of revenue
•90% of BK locations are franchised
•Leads the Industry
19. Competitive Advantage:
Marketing
• Commercials
– Innovative and Edgy
– Rated “best new restaurant ad” by Neilsen’s (2008)
– Also ranked among top 5 “best recalled ads” (2008)
• Product Placement
– BK appearances in Iron Man, The Simpsons Movie, Indiana
Jones, etc.
– Video game alliances: Halo 3, Fight Night, Gears of War, etc.
20. Problems with Marketing
• What would you say is the message of
BK’s advertising?
• Ads for “Texican” burger controversial
– Stereotyped Mexicans
• Muffled message
– Targets “SuperFan”
• Provides no clear differentiation for brand
21. BK’s Recent Performance
Burger King
• 2nd
largest FFHR in US
• $2.3 billion (2007 revenue)
• 11,565 locations worldwide
– 71 countries
• 90% franchised
• 14% market share
• $1.19 million avg. sales per
location
McDonald’s
• 1st
largest FFHR in US
• $22.8 billion (2007 revenue)
• 35,000 locations worldwide
– 100 countries
• 70% franchised
• 45% market share
• $2.4 million avg. sales per
location
22. BK’s Recent Performance
• Average restaurant sales increased 6%
(2007)
– Closed 184 restaurants since 2006
• Recently entered “financially attractive”
Japanese and Indonesian markets
• Strength of foreign currency affects foreign
profits
– If dollar appreciates, revenues decrease
24. Business Model
Burger King
Scalable and cost-efficient quick service
hamburger restaurant model that offers
customers fast food at modest prices.
2006 Public Offering
25. Competitors’ Advantages
• McDonald’s Advantages:
– Appeal to ages 3-12
– “America’s fast food company”
– 3 times larger than BK
• Wendy’s Advantages:
– Dollar menu
• Beginning to change
– Cost-leader
• Becoming harder
26. Growth Opportunities
• Differentiation Strategy
• “Green” and “Modern” Image
– First-mover advantage
• Capitalize off increased corporate-owned
profitability
28. Key Resources
• Flame broiled
• Creative advertising
• “Hippest” of the big 3
• Experienced management
29. Risk Factors
• Restaurant business has few barriers to
entry
• Availability of bank credit
• Government regulation of nutrition
• Food Costs
– 19% and 13% of food costs from beef and
chicken
– Increased ethanol production has cut
remaining availability of corn (used in animal
feed)
30. Franchising - Advantages
• Provides predictable cash flows without
much risk or capital investment
• One time fee: $50,000
• Advertising fee: 4% of sales
• Royalties: 3.5% - 4% of sales
31. Franchising - Disadvantages
• Limited control of daily operations
(cleanliness, culture, etc.)
• Generally less profitable
– 32% of profit came from company owned
restaurants
– ¼ as profitable
32. Break Even Analysis of Conversion
Process
Cost of Repurchase 650,000
Revenue of Franchise (yr) 52,621.26
Revenue of Company owned 220,480.2
Difference in cash flows 167,858.9
Break Even (years) 3.8723
33. Global Presence
• 11,565 restaurants in 71 countries
• 38% located abroad
• Differences in dining preferences
– Fattier foods served domestically
– More dine-in customers
Red=Locations of Burger King
Orange = Former Locations
Yellow=Operates under different name
34. Health Concerns
• Disclosure of caloric content
• Widespread requirements for restaurants
and other food service establishments to
phase out artificial trans-fat in the near
future
• Customers trending towards healthier food
choices
39. Current Ownership Strategy
“We believe that our restaurant ownership
mix provides us with a strategic advantage
because the capital required to grow and
maintain the Burger King» system is
funded primarily by franchisees, while still
giving us a sizeable base of Company
restaurants to demonstrate credibility with
franchisees in launching new initiatives.”
40. Current Strategy
• Drive further sales growth
– Enhance Guest Experience
– Reduce hours
• Enhance Restaurant Profitability
• Expand International Platform
• Employ Innovative Marketing
Strategies
• Accelerate New Restaurant
Development and Expansion
41. Global Growth
• Enter new territories 71
• Latin America 1000 count (#1 FFHC
16/25 countries)
• Eastern Europe (Middle East,
Mediterranean)
• Asia Pacific – project brand presence via
airport locations
• Target bold, edgy, young
• 2009 – open 3-4% net new units world
wide annually
42. Re-imaging
• Whopper Bar – designed to reach new
guests, college students
• Invest money in fresh looks for company
owned restaurants
• 25% savings in real estate development
costs
• Greener Environment
– Energy Efficient – guest notice the re-
imaged restaurants with avg. sales rise 16%
and rebuilt = 36% increase
43. Adventures in Dining –
Differentiation
• Differentiation in Products
– Apple Fries
– Nutritional Kraft Macaroni & Cheese
– Burger Shots
– Mega Angus Burger
• BK Positive Steps: eliminating cooking
with trans fat oils in U.S. and Canada
44. Adventures in Marketing
• “Have it Your Way”
• Flexible Broiler – new products
• Bluetooth Headsets – improved communication and speed of
service – superior guest experience
• Pricing Tool – examine competitive data and make market
driven changes in menu pricing
• Trendy Advertising: Simpsons, Whopper Freak Out, Indiana
Jones, Transformers, Iron Man, ipod downloads, etc. – always
comes down to great food
45. Burger King vs. McDonald’s
2008
• 11,565 restaurants in 71
countries.
• 1,360 Company
Restaurants (11.75%)
• 10,205 Franchise
Restaurants (88.24%)
• 31,967 restaurants in 118
countries .
• 6,502 Company
Restaurants (20.3%)
• 25,465 Franchise
Restaurants. (79.6%)
Burger King McDonald’s
46. What Fast Food Restaurant has
the best Hamburger?
– McDonald’s 21%
– Burger King 37%
– Wendy’s 37%
47. Which FFHR has the best
atmosphere?
– McDonald’s 34%
– Burger King 11%
– Wendy’s 31%
48. Which FFHR do you go to the
most?
– McDonald’s 16%
– Burger King 11%
– Wendy’s 57%
49. How would you change FFHR’s?
• 53% Better quality, cleanliness,
healthier.
• 22% Sought out more menu options
• 17% Requested lower prices.
• 6% Wanted better customer service.
50. Analysis of Results
• BK tied Wendy’s for the best burger.
• Quality, Cleanliness, and Health are Important
– There is a potential demand for quality positions
FFHR
• McDonald’s had the best atmosphere.
– We need to differentiate our atmosphere, imitation is
unsuccessful
• Wendy’s was most frequented.
– Better proximity and late night availability
– BK should focus on lunch-time, evening segment
51. Strategic Objective:
Increase Market Share by:
• Re-positioning BK as a “progressively
responsible” Fast-Food Hamburger Restaurant.
• Increase corporate influence and initiatives over
franchise operations.
• Streamlining business model to achieve a more
product-centric focus.
• Expanding Globally through promotion of brand
name.
52. Differentiation Strategy:
• Green Team Campaign
– Recyclable paper products
• Quality, Sustainability, Responsibility.
• Contemporary counter-front and open view into
kitchen from anywhere in restaurant.
• Restaurant Interior/Exteriors gives “Organic
Feel”
• Focus on Freshness and Quality of Beef,
Produce, Beverage.
53. Burger King Lounge
• Free Wi-Fi will appeal to business people.
• Segmented table layout adds privacy and
relaxed atmosphere.
• Plants and foliage support sustainable
position.
• Earth-tone color-scheme aligns with
message.
• First Mover Advantage
54. Easy-Order Touch Screens (POS)
• Self-Order touch screens at counter.
• Increases order accuracy
• Provides screen by screen option interface
and comparable value information
• Reduces unorganized menu cluster
• Reduces labor costs
55. Global
• Focus advertising efforts on new target
market
• Promote healthy BK Kids meals
• Implement US Standards for emerging
global franchises.
56. Objectives: 6 Month
• Start Conversion of Company/ Franchise
Ownership from 11.75% to 15%
– For every 100 BK’s, 15 will be Company
Owned.
• Launch “Green Team” Campaign in new
restaurants.
• Launch Conversion of existing
restaurants.
57. Objectives: 12 Month
• Completion of Old Restaurant Conversion
– 5% Franchisees renegotiated
• Increase Average Gross Sales per store
by 10%
• 500 New Franchise Restaurants World-
Wide.
– Maintain Company/Franchise Ratio Goal.
(15%)
58. Strategic Goal for the Future
• BigBig Hairy Audacious Goal
– To become largest Fast-Food Hamburger
Restaurant in the world. (Currently second to
McDonald’s)
• As measured by:
– Total number of restaurants
– System-wide sales.