burger king case summary final

1.0 CASE SUMMARY

Burger King is the world´s second largest fast food hamburger restaurant (FFHR)

company. The BKW system includes over 12,600 restaurants in the U.S. and

more than 80 other countries worldwide, with 95% of the system currently

operated under a franchised business model. Burger King Corporation was

founded in 1954 in Miami, Florida, by James McLamore and David Edgerton.

McLamore and Edgerton, both of whom had extensive experience in the

restaurant business before starting their joint venture, believed in the simple

concept of providing the customer with reasonably priced quality food served

quickly in attractive, clean surroundings.

The success and size of Burger King Corporation is the result of a tradition of

leadership within the fast-food industry in such areas as product development,

restaurant operation, decor, service, and advertising.

At the end of its fiscal year 2007, Burger King reported that there are more than

11,300 outlets in 69 countries, 66% are in the United States and 90% are

privately owned and operated. The company has more than 37,000 employees

serving approximately 11.4 million customers daily. The company's two largest

franchisees are Carrols Corporation with over 325 restaurants in United States,

and Hungry Jack's, which exclusively owns, operates or sub-licenses over 300

restaurants in Australia.

In 2010, 3G Capital, a global multi-million dollar investment firm focused on long

term value creation, purchased Burger King Corporation, making it a privately-

held company.

The buyout marks the largest leveraged acquisition of a fast-food chain ever, and

the second for Burger King in the last eight years. The whopper-maker’s possible

new owner, 3G Capital, is backed by a number of wealthy Brazilians, including

billionaire and a sport celebrity (tennis player). 3G plans to expand Burger King’s

foothold internationally, especially in Latin America and Asia.

2.0 SWOT ANALYSIS

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

2.1 Strengths Strong market position Greater franchise mix Robust financial performance

2.2 Weakness Market concentration Scattered Marketing Campaign

2.3 Internal Strategic Factor Analysis (IFAS)

Weight (Ranges from 0.0 to 1.0)0.0 1.0

Not important Very importantRating

1 2 3 4

Major weakness Minor weakness

Minor strength

Major strength

Internal Strategic Factors Weight Rating WeightedScore

Comments

1 2 3 4 5Strengths• Strong market position• Greater franchise mix• Robust financial performance

Weakness

• Market concentration• Scattered Marketing Campaign

0.250.200.20

0.200.15

433

42

10.60.6

0.60.3

TOTAL 1.0 3.10

The total of 3.10 shows that the strengths and weaknesses of Burger King are

only at minor strength which is quite significant for Burger King to improve

their strengths and overcome their weaknesses from time to time as to

strengthen the company’s profile and to widen market shares internationally.

2.4 Opportunity• New products development• New opportunities in growing economies• Positive outlook for restaurant industry in the US

2.5 Threats Intense competition Expiry of Franchise Agreements Acrylamide in French fries

2.6 External Strategic Factor Analysis Summary (EFAS)Weight (Ranges from 0.0 to 1.0)

0.0 1.0Not important Very important

Rating1 2 3 4

Major weakness Minor weakness

Minor strength

Major strength

Internal Strategic Factors Weight Rating WeightedScore

Comments

1 2 3 4 5Opportunities• 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

0.250.20

0.15

0.200.10

0.10

44

3

43

2

1.00.8

0.45

0.80.3

0.2

TOTAL 1.0 3.55

The total of 3.1 shows that the opportunities and threats of Burger King are

only at minor strength which is quite significant for Burger King to use their

abundance of opportunities in order to overcome threats which are coming to

take control over their market shares globally.

Weight (Ranges from 0.0 to 1.0)0 1

Not important Very importantRating

1 2 3 4Major weakness Minor weakness Minor strength Major strength

Critical Success Factor Weight

Burger King Wendy McDonald

RatingWeighte

d Score

RatingWeighte

d Score

RatingWeighte

d Score

Strong Market Position 0.1 4 0.4 4 0.4 4 0.4

Market Concentration 0.2 4 0.8 3 0.6 3 0.6

New Products development 0.1 3 0.3 3 0.3 3 0.3

Intense Competition 0.15 4 0.6 3 0.45 4 0.6

Financial Position 0.2 2 0.4 3 0.6 3 0.6

Product Quality 0.25 2 0.5 3 0.75 3 0.75

TOTAL 1.00 3.00 3.10 3.25

2.7 Competitive Profile Matrix (CPM)

The total of 3.00 shows that Burger King is rated in minor strength position. They

are competing in a competitive environment particularly with Wendy and

McDonald. Proper strategies which will be discussed in later page will be able to

improve the net competitive advantage for Burger King.

3.0 PROBLEM STATEMENT

The case study indicates the main problem on the concerned of the new management

of Burger King’s ability to continue to capitalize on the Burger King Brand by

growing globally and reimagining Burger King Brand in the market.

Following are the list of problems:-

a) Heavily concentrated in the US.

b) Confusing advertisement campaigns.

c) Inconsistent management and strategy. Changing Executives.

1. Heavily concentrated in the US.

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. 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.

2. Confusing advertisement campaigns

Ineffective ad campaigns were one of the problems facing BK. Burger king lost its core

product-flame broiled burgers, made the way the customer wanted them. Many in store

promotion also failed. They fail to efficiently promote products, because they are too

busy trying to promote “The King” character. The Burger King "I like square butts"

commercial. I found that offensive because it was promoting a Sponge Bob kid's meal. I

just didn't think that was appropriate for little kids, especially when you know the real

lyrics to the real song. In the commercial, the Burger King icon was measuring the

square butts of other girls. A lot of people were offended over this commercial.

3. Inconsistent management and strategy

Management lacked focus and direction and has struggled with marketing mix decisions.

Franchises became confused and angered, service was slow and food preparation

wasn't consistent. Burger King lost its core product-flame broiled burgers, made the way

the customer wanted them. Burger King Corp. was founded in Miami in 1954 by James

McLamore and David Edgerton, a year before Ray Kroc opened his first McDonald's in

suburban Chicago. The Whopper was introduced in 1957. In 1967, Burger King was

acquired by the food conglomerate Pillsbury. In 1988, Pillsbury was bought by Grand

Metropolitan PLC, a British conglomerate. In 1997, Grand Metropolitan merged with

Guinness to create Diageo. With each merger, even as Burger King grew, it became a

smaller piece of the overall company. Ultimately, it became an afterthought. Soon after

the merger, Diageo decided that Burger King no longer belonged. In 2000, Diageo

officially placed Burger King on the auction block. The company was finally sold in 2002

to a consortium of private equity investors, Texas Pacific Group (TPG), Bain Capital, and

Goldman Sachs Capital Partners for $1.5 billion.

4.0 ALTERNATIVE STRATEGIES

1. Increase average unit sales

2. Accelerate Net Restaurant Growth (NRG) and continued sales growth

3. Global Refranchising


An increased average unit sale per transaction is the result of completing

every sale where the customer makes an informed purchase. If a customer

leaves your store following an incomplete sale then who suffers? First, the

store suffers because of the lost opportunity to increase the value of the sales

transaction. And secondly, the customer suffers because he or she may not

have been well-served with the purchase that was made. In Burger King, we

would like to emphasize on four key areas which are menu, image,

marketing communication and operations. The strength of our menu has

been built upon our signature flame-grilled cooking process, which we believe

results in better tasting burgers. We believe that with the introduction of new

image will drive store sales, higher profits and strong return on invested

capital. We have established a data driven marketing process which is focused

on driving restaurant sales and traffic, while targeting a broader consumer

base with more inclusive messaging. By restructuring the current field teams,

it will significantly increase our field presence and restaurant visits by

reducing the span of control of our field teams.


Net Restaurant Growth or NRG is defined as the change in system restaurants

as of the end of a given period compared to the end of the prior period. This

change is composed of new restaurants opened, less restaurants closed

during the period. In Burger King, it accelerates NRG by creating Master

Franchise JVs and Development Agreements. Master franchising is a method

that has been employed by most franchise systems. The operational

efficiency of these systems, with their distinctly complex organizational form,

benefits from increased growth rates of the sub franchises.


Taking a franchise brand international is, in a sense, the final frontier for

growth. It's where many franchise brands that have begun - and been

successful - in the U.S turn when they seek expansion. It's a strategy that

often occurs in part because of growth that has saturated domestic markets

and territories. Typically, larger more established franchise brands begin

looking across borders for untapped markets and potential growth. In Burger

King, we believe the refranchising strategy will continue to enhance our cash

flow, accelerate the re-imaging initiative and strengthen relationships with

key franchisees

5.0 EVALUATION OF ALTERNATIVE STRATEGIES


Positive Outcome

With the implementation of Increase average unit sales will eventually

build the confidence and strengthen the brand image of Burger King. The

strategies will also drive store sales, higher profits and strong return on

invested capital. As for operation, it will be more focus and strategic, in return

will be able to increase the staff productivity and reducing the span of control

of field teams.

Negative Outcome

The drawback of this strategy would be the acceptance of the consumer on

the implementation of the action plan. It will also jeopardize the

implementation of restructuring in the operation field team which without

evaluating the numbers of experience staff to lead the implementation of the

restructuring strategy.


Positive Outcome

This strategy will leads to the implementation of master franchisor in which a

master franchisor will grant the master franchisee, or subfranchisor, the right

to third-party operations within a defined territory. And then, with respect to

regional issues, the subfranchisor will assume the role of the franchisor, but

they typically will not own or operate the franchise. They are removed from a

direct management position. This duplication of the franchisor's role forms an

additional layer of control in the general franchise system, which results in

some small scale inefficiencies on the small, local scale but greatly reduces

the large scale inefficiencies. Additionally, a master franchise allows the

company holding the franchising permit to benefit from management talent

and more and more accessible capital. Combined, these two factors translate

into almost instant penetration into the market and a competitive advantage,

both of which increase system growth rates. Managerial levels and

hierarchical framework exemplify one competitive advantage. By allowing the

franchisor to specialize in recruiting, screening and training of subfranchisors,

which then develop their area in a similar way, the overall growth rate of

chains increases. Other benefits include faster development, a more

comprehensive financial base, specific expansion plans, access to capital and

a regular cash flow, proximity to the customer, some independence, and the

ability to address the demands of the customers as well as address the local

competition.

Negative Outcome

Although master franchising can be beneficial and advantageous, there are

also setbacks, including legal problems and overly long contracts. One

specific setback of master franchises is that the increase in agency costs.

Franchise agreements are needed to codify the enforcement of behavior. But,

because all aspects of the franchise cannot be predicted, this requirement

raises the opportunity for franchise shirking while reducing the overall ability

to monitor all aspects of the franchise.


Positive Outcome

Through global refranchising, it will reposition Burger King as a “progressively

responsible” Fast-Food Hamburger Restaurant. Subsequently increase

corporate influence and initiatives over franchise operations. With global

refranchising, it will help by streamlining Burger King Business model in

return leads to a more product-centric focus.

Negative Outcome

Although going global would be able to create a positive opportunity, but it is

also has its own setback. One of it would be the implementation of the

franchisee commitment and cooperation toward the implementation of the

required initiative. Different franchisee would have their own way in

implementing it and having different strength and weaknesses. Main

franchisee would need to play their role to ensure aligned to the requirement.

THE BEST STRATEGY AND JUSTIFICATION

Of all the three alternative strategies, we have concluded that increase

average unit sales as the most appropriate strategy in handling Burger King

competitive position and reimagining in driving sales and traffic based on the

following four key areas:

Menu

The strength of our menu has been built upon our signature flame-grilled

cooking process, which we believe results in better tasting burgers. Our menu

strategy seeks to optimize our menu by focusing on our core products, such

as our flagship Whopper sandwich, while enhancing our menu to broaden our

appeal to women, parties with kids and seniors. Our recently launched

initiative to focus on our food expanded our product platforms and introduced

21 new or improved menu items in 2012. We believe that our renewed focus

on our food will provide us the opportunity to meaningfully increase same

store sales and margins.

Marketing & Communications

We have established a data driven marketing process which is focused on

driving restaurant sales and traffic, while targeting a broader consumer base

with more inclusive messaging. Through our food-centric marketing

communication strategy, we believe we can refocus our consumers on our

food, which is a core asset and competitive differentiator.

Image

We believe that our contemporary "20/20 design," which draws inspiration

from our signature flame-grilled cooking process, will drive same store sales,

higher profits and strong return on invested capital. To encourage franchisees

to commit to these remodeling efforts, we developed a lower cost remodeling

alternative and provided our U.S. franchisees with access to a third-party

financing program.

Operations

We have restructured our field teams through our "field optimization project,"

to significantly increase our field presence and restaurant visits by reducing

the span of control of our field teams. We believe that this reduction in the

number of restaurants for which a field employee is responsible will improve

all aspects of restaurant operations, including food quality, guest service, and

speed of service and restaurant cleanliness. We also redefined the role of a

field employee to be that of a "business coach" who is responsible for closely

working with the restaurant teams and franchisees to achieve their sales,

profit, and operational goals. The field employees’ variable compensation is

linked to the performance of those franchise restaurants. We believe that this

"business coach" approach will ensure accountability and alignment with our

franchisees. We have also launched standardized operational metrics to

evaluate restaurants that focus on those core competencies that we believe

will maximize the guest experience. We believe that enhancing our guests’

experience increases traffic to restaurants and provides us and our

franchisees the opportunity to improve sales and margins.

IMPLEMENTATION

Short-Term Plans

Implementing the increase average unit sales strategies,

concentrating on the four key areas (menu, image, marketing

communication and operations), it will optimize the menu by focusing on

the core products, such as our flagship Whopper sandwich, while enhancing

new menu to broaden the appeal to women, parties with kids and seniors

citizens. By introducing 21 new or improved menu items, it will renew the

focus on the food menu and will provide the opportunity to significantly

increase store sales and margins. Implementation of focused marketing message

“TASTE IS KING”, which a food-centric advertisements to all demographics will

strengthen the brand image. Future goal of Burger King is to have 40% of U.S.

and Canada system units on a modern image by 2015. Currently, U.S. and

Canada system ended 2012 with 19%of units on a modern image, up from

11% at the end of 2011. Re-imaged restaurants continue to experience an

average sales uplift of 10-15%. In the operation initiative, we will implement

“Sales, Profit and Operations Coaches” who work shoulder-to-shoulder with

restaurant team. Burger King also began to rank franchisees to increase

transparency and promote healthy competition to improve operations system-

wide.

Long-Term Plans

Accelerate Net Restaurant Growth (NRG) and continued sales growth as well

as Global Refranchising will be implemented once ready and it will long term

basis. Since 2011, Burger King successfully entered into international

development and joint venture agreements, laying the foundation for

sustainable long-term unit development

burger king case summary final

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