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FDD Talk 2015: The Burger King Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on September 17, 2015

in FDD Talk 2017: Food Franchises, Franchise Earnings, Hamburger Franchise

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Burger King Photo by Marr3wk

In this FDD Talk 2015 post, you’ll learn the following:

  • Section I – Background information on the Burger King franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Burger King franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Burger King’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • sales distribution (above $1.5 million, $1.3 million to $1.5 million, $1.1 million to $1.3 million, $0.9 million to $1.1 million, $0.7 million to $0.9 million, below $0.7 million) of traditional and non-traditional Burger King restaurants with 12 months of actual sales as of December 31, 2014
  • 2014 average, high, and low annual sales for company-owned, franchised, and consolidated traditional and non-traditional Burger King restaurants with 12 months of actual sales as of December 31, 2014
  • 2014 average food costs, labor costs including fringe benefits, repairs and maintenance (building and equipment), utilities, and other expenses experienced by traditional Burger King restaurants that were open and operated by BKC for those 12 months

Section I – Background Information

Burger King Posting Big Numbers As McDonald’s Slides

With a 6.7 percent increase in same-store sales, including a 7.9 percent increase within the U.S. and Canada, Burger King had its best quarterly performance in nine years in second-quarter results announced in July 2015. Burger King’s sales are rising, while top-dog McDonald’s sales continue to slip.

Burger King credited menu changes, marketing, operations and a changing brand image for the substantial uptick. Here are a few examples:

  • Popular additions to the menu are driving sales, like the limited-time Extra Long Pulled Pork Sandwich and the return of cult favorite Chicken Fries as a permanent menu item. The Chicken Fries returned in March 2015 after a spirited fan campaign, but BK didn’t stop there, also unveiling Fiery Chicken Fries in August 2015. The thin strips of white-meat chicken are marinated in a mixture of cayenne pepper, black pepper and other spices.
  • The return of the “Subservient Chicken” advertising campaign boosted engagement for Burger King on social media in 2014. The chain resurrected the campaign in August for the bird’s 10-year-anniversary, starting with ads featuring “missing” posters looking for the missing giant bird. Amid falling chicken prices and rising beef prices, the chain is putting a heavy focus on chicken, and this particular campaign promoted the launch of the Chicken Big King sandwich.
  • The chain updated its packaging designs in July 2015 as part of its strategy for global design consistency. The change will affect bags, wrappers, containers and cups, as well as some elements of interior design.

Company Started With a Failure

Burger King got its start in 1953, when Keith J. Kramer and Matthew Burns founded Insta-Burger King in Jacksonville, Florida. When that company faltered financially the next year, two Miami franchisees, David Edgerton and James McLamore, purchased it and gave it the Burger King name.

The company has changed hands several times; 3G Capital of Brazil acquired a majority stake in 2010 and restructured the company.

Merger Created New Parent Company

Along with Berkshire Hathaway, 3G Capital in December 2014 merged the company with Canada-based Tim Hortons, creating a new Canada-based company called Restaurant Brands International. The merger created the third-largest fast-food operator in the world, with 3G retaining 51 percent of the company.

Burger King is a subsidiary of RBI; while RBI and Tim Hortons are based in Oakville, Ontario, Burger King retained its Miami headquarters. Daniel Schwartz, the former CEO of Burger King Worldwide, became the CEO of RBI.

No ‘Peace Burger’ for BK, McD’s

Burger King drew notice in August 2015 with its failed quest to pair up with McDonald’s on a “McWhopper” in a respite from their burger wars, but McDonald’s didn’t bite.

The McWhopper, which Burger King said would tie in the best of both burgers, would have been sold only on the International Day of Peace, which in 2015 fell on September 21. Burger King said the proceeds would go to Peace One Day, a nonprofit organization that helps schools in 131 countries.

Burger King bought full-page newspaper ads to call for a one-day truce with McDonald’s, proposing that the two burger chains sell their burger baby in Atlanta, which is midway between the two chains’ headquarters, but McDonald’s declined the partnership.

Burger King Wedding

An Illinois couple tied the knot in July 2015, with Burger King footing the bill. The reason? The wedding was between Burger and King — Joel Burger and Ashley King, that is.

When Burger King heard about the pairing, the company contacted the lucky couple and offered to pick up the tab for the nuptials, which featured 10 bridesmaids and 10 groomsmen. The Burger King logo found its way onto the undershirts of the groomsmen, who also wore hamburger-inspired socks and BK cufflinks. The wedding party donned Burger King paper hats after the ceremony. Burger King also provided personalized yo-yos, Mason-jar napkin holders and other touches.

Section II – Estimated Costs

  • Please click here for detailed estimates of Burger King franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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