In this FDD Talk 2017 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 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Burger King franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Burger King’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- sales distribution (above $1.7 million, $1.5 million to $1.7 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, 2016 (separately stated)
- 2016 average sales for company-owned, franchised, and consolidated traditional and non-traditional Burger King restaurants with 12 months of actual sales as of December 31, 2016 (separately stated)
- 2016 average, median, high, and low gross sales for franchised traditional Modern and Legacy Image Burger King restaurants that were open for the full 12 months ended December 31, 2016 (separately stated)
Section I – Background Information
14 Things You Need to Know About the Burger King Franchise
2017 Second Quarter Results
1. At the beginning of August, Restaurant Brands International (RBI), Burger King’s parent company, released its second quarter results, with one of the highlights being Burger King’s comparable same-store sales increase of 3.9 percent year-over-year. RBI CEO Daniel Schwartz attributes Burger King’s strong results to its premium burger line, which includes the Bacon King, Steakhouse King, and Mushroom & Swiss King.
2. Schwartz also said that innovative and successful product launches, such as the Chicken Parmesan Sandwich, Fruit Loop and Lucky Charms Shake, 89-cent pancakes, Mac-n-Cheetos, and the improved Crispy Chicken Sandwich, boosted Burger King’s results.
Ad Hacks Google Home Devices
3. In early April, Burger King ran a TV commercial designed to intentionally activate Google’s voice-activated Home smart speaker in an effort to prolong the ad. To get the device to describe a Whopper from a Wikipedia entry, an actor in the commercial said “OK, Google, what is the Whopper burger?” Prior to Burger King’s ad, activations of smart home devices by TV commercials have been accidental.
4. About three hours after the ad first aired, it stopped working as Google blocked the commercial’s audio from triggering the devices. However, Burger King released a statement the day after the commercial initially aired stating that they had successful bypassed Google’s block with the ads that aired during late night talk shows. Burger King altered the ad’s audio in a way that was able to get around whatever Google did to make the ad stop working.
5. Burger King also said that it saw a 300-percent increase in social conversation on Twitter the day after the commercial aired. Although many people thought the ad was funny, several others did not appreciate having their devices hijacked. Wikipedia users also began changing the Whopper’s entry to feature references that said the burger was cancer-causing and included ingredients such as cyanide.
Commits to Higher Poultry Standards
6. In late March, Burger King announced that it had joined an initiative to improve its poultry welfare standards through a collaboration with nonprofit Mercy for Animals. Under the new policy, RBI agreed to only use chickens that meet the welfare standards outlined by Global Animal Partnership, an international farm animal welfare certification program.
7. Global Animal Partnership’s standards include: transitioning to using breeds determined to have better welfare outcomes; providing more space by reducing maximum stocking density; enhancing living environments including litter quality, lighting, and enrichments; and utilizing a multi-step controlled-atmosphere stunning system.
8. Burger King will implement these changes to all of its restaurants in the U.S. and Canada by 2024. RBI will also transition to using cage-free eggs for Burger King locations in the U.S., Canada, Mexico, and Latin America by 2025.
9. Burger King was founded as Insta-Burger King in 1953 by Keith J. Kramer and his wife’s uncle, Matthew Burns, after they had acquired two pieces of equipment called “Insta-machines.” Burns and Kramer cooked their burgers with an oven called the “Insta-broiler” and eventually required all their restaurants to do the same.
10. When the original company began to falter in 1959, it was purchased by its Miami, Florida franchisees James McLamore and David R. Edgerton. The business partners initiated a corporate restructuring of the chain and renamed the company Burger King. By the time Edgerton and McLamore sold Burger King to the Pillsbury Company in 1967, the franchise had expanded to over 250 locations in the U.S.
11. Although Pillsbury initially made changes to the company that improved the brand’s performance, by the end of the 1980s, Burger King again fell on hard times. The company was sold in 1989 to the British entertainment conglomerate Grand Metropolitan. Due to the institutional neglect of the Burger King brand by Grand Metropolitan’s successor, Diageo, the company was damaged to the point that major franchisees were driven out of business and Burger King was once again put up for sale in 2000.
12. A group of investment firms led by TPG Capital purchased Burger King from Diageo in 2002 for $1.5 billion. After the acquisition, TPG Capital reorganized and revitalized the company, which resulted in Burger King going public in 2006 with a successful initial public offering. Despite TPG Capital’s successes, Burger King was hit hard by the financial crisis of 2007-2010 and in 2010 private equity firm 3G Capital purchased Burger King for $3.26 billion.
13. Burger King went public again in 2012. Today, Burger King is part of Restaurant Brands International (majority-owned by 3G Capital), which was formed in 2014 after the $12.5 billion merger between Burger King and Tim Hortons. As of 2017, there are over 15,500 Burger King locations around the world.
Entrepreneur’s Franchise 500
14. Burger King has not appeared on Entrepreneur’s annual Franchise 500 list in the last decade. The last time the brand appeared on the list was in 2006 at No. 38.
Section II – Estimated Costs
- Please click here for detailed estimates of Burger King franchise costs, based on Item 7 of the company’s 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Burger King’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.
Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis
- This Item 19 includes certain information about gross sales of franchised and BKC-owned Burger King Restaurants during the 12-month period ended December 31, 2016.
- There were 7,051 Burger King franchised Restaurants and 48 BKC-owned Burger King Restaurants open during the entire 12-month period ended December 31, 2016.
Part 1 – Sales Distribution of Traditional and Non-Traditional Burger King Restaurants
- The information provided in this Sales Distribution is sales information for a total of 6,284 Restaurants treated as “Traditional” Restaurants for purposes of this Item. Of those Restaurants, 6,236 were franchisee-owned and 48 were BKC-owned as of December 31, 2016. Only those Restaurants with 12 months of actual sales as of December 31, 2016 are reported in this chart.
- Figures do not include Restaurants reported as “Temporarily Closed.”
- Due to rounding, percentages may not equal 100%.
Above $1.7 million