In this FDD Talk 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 2020 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 2020 FDD
- Section IV – Number of franchised and company-owned Burger King outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Burger King’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- sales distribution (above $1.9 million, $1.7 million to $1.9 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) for company-owned, franchised, and consolidated traditional and non-traditional Burger King restaurants with 12 months of actual sales as of December 31, 2019 (separately stated)
- 2019 average, median, high, and low sales for company-owned, franchised, and consolidated traditional and non-traditional Burger King restaurants with 12 months of actual sales as of December 31, 2019 (separately stated)
- 2019 average and median sales for franchised traditional Modern and Legacy Image Burger King restaurants that were open for the full 12 months ended December 31, 2019 (separately stated)
Section I – Background Information
20 Things You Need to Know About the Burger King Franchise
Unveils First Complete Rebrand in Over 20 Years
1. In early January 2021, Burger King announced its first complete rebrand in more than two decades. The company revealed a new visual design that will thread throughout all touchpoints of the guest experience. Burger King said the modern look “will more authentically represent Burger King values,” and is inspired by “real and delicious food.”
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2. Additionally, the announcement signals a commitment to digital-first expression and recent improvements to product quality, including the removal of colors, flavors, and preservatives from artificial sources. Also, there’s an “ambitious pledge to environmental sustainability.”
3. Included in the rebrand will be a new logo, packaging, restaurant merchandise, menu boards, crew uniforms, restaurant signage and décor, social media, and digital and marketing assets. Burger King’s current logo was launched in 1999. The new option takes a minimalist approach that “seamlessly meets the brand evolution of the times and pays homage to the brand heritage with a refined design that’s confident, simple and fun,” Burger King said.
4. Burger King’s fresh color palette was inspired by its flame grilling process and ingredients. New photography is hyper textured and dials up the sensorial aspect of the food, the company said. Burger King also created a proprietary font called “Flame,” which is built from the shapes of Burger King’s food.
5. Employees will wear new uniforms that reflect “flame grill masters,” mixing contemporary and comfortable style with distinct colors and graphics. The company plans to feature real crew members in its new advertising as well. The packaging showcases Burger King’s revamped logo, as well as the colors and illustrations of ingredients.
6. Raphael Abreu, parent company Restaurant Brands International’s head of design, said, “Design is one of the most essential tools we have for communicating who we are and what we value, and it plays a vital role in creating desire for our food and maximizing guests’ experience. We wanted to use design to get people to crave our food; its flame-grilling perfection and above all, its taste.”
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7. Burger King began introducing the new visual identify early this year. The company aims to implement the look at stores across the globe over the next few months. The rebrand isn’t the only facelift taking shape at Burger King of late, either. In October, RBI announced plans to modernize the drive-thru experience at more than 10,000 Burger King and Tim Hortons locations by the end of next year. This includes the installation of about 40,000 screens.
8. Burger King has more than 6,500 U.S. drive thrus. And, naturally, the channel has surged during COVID. During the third quarter of 2020, drive-thru mix lifted to more than 85 percent of total sales versus two-thirds in 2019. The initiative includes presenting menu options on digital screens tailored to each guest, as well as the integration of the company’s loyalty program at the moment of ordering, providing remote, contactless payment to speed up drive-thru lanes in the near future.
9. Additionally, Burger King is creating weather-proof installations to withstand the heat of the southern U.S., the cold of Canada’s north, and the corrosive, salty air from cities along North America’s oceans. A month earlier, Burger King unveiled restaurant designs for the future, including a fully contactless model with a suspended kitchen and dining room sitting above drive-thru lanes, configured to reduce the building’s footprint. Drive-thru customers can even have their order delivered via a conveyor belt system.
Plans to Modernize 10,000 Drive Thrus
10. In October 2020, Burger King’s parent company Restaurant Brands International announced that it will modernize the drive-thru experience at more than 10,000 Burger King and Tim Hortons locations, with Popeyes beginning a rollout of its own in late 2020. This includes the installation of about 40,000 screens. Burger King has more than 6,500 U.S. drive thrus. In the past quarter, drive-thru mix lifted to more than 85 percent of total sales versus two-thirds in 2019.
11. Jose Cil, CEO of Burger King, said, “Our guests have sought out our drive-thru lanes for our iconic food and beverages throughout the COVID-19 pandemic – even in the face of mandated dining room closures around the world. We believe strongly that it is time to modernize our drive-thru lanes throughout the US and Canada to provide even better, quicker and contactless service for our guests. The initiative includes presenting menu options on digital screens tailored to each guest, as well as the integration of the company’s loyalty program at the moment of ordering, providing remote, contactless payment to speed up drive-thru lanes in the near future.”
12. Josh Kobza, RBI’s chief operating officer, said, “We have attracted exceptional digital and technology talent to join our global team and our digital drive-thru menu board initiative is just one in a series of strategic projects that we are rolling out over the next year to strengthen our business model and improve the level of service we provide to our guests.”
13. Here’s what to expect:
- Predictive Selling – RBI is designing new digital drive-thru menu boards with predictive selling technology created by the company’s in-house “guest intelligence” team. These will allow for special promotions to be curated based on previous orders, regional weather patterns, the time of day, and many other factors.
- Integrated Loyalty Program – The menu boards were created with the ability to integrate loyalty programs, allowing for customized menu items to be displayed based on a guest’s favorite purchases and redemption history.
- Remote, Contactless Payment – RBI’s digital menu boards also feature the flexibility to add immediate, remote contactless payment to allow guests to order and pay simultaneously, and speed up drive-thru lanes.
- Weather-Proof Installations – New installations are using enclosures modeled to withstand the heat of the southern U.S., the cold of Canada’s north, and the corrosive, salty air from cities along North America’s oceans, RBI said.
- Technology – RBI’s 40,000-plus outdoor-rated 46-inch screens are powered by STRATACACHE Media Engines that are clustered together, redundantly, for high availability. In other terms, if any of the four digital screens in a typical drive thru loses communication with its primary media player, the secondary media player will take over and keep the content displayed correctly.
14. A typical drive-thru lane for RBI includes four digital screens, while double drive-thru lanes typically boast a total of seven. RBI said it’s assessing drive-thru locations and, where possible, will install double drive-thru lanes to increase capacity and efficiency.
15. Burger King was founded as Insta-Burger King in 1953 by Keith J. Kramer and his wife’s uncle, Matthew Burns, in Jacksonville, Florida. Kramer and Burns were interested in starting their own quick service burger restaurant after visiting the original McDonald’s restaurant in San Bernardino, California. To cook their burgers, Kramer and Burns purchased the rights to two pieces of equipment called the Insta-Broiler and they opened two restaurants. The Insta-Broiler cooked the burgers so quickly and effectively, that it didn’t take long for Kramer and Burns to start franchising the Insta-Burger King concept based on the machines.
16. In 1954, James McLamore and David R. Edgerton became some of the first Insta-Burger King franchisees. Although Kramer and Burns had opened several restaurants, the business began to falter around 1959 and they sold Insta-Burger King to McLamore and Edgerton. The new owners noticed that the Insta-Broiler’s heating elements eventually degraded because of the meat drippings. They switched over to a flame broiler and it worked even better than the Insta-Broilers. All franchises were required to switch to the new flame broilers. In addition to updating the cooking machinery, McLamore and Edgerton also came up with Burger King’s signature sandwich, the Whopper, as well as the brand’s “Burger King” mascot.
17. For nearly a decade, McLamore and Edgerton expanded Burger King around the United States. In 1967, they decided to sell Burger King to the Pillsbury Company. Throughout the 1970s and 1980s, Pillsbury’s management tried to restructure Burger King. Around this time, Burger King’s sales slumped and major franchisees went out of business. Burger King continued to suffer during the 1990s due to bad business decisions by its leadership. In 2002, Burger King was acquired by TPG Capital for US$1.5 billion.
18. While TPG Capital worked hard to revitalize Burger King, the chain was hit hard during the financial crisis of 2007-2010. 3G Capital purchased Burger King for $3.26 billion in 2010 and once again tried to turn the company around. In 2014, 3G announced that it planned to acquire the Canadian restaurant and coffee shop chain Tim Hortons and merge it with Burger King with backing from Warren Buffett’s Berkshire Hathaway. Both Burger King and Tim Hortons are run by Restaurant Brands International, which is majority-owned by 3G Capital.
19. Currently, Burger King has fallen to third third place in terms of system sales, behind McDonald’s and Wendy’s. However, Burger King is still one of the largest fast food chains and has locations in over 100 countries.
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20. Burger King did not rank on Entrepreneur’s 2021 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Burger King franchise costs, based on Item 7 of the company’s 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 7,105
- Outlets at the End of the Year: 7,176
- Net Change: +71
- Outlets at the Start of the Year: 7,176
- Outlets at the End of the Year: 7,280
- Net Change: +104
- Outlets at the Start of the Year: 7,280
- Outlets at the End of the Year: 7,294
- Net Change: +14
- Outlets at the Start of the Year: 51
- Outlets at the End of the Year: 50
- Net Change: -1
- Outlets at the Start of the Year: 50
- Outlets at the End of the Year: 50
- Net Change: 0
- Outlets at the Start of the Year: 50
- Outlets at the End of the Year: 52
- Net Change: +2
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- This Item 19 includes certain information about Gross Sales of franchised and company-owned Burger King Restaurants in the United States during the 12-month period ended December 31, 2019 (“Sales Distributions”).
- Gross Sales reported in this Item has the same meaning as the term Gross Sales in the Franchise Agreement; that is, all sums charged for goods, merchandise, or services sold at or from the Restaurant and from any other approved location, but excluding sales taxes.
- Sales Distributions are provided separately for “Traditional Restaurants” and “Non-Traditional Restaurants”.
- Sales Distributions are also provided for Modern Image “Traditional Restaurants” compared to Legacy Image “Traditional Restaurants” as those terms are defined in this Item.
- For purposes of this Item, “Non-Traditional Restaurants” include the following types of Burger King Restaurants:
- (1) In-line facilities;
- (2) Restaurants or food courts at institutional locations (such as airports, military facilities, colleges, schools, office buildings, retail stores, tourist locations, and turnpikes);
- (3) Conversion restaurant facilities;
- (4) Drive-thru only facilities;
- (5) Mall location facilities;
- (6) Mobile restaurant units (buses/trailers);
- (7) Big box retail; and
- (8) Fuel co-branded restaurants.
- For purposes of this Item, “Traditional Restaurants” are all Restaurants other than those included as “Non-Traditional Restaurants”.
- There were 7,294 franchised Restaurants and 52 company-owned Burger King Restaurants open during the entire 12-month period ended December 31, 2019.
- The Sales Distributions presented here do not reflect the sales distributions of all the varying facility types or sizes or facility locations.
- Some Restaurants have sold these amounts. Your individual results may differ. There is no assurance you’ll sell as much.
- The data used in preparing the information in this Item has been prepared on a basis consistent with generally accepted accounting principles to the extent applicable.
- Burger King has not independently confirmed Gross Sales or other information reported by franchisees for franchisee-owned Restaurants, but has relied on the Gross Sales and other information as reported by franchisees.
Part 1 – Sales Distribution of Traditional and Non-Traditional Burger King Restaurants (January 1, 2019 to December 31, 2019)
- The information provided in this Sales Distribution is sales information for a total of 6,097 Restaurants treated as “Traditional” Restaurants for purposes of this Item. Of those Restaurants, 6,047 were franchisee-owned and 50 were company-owned as of December 31, 2019.
- Only those Restaurants with 12 months of actual sales as of December 31, 2019 are reported in this chart. As a result, 1 company-owned Restaurant and 396 franchisee-owned Restaurants that were opened before 2019 and temporarily closed during the year were not included.
- In addition, 0 company-owned Restaurant and 144 franchisee-owned Restaurants that were permanently closed in 2019 were not included. All of these Restaurants had been operated for more than 12 months.
- The 166 franchisee-owned Restaurants that opened in 2019 without 12 months of sales were not included.
- Due to rounding, percentages may not equal 100%.
Above $1.9 million