June 27, 2023 Mary Scott
Burger King’s efforts to revive its U.S. business are paying off, with early indications of improved franchise profitability and stronger sales. The parent company, Restaurant Brands International, has been focusing on a $400 million turnaround plan developed in collaboration with franchisees. CEO Josh Kobza shared positive insights, stating that not only have sales started moving in the right direction, but franchise profitability has also seen a notable increase.
Restaurant Brands International, which owns Burger King along with Popeyes Louisiana Kitchen, Firehouse Subs, and Tim Hortons, aims to reverse the declining sales trend that caused Burger King to slide to the third position in the U.S. burger chain market. One of the key strategies involves substantial investments in restaurant renovations and advertising. Burger King is also focused on enhancing restaurant operations, menu offerings, and placing renewed emphasis on its flagship menu item, the Whopper.
The initial results of these efforts are promising, with Burger King’s U.S. same-store sales growing by 8.7% in the first quarter. This positive momentum contrasts with the previous year when quarterly same-store sales remained relatively flat. However, the company is committed to ensuring the turnaround is sustainable, rather than short-lived. A key aspect of the long-term strategy is to improve franchise profitability, which serves as a crucial indicator of the chain’s overall success.
Higher profits for franchise operators enable them to reinvest in their existing restaurants or open new locations, ultimately driving more sales for the franchisor. This mutually beneficial relationship ensures that struggling franchisees do not become a burden on the business, leading to closures and lower system-wide sales. As part of this ongoing process, Restaurant Brands executives anticipate closing 300 to 400 underperforming locations this year, allowing franchisees to focus on more viable opportunities.
Burger King’s commitment to growth includes changing its expansion policy for franchisees. The company now limits most operators to footprints of under 50 restaurants and emphasizes local ownership. These adjustments aim to strengthen operations and ensure sustainable growth within manageable parameters.
Investors have shown optimism about the company’s future, as evidenced by the 16% rise in Restaurant Brands’ shares this year, outperforming the broader market. The company’s market value currently stands at $23.5 billion. Burger King’s U.S. President, Tom Curtis, attributes this investor confidence to the company’s investments in brand resurgence and growth.
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