Burger King’s Next Act: Value You Can Count On

Will Kreznick

Additionally, Burger King just this week announced a loyalty test with the potential to engage—and reengage—guests through its app and drive thru with “a benefit every single time” approach. “There’s a tremendous opportunity on all those areas,” Cil said. “And none of these are promotions that we think we should […]

Additionally, Burger King just this week announced a loyalty test with the potential to engage—and reengage—guests through its app and drive thru with “a benefit every single time” approach.

There’s a tremendous opportunity on all those areas,” Cil said. “And none of these are promotions that we think we should be dropping in at some point in time. These are important platforms that will be long-standing platforms for the business to drive top line and franchise profitability for years to come.

Burger King’s overall digital opportunity is wide-ranging and heavy on drive-thru potential. Before diving in, however, how deep is the competitive delta for Burger King?

The brand’s Q4 same-store sales declined 7.9 percent globally against a 2.8 percent rise in the year-ago period. Net restaurant growth fell 1.1 percent, with Burger King exiting the period at 18,625 restaurants. This date last year (December 31, 2019), the chain had 18,838 locations.

In the U.S., where RBI cautioned higher closures in 2020, net restaurant growth decreased 3.6 percent. Burger King finished Q4 with 7,081 domestic units compared to 7,346 last year.

Overall, with Tim Hortons and Popeyes added in, RBI shuttered just under 1,200 restaurants in 2020 and opened about 1,100. The closure figured represented about 4 percent of the company’s global locations, but only roughly 2 percent of systemwide sales.

“Not only is this healthy and positive for our brand image, but it positively impacts franchisee profitability and frees up resources for our franchisees to redeploy into building newer, better and more profitable restaurants,” Cil said.

The average-unit volume for Burger King stores that closed was in the neighborhood of $800,000. Generally, U.S. venues come in at $1.35–$1.4 million.

Cil candidly said RBI was disappointed by Burger King’s negative growth in Q4. McDonald’s is the only other main-line competitor to post results so far this earnings season, and the chain’s domestic comps rose 5.5 percent.

Across 2020, Burger King’s systemwide sales fell 11 percent to $20 billion, driven by a decrease in global same-store sales of 8 percent.

Cil said Burger King continues to see varied performance across dayparts as COVID disrupts routines, with particular softness in breakfast and late night, partially countered by lunch and snack growth.

Burger King has actively worked to reroute trends. With the Whopper quality change, 85 percent of the permanent menu is now free from artificial flavors or preservatives, with a path to getting to 100 percent in the next few months, Cil said.

Yet the value question looms. Cil said the $1 Your Way construct, while still early days, helped jolt Burger King’s comps into positive territory in January. The results are encouraging but a bit difficult to read against a pandemic backdrop. “To be sure, this is not a victory lap since some of that performance improvement was bolstered in part by the government stimulus,” Cil said. “That said, a straightforward, easy-to-understand, everyday value proposition featuring craveable products only Burger King can offer is something [quick-service restaurant] fans are demanding, and we’re happy to oblige and confident we’re on the right path.”

In early January, Burger King unveiled a new visual design it plans to roll throughout all touchpoints of the guest experience. Complete with new logo, merchandise, uniforms, and restaurant signage, it marked the company’s first complete rebrand in more than two decades.

While this unfurls, RBI continues to make a major drive-thru push. In an effort to deliver an improved and personalized experience, RBI is upgrading drive thrus by installing outdoor digital menuboards across the system.

To date, more than 1,700 Tim Hortons and 1,900 Burger Kings (all U.S. in Burger King’s case) have been completed. The “considerable majority” of remaining installations are expected by year’s end, COO Josh Kobza said. Most of Popeyes’ system will follow in 2021.

So about a third of the more than 10,000 targeted drive thrus (by mid-2022) in the U.S. and Canada are finished.

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