Burger King Holdings (BKC)

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See all 5 Bulls Reasons Bulls: Reasons To Buy "Company in midst of revitalization, has strong momentum" 0% agree "Company in midst of revitalization, has strong momentum" Burger King (BKC) is midway through a revitalizing transition and appears to have strong momentum. After falling miserably behind competitors in the late 1990’s the company was taken private and given new management and a new growth strategy. The stock was launched... read more View or Edit Reason 0 votes 0% agree Company in midst of revitalization, has strong momentum 0% agree Company in midst of revitalization, has strong momentum Burger King (BKC) is midway through a revitalizing transition and appears to have strong momentum. After falling miserably behind competitors in the late 1990’s the company was taken private and given new management and a new growth strategy. The stock was launched... read more View or Edit Reason 0 votes 0% agree BKC has more room for growth internationally than saturated competitors like McDonalds do 0% agree BKC has more room for growth internationally than saturated competitors like McDonalds do While largely considered an American phenomenon, the burger industry has expanded to cover a large geographic compilation of countries. While Burger King’s largest rival McDonalds (MCD) has roughly 16,000 locations outside the US, BKC has built its international... read more View or Edit Reason 0 votes 0% agree Bears: Reasons To Sell Feeling Bearish? Be the first to explain why this would make a poor investment Send the authors a comment or suggestion Be the first to make a suggestion See All Suggestions

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Since 2004, Burger King has implemented several cost cutting initiatives, including smaller restaurant sizes that take advantage customers' preference for the drive-thru, a real time scheduling system to improve employee efficiency, and the closure of poorly performing restaurants. These measures resulted in an increase in net income from just $5MM in 2004 to $148MM in 2007. Despite improvements, Burger King still trails its largest competitor, McDonald's (MCD) in terms of revenue per restaurant and growth. In 2006, BKC company operated restaurants produced an average of $1.2MM in revenue per restaurant, compared to $1.8MM for McDonalds'. Even more telling, McDonald’s received nearly 6 times as much in franchise fees per franchised restaurant.

[edit] Business Overview

BKC's net income grew by a factor of 9 from 2006 to 2007 due to cost cutting and growing revenues. ^[3]

Burger King competes within the fast food hamburger restaurant (FFHR) category of the $59 billion quick service restaurant (QSR) segment of the restaurant industry. Burger King offers hamburgers, chicken and specialty sandwiches, french fries, soft drinks, breakfast foods, and a variety of other fast food choices.

BKC's percentage of sales almost directly mirrors the percentage of restaurants for each geographic region^[4]

In 2007, roughly 90% of the company's restaurants were franchised and only 10% were company owned. Although the former, produced approximately 75% of the company's revenue. Burger King operates in four geographic regions^[5]: approximately 3 quarters of the company's revenues, however, are generated by company owned restaurants.

• U.S. and Canada: The U.S. and Canada is BKC's largest sector with 7,488 restaurants generating $8.8 billion in revenue.
• EMEA (Europe, the Middle East, and Africa): The EMEA sector is BKC's largest international sector. It has 2,248 restaurants in 29 countries and generated $2.8 billion in sales (2007). It had the largest presence in the U.K. with over 552 restaurants.
• APAC (Asia Pacific): The APAC sector is BKC's smallest international sector, but BKC feels it has the highest potential for growth and development. It has 644 restaurants in 13 countries and had $742 million in sales (2007).
• Latin America: The Latin American sector has 903 restaurants in 25 countries. The Latin American sector contributed $861 million in sales (2007). BKC believes Latin America also has a high growth potential and BKC sees Brazil as the country with the most opportunity for growth. BKC Latin America experienced a 13.3% sales growth from 2006 to 2007.

Data from 2007 Annual Report

[edit] Trends and Forces

[edit] Burger King's new advertising campaign pays dividends

BKC's management has reinvigorated its marketing strategy by pursuing partnerships with the NFL, Nascar and multiple product placements in movies such as Spiderman3. In July 2007, Burger King was ranked in the top position for the "most-liked" television advertisements for all national advertisers^[7]. Towards the end of the same year, the company launched a new ad campaign. The campaign which featured real customers and hidden cameras, was credited by management for leading to double digit sales growth during the December quarter. ^[8].

[edit] BKC's future is overseas

BKC is growing its international presence with an emphasis on underpentrated markets in developing countries, while scaling back its number of domestic franchises by closing underperforming restaurants. Latin America is one of its fastest growing regions. It opened 45 new restaurants in Mexico in 2007^[9] and another 34 restaurants in Brazil from 2005-2007. franchisees)^[10], ^[11]. In total, the number of BKC company operated and franchised restaurants in Latin America increased by 49% and 76%, respectively, from 2003-2007, while the number of BKC franchises in the U.S. and Canada has actually dropped by nearly 10% over the same time period.

[edit] Closing the gap-new products, longer hours

Burger King has the third highest sales in the FFHR segment and McDonald's leads the FFHR sector with $2.1 M in sales per restaurant^[12].

Burger King has also added more items to its breakfast menu, while increasing the variety of dessert and snack items. In total, Burger King has added 35 new menu items from 2004 to 2006. In addition to adding more items to its menu and increasing operating hours, Burger King has also instituted a "value menu" like its competitors to focus on its low price points.

[edit] Smaller restaurants cater to drive thru crowd

In addition to cutting costs through increased franchising, Burger King has reduced the average size of new restaurants. Since approximately 62% of sales can be attributed to drive-thru purchases^[15], larger restaurants aren't necessary. Since adopting a smaller restaurant design, Burger King has reduced its building costs by 25% ^[16] and has begun using new appliances and systems to increase efficiency and further cut costs.

[edit] Competition

Burger King competes with:

• McDonald's (MCD): McDonald's is one of the world's largest companies and by far the worlds largest fast food hamburger chain with $21.6 billion in revenue (2006) and a 20.6% operating margin.
• Wendy's International (WEN): Wendy's is the third largest FFHR restaurant. Wendy's could be more affected by rising beef and oil prices because of their extremely low margins.
• Yum! Brands (YUM): With more restaurants than McDonald's and revenues near $10 billion, Yum! is one of the largest restaurant companies in the world. Yum! operates KFC, Taco Bell, Pizza Hut, Long John Silver's, and A&W All-American Food Restaurants. Although Yum! doesn't compete in the FFHR category, BKC competes with it in the QSR segment.

Data from BKC 2007 Annual Report, MCD 2006 Annual Report, WEN 2006 Annual Report, and YUM 2006 Annual Report

 Burger King Holdings

	Select All  |  Select None Metrics Total Number of Restaurants Comparable Sales Growth Net Income Company-operated Sales Company-operated Restaurants Number of Franchised Restaurants Number of Affiliated Restaurants Operating Income Sales per Restaurant Cancel

	Select All  |  Select None Companies Brazil Fast Food Corp. (BOBS) Buffalo Wild Wings (BWLD) Burger King Holdings (BKC) CKE Restaurants (CKR) Caribou Coffee Company (CBOU) Chipotle Mexican Grill (CMG) Cosi (COSI) Denny's (DENN) Good Times Restaurants (GTIM) Jack In The Box (JBX) Krispy Kreme Doughnuts (KKD) Luby's (LUB) Max & Erma's Restaurants (MAXE) McDonald's (MCD) Nathan's Famous (NATH) Papa John's International (PZZA) Pizza Inn (PZZI) Rubio's Restaurants (RUBO) Sonic (SONC) Steak n Shake Company (SNS) Tim Hortons (THI) Triarc Companies (TRY) Wendy's International (WEN) Yum! Brands (YUM) Cancel

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Company	Data From	Company-operated Sales	Company-operated Restaurants	Number of Franchised Restaurants	Number of Affiliated Restaurants	Sales per Restaurant	Operating Income
Burger King Holdings (BKC)	2007	$1.66B	1.3K	9.98K	0	$1.19M	$291M
CKE Restaurants (CKR)	2006	$1.21B	1.15K	2.01K	0	$1.05M	$77.9M
McDonald's (MCD)	2007	$6.91K	Add	50K	3.97K	Add	$3.88
Wendy's International (WEN)	2007	$6.91K	Add	Add	Add	Add	Add
Yum! Brands (YUM)	2006	$8.37B	7.74K	23.5K	3.34K	$1.08M	$1.26B

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See all Fast Food Restaurants Industry WikiData

[edit] Market Share

The QSR is a $59 billion segment. Burger King has a 14% share of the segment and is second behind McDonald's 45% share. The QSR segment and FFHR category are extremely competitive because each FFHR restaurant offers similar menus and prices.

Burger King is second behind McDonald's in the Fast Food Hamburger Restaurant category for revenue.^[34]

[edit] References

1. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 1
2. ↑ Burger King Holdings 2007 Annual Report, "Selected Financial Data", p. 2
3. ↑ Burger King Holdings 2007 Annual Report, "Selected Financial Data", p. 2
4. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 3-8
5. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 3-8
6. ↑ Burger King Holdings 2007 Annual Report, "Selected Financial Data", p. 2
7. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 2
8. ↑ Wall Street Journal, Media and Marketing, pg. B3, "Hey, No Whopper on the Menu?" February 08, 2008
9. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 8
10. ↑ Burger King Holdings 2007 Annual Report, "Management's Discussion and Analysis...", p. 4
11. ↑ Burger King Holdings 2007 Annual Report, "Management's Discussion and Analysis...", p. 4
12. ↑ Bruger King Company Report 10-05-2007
13. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 3
14. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 3
15. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 3
16. ↑ Burger King Holdings 2007 Annual Report, "Business", p. 3
17. ↑ McDonald's 2006 Annual Report, "11-Year Summary", p. 20
18. ↑ Wendy's International 2006 Annual Report, "Business" and "Selected Financial Data", p. 3, 20
19. ↑ Yum! Brands Inc. 2006 Annual Report
20. ↑ BKC, 2007 10-K, Item 6, Pg.36
21. ↑ ^{21.0 21.1 21.2} BKC, 2007 10-K, Item 6, Pg.37
22. ↑ BKC, 2007 10-K, Item 6, Pg.36
23. ↑ CKR, 2006 10-K, item6, pg20
24. ↑ CKR, 2006 10-K, item1, pg 1
25. ↑ CKR, 2006 10-K, item1, pg 1
26. ↑ CKR, 2006 10-K, item6, pg22/pg23
27. ↑ CKR, 2006 10-K, item6, pg20
28. ↑ McDonald\'s
29. ↑ 1233
30. ↑ MacDonald\'s
31. ↑ McDonald\\\\\\\\\\\\\\\'s
32. ↑ McDonald\'s
33. ↑ ^{33.0 33.1 33.2 33.3 33.4 33.5} YUM, 2006 10-K, Item-6,PG-23.
34. ↑ Burger King Company Report