Restaurant Brands International CEO Jose Cil announced in early August that Burger King was preparing to announce a major turnaround strategy. He kept his promise, up to $400 million.
The so-called “Reclaim the Flame” plan, shared at the chain’s annual U.S. franchise convention, is a multi-tiered strategy aimed at increasing sales and increasing operators’ profitability. The fast-food giant will spend $400 million over the next two years, including $150 million for advertising and digital investments and $250 million for technology, kitchen equipment, building improvements and renovations/moves. Burger King franchisees, who make up 93% of the national system, will co-invest in advertising.
Burger King North America President Tom Curtis said the plan is based on three anchors: operational excellence, a refreshed image and improved marketing. The Domino veteran was promoted to his role in August 2021, around the time Cil first indicated that Burger King was formulating a bigger, long-term solution.
“I am very proud and grateful that our franchisees have once again come together to invest in our performance together, reflecting the true partnership and mutual respect we have built between franchisor and franchisees,” Curtis said in a statement. “Ultimately, the success of this Recover the flame the plan comes down to execution at the restaurant level and we are so lucky to have franchisees who love this brand and work closely with us to focus on the right priorities. I believe in this team, in this plan, and in a bright future as we evolve and improve our customer experience and drive profitable growth for the business. »
In recent years, Burger King has underperformed in the eyes of executives. The chain’s national same-store sales rose 0.4% in the second quarter, or 13.4% over a two-year period. Meanwhile, at McDonald’s, U.S. competitors were up 3.7%, or 29.6% on a two-year basis, and at Wendy’s, sales were up 2.3%, or 18.4% on a two-year basis. Additionally, Burger King is the seventh-largest quick-service brand by sales in the United States, according to the QSR 50down from fifth in 2019. It was skipped by Wendy’s and Dunkin’.
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Going forward, Burger King will look to modernize to appeal to a younger and more diverse customer base. The $250 million portion of the investment will be divided into two parts. One is $50 million, plus matching funds from franchisees, for a 3,000 unit refresh program. The remaining 200 million dollars are intended for the renovation of approximately 800 stores. This specific initiative also includes a change in the incentive structure. Previously, franchisees received discounts on advertising and royalties for up to seven years. Now, operators will receive “more substantial” incentives, have access to more contributions in exchange for a higher royalty rate, and will receive cash incentives as soon as the renovations are completed.
Historically, Burger King’s reimage program has resulted in a 12% year-on-year increase in sales and a 2% outperformance of competitors. The company hopes to improve on those numbers with its new program.
“The Royal Reset The renovation program represents a shift to higher quality renovations and creates a viable path to system modernization,” the company said in a statement. “With a more thoughtful approach and increased funding, we are building support for our franchisees to meet their most important investments. and lay the foundation for sales growth and profitability in the years to come. This will be the first step toward a more consistent, long-term cadence of portfolio reimaging that focuses on smarter investments and quality execution to drive sales growth and attractive capital returns for Burger King and its franchisees. »
The menu will invest more in premium branding, especially the Whopper. Curtis previously told analysts, “The Whopper is a multi-billion dollar brand, and we need to treat it as such. That means removing the discount burger and developing flavor extensions. A recent example is the Whopper Melt released in March. The innovation, with fame-grilled beef patties sandwiched between toast, had regular, spicy, and bacon versions.
Burger King will also strengthen its chicken platform. The chain is replacing its short-lived Ch’King Sandwich with the Royal Crispy Chicken Sandwich, which comes in crispy, spicy, bacon and Swiss cheese. Burger King didn’t give a reason for the change, but said the Royal Sandwich is built around a simplified menu and improved operations. According to the concept, over the past year, streamlining efforts have resulted in four consecutive quarters of better operating metrics and improved customer satisfaction. To maintain this, Burger King will host dozens of “Royal Rountable” events with managers and franchisees to educate teams on implementing operational changes.
As the brand expands its premium offerings, it will keep the pulse on daily value for customers struggling with historic inflation. Currently, this comes in the form of a $6 your way deal (double cheeseburger, chicken fries, and regular fries). This replaces the $5 Your Way meal, which included a Double Whopper Jr., nuggets, fries and a drink.
In terms of advertising, Burger King will invest $120 million in its fund over the next two years, representing a 30% annual increase in “media buying firepower”, the company said. This increase takes into account efficiencies achieved through the channel’s new media agency, Omnicom Media Group’s PHD. After 2023 and 2024, participating franchisees will increase their contribution to the advertising fund by 50 basis points through 2028, subject to profitability targets being met. Burger King will also target $30 million toward digital, which now generates $900 million in annual US system-wide sales.
“Over the past year, Tom has built a talented management team that has worked collaboratively with Burger King franchisees to develop a multi-year plan to improve system performance,” Cil said in a statement. “We believe the time is right to make a significant investment to accelerate work given the quality of the team, the direction of the plan, the commitment of our franchisees and the opportunity that clearly exists for our iconic brand of Recover the flame and be the first choice for a high quality meal, exceptional experience and great value.”