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The Industry
• Restaurant Fast Food (Limited Service Restaurants)
• Researchers defined fast-food restaurants
as chain res...
External Environment of Industry
• Spending Trends
• Lifestyle Trends
• Demographics Trends
Spending Trends
As of the end of 2008
– Economic downturn, leading to lower consumer spending
• 2 opinions in relation to ...
Lifestyle Trends
• Home cooked meals are becoming less prevalent
• Changes in lifestyle such as divorce, late marriages, a...
Demographics Trends
• Demographic changes have been pushing consumers
towards fewer meals, a preference for less meal prep...
Global Fast Food Forecasts
Market Value Forecast
In 2011, the global fast food
market is forecast to have a
value of $125....
Global Market Share Segmentation
United States compound annual growth
rate will increase by 3.7% to
$66.3 billion by 2011
...
SWOT Analysis Overview
Burger King
Strengths
• Strong market position
• Greater franchise mix
• Robust financial performan...
SWOT: Strengths
• Strong Market Position
– BKC is the world's second-largest FFHR chain as
measured by the total number of...
SWOT: Weaknesses
• Market Concentration
– Though the company operates in 65 countries, its
operations are heavily concentr...
SWOT: Opportunities
• New Products
– BK value menu featuring six items at less than $1,
breakfast sandwiches, and specialt...
SWOT: Threats
• Intense Competition
• The company's competition in the broadest perspective
includes restaurants, quick se...
Forces of Competition
• Threat of entry
– High cost of entry
– Highly established competitors
• Threat of substitutes
– Gr...
Forces of Competition
• Complimentary Products
• Power of Supplier
– Varies from region to region
– Usually large number o...
BK’s Image
• What comes to mind when you think of
BK?
Competitive Advantage:
Brand Names
• Burger King
• “It’s all in the name”
• Established since 1954
• Loyal following of pa...
Competitive Advantage:
Highest Franchise Rate
• Pros:
– Low capital
expenditure
– Allows for high cash
flow/ reinvestment
...
Competitive Advantage:
Marketing
• Commercials
– Innovative and Edgy
– Rated “best new restaurant ad” by Neilsen’s (2008)
...
Problems with Marketing
• What would you say is the message of
BK’s advertising?
• Ads for “Texican” burger controversial
...
BK’s Recent Performance
Burger King
• 2nd
largest FFHR in US
• $2.3 billion (2007 revenue)
• 11,565 locations worldwide
– ...
BK’s Recent Performance
• Average restaurant sales increased 6%
(2007)
– Closed 184 restaurants since 2006
• Recently ente...
Recent Cost-Leading Initiatives
• Real-time Scheduling System
– Increased employee efficiency
• Closed Underperforming Res...
Business Model
Burger King
Scalable and cost-efficient quick service
hamburger restaurant model that offers
customers fast...
Competitors’ Advantages
• McDonald’s Advantages:
– Appeal to ages 3-12
– “America’s fast food company”
– 3 times larger th...
Growth Opportunities
• Differentiation Strategy
• “Green” and “Modern” Image
– First-mover advantage
• Capitalize off incr...
Differentiation for BK
How can Burger King differentiate themselves
from their main competitors?
Key Resources
• Flame broiled
• Creative advertising
• “Hippest” of the big 3
• Experienced management
Risk Factors
• Restaurant business has few barriers to
entry
• Availability of bank credit
• Government regulation of nutr...
Franchising - Advantages
• Provides predictable cash flows without
much risk or capital investment
• One time fee: $50,000...
Franchising - Disadvantages
• Limited control of daily operations
(cleanliness, culture, etc.)
• Generally less profitable...
Break Even Analysis of Conversion
Process
Cost of Repurchase 650,000
Revenue of Franchise (yr) 52,621.26
Revenue of Compan...
Global Presence
• 11,565 restaurants in 71 countries
• 38% located abroad
• Differences in dining preferences
– Fattier fo...
Health Concerns
• Disclosure of caloric content
• Widespread requirements for restaurants
and other food service establish...
Industry Leaders Ratios
Stock Trend
Cash Flow Analysis
 
Operating 
Activities
Investing 
Activities
Financing 
Activities Dividends
NET CASH 
FLOWS
2008 243,...
DuPont Formula
  Margin Asset T/O Leverage ROE
2008 7.74% .978 3.18 24.08%
2007 6.62% .990 3.52 23.07%
2006 1.32% .870 4.5...
Current Ownership Strategy
“We believe that our restaurant ownership
mix provides us with a strategic advantage
because th...
Current Strategy
• Drive further sales growth
– Enhance Guest Experience
– Reduce hours
• Enhance Restaurant Profitability...
Global Growth
• Enter new territories 71
• Latin America 1000 count (#1 FFHC
16/25 countries)
• Eastern Europe (Middle Eas...
Re-imaging
• Whopper Bar – designed to reach new
guests, college students
• Invest money in fresh looks for company
owned ...
Adventures in Dining –
Differentiation
• Differentiation in Products
– Apple Fries
– Nutritional Kraft Macaroni & Cheese
–...
Adventures in Marketing
• “Have it Your Way”
• Flexible Broiler – new products
• Bluetooth Headsets – improved communicati...
Burger King vs. McDonald’s
2008
• 11,565 restaurants in 71
countries.
• 1,360 Company
Restaurants (11.75%)
• 10,205 Franch...
What Fast Food Restaurant has
the best Hamburger?
– McDonald’s 21%
– Burger King 37%
– Wendy’s 37%
Which FFHR has the best
atmosphere?
– McDonald’s 34%
– Burger King 11%
– Wendy’s 31%
Which FFHR do you go to the
most?
– McDonald’s 16%
– Burger King 11%
– Wendy’s 57%
How would you change FFHR’s?
• 53% Better quality, cleanliness,
healthier.
• 22% Sought out more menu options
• 17% Reques...
Analysis of Results
• BK tied Wendy’s for the best burger.
• Quality, Cleanliness, and Health are Important
– There is a p...
Strategic Objective:
Increase Market Share by:
• Re-positioning BK as a “progressively
responsible” Fast-Food Hamburger Re...
Differentiation Strategy:
• Green Team Campaign
– Recyclable paper products
• Quality, Sustainability, Responsibility.
• C...
Burger King Lounge
• Free Wi-Fi will appeal to business people.
• Segmented table layout adds privacy and
relaxed atmosphe...
Easy-Order Touch Screens (POS)
• Self-Order touch screens at counter.
• Increases order accuracy
• Provides screen by scre...
Global
• Focus advertising efforts on new target
market
• Promote healthy BK Kids meals
• Implement US Standards for emerg...
Objectives: 6 Month
• Start Conversion of Company/ Franchise
Ownership from 11.75% to 15%
– For every 100 BK’s, 15 will be...
Objectives: 12 Month
• Completion of Old Restaurant Conversion
– 5% Franchisees renegotiated
• Increase Average Gross Sale...
Strategic Goal for the Future
• BigBig Hairy Audacious Goal
– To become largest Fast-Food Hamburger
Restaurant in the worl...
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Transcript of "Bkpresentation 124585716184-phpapp01"

  1. 1. The Industry • Restaurant Fast Food (Limited Service Restaurants) • Researchers defined fast-food restaurants as chain restaurants that have two or more of the following characteristics: – expedited food service – takeout business – limited or no wait staff – payment tendered prior to receiving food.
  2. 2. External Environment of Industry • Spending Trends • Lifestyle Trends • Demographics Trends
  3. 3. Spending Trends As of the end of 2008 – Economic downturn, leading to lower consumer spending • 2 opinions in relation to the future growth – Fast food restaurants become alternatives to full service restaurants because they are cheaper – Senior trends manager for TRU says • "I wouldn't expect people are going to stop going to fast-food restaurants," he says. "They will curtail it to a degree, but teens and twenty-somethings are already going to fast-food restaurants quite a lot. You're going to see minimizing across the board." – Two of the four top categories young people plan to spend less on are eating out, while 51 percent plan to spend less on snacks.
  4. 4. Lifestyle Trends • Home cooked meals are becoming less prevalent • Changes in lifestyle such as divorce, late marriages, an increase in single-parent households, homes with two working parents, an aging population, increased hours spent working, and an increase in commuting time are driving more consumers into the restaurants.
  5. 5. Demographics Trends • Demographic changes have been pushing consumers towards fewer meals, a preference for less meal preparation time, and more frequent snacking in lieu of sit-down meals. • Low income neighborhoods have a higher density of fast-food restaurants • According to a British study, lower socioecomic groups had diets with less vegetables and fruit, and more unhealthy foods (fast food) compared to higher socioeconomic groups. Percent who say they eat at a meal from a fast food restaurant at least weekly
  6. 6. Global Fast Food Forecasts Market Value Forecast In 2011, the global fast food market is forecast to have a value of $125.4 billion, an increase of 22.2% since 2006. Market Volume Forecast In 2011, the global fast food market is forecast to have a volume of 86.4 billion transactions, an increase of 7.6% since 2006.
  7. 7. Global Market Share Segmentation United States compound annual growth rate will increase by 3.7% to $66.3 billion by 2011 European CAGRs will grow by 3.3% to $22.9 billion by 2011.
  8. 8. SWOT Analysis Overview Burger King Strengths • Strong market position • Greater franchise mix • Robust financial performance Weaknesses • Market concentration • Scattered Marketing Campaign Opportunities • New products development • New opportunities in growing economies • Positive outlook for restaurant industry in the US Threats • Intense competition • Expiry of Franchise Agreements • Acrylamide in French fries
  9. 9. SWOT: Strengths • Strong Market Position – BKC is the world's second-largest FFHR chain as measured by the total number of restaurants and system-wide sales. • Greater Franchise Mix – As a result of its higher franchise mix, the company is able to grow with minimal capital expenditure and is assured of regular income in the form of fees and royalties. • Robust Financial Performance – Revenues and Income have consistently grown providing a platform for future growth.
  10. 10. SWOT: Weaknesses • Market Concentration – Though the company operates in 65 countries, its operations are heavily concentrated in the US and Canada. About 65% of its restaurants are located in the US and Canada – Concentration of operations in one geographic area increases company's exposure to local factors such as adverse economic situation, labor strikes and changes in regulations that can affect its operations. • Scattered Marketing Campaign – Fail to efficiently promote products, because they are too busy trying to promote “The King” character
  11. 11. SWOT: Opportunities • New Products – BK value menu featuring six items at less than $1, breakfast sandwiches, and specialty burgers • New Opportunities in Economy – India, China, Singapore, and Malaysia • Positive Outlook for US Industry – The year 2009, would mark the 18th consecutive year of sales growth in the restaurant industry. – Well positioned companies will benefit from growing foodservice sector
  12. 12. SWOT: Threats • Intense Competition • The company's competition in the broadest perspective includes restaurants, quick service eating establishments, pizza parlors, coffee shops, street vendors, convenience food stores, delicatessens and supermarkets. • Expiry of Franchise Agreements • Of the 409 agreements that expired in fiscal 2006, only 47% were renewed and 28% were extended for similar periods. • Acrylamide in French fries • Acrylamide has been shown to cause cancer in some studies in experimental animals although further studies are underway to better understand the significance of these results in relation to human health.
  13. 13. Forces of Competition • Threat of entry – High cost of entry – Highly established competitors • Threat of substitutes – Growing amount of “limited service restaurant” companies – Ex: Dominos, Subway, Dairy Queen, Taco Bell, KFC • Industry Rivalry – “Copycat industry” – Large amount of competition, domestic and global
  14. 14. Forces of Competition • Complimentary Products • Power of Supplier – Varies from region to region – Usually large number of suppliers • Power of Buyer – Many choices in fast food industry – Demand
  15. 15. BK’s Image • What comes to mind when you think of BK?
  16. 16. Competitive Advantage: Brand Names • Burger King • “It’s all in the name” • Established since 1954 • Loyal following of patrons • Whopper -Known for quality -One of best known brands in fast-food -50th anniversary
  17. 17. Competitive Advantage: Highest Franchise Rate • Pros: – Low capital expenditure – Allows for high cash flow/ reinvestment – Quicker expansion into new markets • Cons: – Limited control – Inability to influence changes in ownership – Only 75% of revenue •90% of BK locations are franchised •Leads the Industry
  18. 18. Competitive Advantage: Marketing • Commercials – Innovative and Edgy – Rated “best new restaurant ad” by Neilsen’s (2008) – Also ranked among top 5 “best recalled ads” (2008) • Product Placement – BK appearances in Iron Man, The Simpsons Movie, Indiana Jones, etc. – Video game alliances: Halo 3, Fight Night, Gears of War, etc.
  19. 19. Problems with Marketing • What would you say is the message of BK’s advertising? • Ads for “Texican” burger controversial – Stereotyped Mexicans • Muffled message – Targets “SuperFan” • Provides no clear differentiation for brand
  20. 20. BK’s Recent Performance Burger King • 2nd largest FFHR in US • $2.3 billion (2007 revenue) • 11,565 locations worldwide – 71 countries • 90% franchised • 14% market share • $1.19 million avg. sales per location McDonald’s • 1st largest FFHR in US • $22.8 billion (2007 revenue) • 35,000 locations worldwide – 100 countries • 70% franchised • 45% market share • $2.4 million avg. sales per location
  21. 21. BK’s Recent Performance • Average restaurant sales increased 6% (2007) – Closed 184 restaurants since 2006 • Recently entered “financially attractive” Japanese and Indonesian markets • Strength of foreign currency affects foreign profits – If dollar appreciates, revenues decrease
  22. 22. Recent Cost-Leading Initiatives • Real-time Scheduling System – Increased employee efficiency • Closed Underperforming Restaurants • Smaller Locations – Customer’s drive-thru preference – 62% of sales – Lower costs by 25%
  23. 23. Business Model Burger King Scalable and cost-efficient quick service hamburger restaurant model that offers customers fast food at modest prices. 2006 Public Offering
  24. 24. Competitors’ Advantages • McDonald’s Advantages: – Appeal to ages 3-12 – “America’s fast food company” – 3 times larger than BK • Wendy’s Advantages: – Dollar menu • Beginning to change – Cost-leader • Becoming harder
  25. 25. Growth Opportunities • Differentiation Strategy • “Green” and “Modern” Image – First-mover advantage • Capitalize off increased corporate-owned profitability
  26. 26. Differentiation for BK How can Burger King differentiate themselves from their main competitors?
  27. 27. Key Resources • Flame broiled • Creative advertising • “Hippest” of the big 3 • Experienced management
  28. 28. Risk Factors • Restaurant business has few barriers to entry • Availability of bank credit • Government regulation of nutrition • Food Costs – 19% and 13% of food costs from beef and chicken – Increased ethanol production has cut remaining availability of corn (used in animal feed)
  29. 29. Franchising - Advantages • Provides predictable cash flows without much risk or capital investment • One time fee: $50,000 • Advertising fee: 4% of sales • Royalties: 3.5% - 4% of sales
  30. 30. Franchising - Disadvantages • Limited control of daily operations (cleanliness, culture, etc.) • Generally less profitable – 32% of profit came from company owned restaurants – ¼ as profitable
  31. 31. Break Even Analysis of Conversion Process Cost of Repurchase 650,000 Revenue of Franchise (yr) 52,621.26 Revenue of Company owned 220,480.2 Difference in cash flows 167,858.9 Break Even (years) 3.8723
  32. 32. Global Presence • 11,565 restaurants in 71 countries • 38% located abroad • Differences in dining preferences – Fattier foods served domestically – More dine-in customers Red=Locations of Burger King Orange = Former Locations Yellow=Operates under different name
  33. 33. Health Concerns • Disclosure of caloric content • Widespread requirements for restaurants and other food service establishments to phase out artificial trans-fat in the near future • Customers trending towards healthier food choices
  34. 34. Industry Leaders Ratios
  35. 35. Stock Trend
  36. 36. Cash Flow Analysis   Operating  Activities Investing  Activities Financing  Activities Dividends NET CASH  FLOWS 2008 243,000 (199,000) (62,000) (34,000) ($4,000) 2007 117,000 (84,000) (127,000) (17,000) ($89,000) 2006 74,000 (74,000) (173,000) (367,000) ($173,000) *Effect Of Exchange Rate Changes 14,000 in 2008 and 5,000 in 2007*
  37. 37. DuPont Formula   Margin Asset T/O Leverage ROE 2008 7.74% .978 3.18 24.08% 2007 6.62% .990 3.52 23.07% 2006 1.32% .870 4.50 5.17%
  38. 38. Current Ownership Strategy “We believe that our restaurant ownership mix provides us with a strategic advantage because the capital required to grow and maintain the Burger King» system is funded primarily by franchisees, while still giving us a sizeable base of Company restaurants to demonstrate credibility with franchisees in launching new initiatives.”
  39. 39. Current Strategy • Drive further sales growth – Enhance Guest Experience – Reduce hours • Enhance Restaurant Profitability • Expand International Platform • Employ Innovative Marketing Strategies • Accelerate New Restaurant Development and Expansion
  40. 40. Global Growth • Enter new territories 71 • Latin America 1000 count (#1 FFHC 16/25 countries) • Eastern Europe (Middle East, Mediterranean) • Asia Pacific – project brand presence via airport locations • Target bold, edgy, young • 2009 – open 3-4% net new units world wide annually
  41. 41. Re-imaging • Whopper Bar – designed to reach new guests, college students • Invest money in fresh looks for company owned restaurants • 25% savings in real estate development costs • Greener Environment – Energy Efficient – guest notice the re- imaged restaurants with avg. sales rise 16% and rebuilt = 36% increase
  42. 42. Adventures in Dining – Differentiation • Differentiation in Products – Apple Fries – Nutritional Kraft Macaroni & Cheese – Burger Shots – Mega Angus Burger • BK Positive Steps: eliminating cooking with trans fat oils in U.S. and Canada
  43. 43. Adventures in Marketing • “Have it Your Way” • Flexible Broiler – new products • Bluetooth Headsets – improved communication and speed of service – superior guest experience • Pricing Tool – examine competitive data and make market driven changes in menu pricing • Trendy Advertising: Simpsons, Whopper Freak Out, Indiana Jones, Transformers, Iron Man, ipod downloads, etc. – always comes down to great food
  44. 44. Burger King vs. McDonald’s 2008 • 11,565 restaurants in 71 countries. • 1,360 Company Restaurants (11.75%) • 10,205 Franchise Restaurants (88.24%) • 31,967 restaurants in 118 countries . • 6,502 Company Restaurants (20.3%) • 25,465 Franchise Restaurants. (79.6%) Burger King McDonald’s
  45. 45. What Fast Food Restaurant has the best Hamburger? – McDonald’s 21% – Burger King 37% – Wendy’s 37%
  46. 46. Which FFHR has the best atmosphere? – McDonald’s 34% – Burger King 11% – Wendy’s 31%
  47. 47. Which FFHR do you go to the most? – McDonald’s 16% – Burger King 11% – Wendy’s 57%
  48. 48. How would you change FFHR’s? • 53% Better quality, cleanliness, healthier. • 22% Sought out more menu options • 17% Requested lower prices. • 6% Wanted better customer service.
  49. 49. Analysis of Results • BK tied Wendy’s for the best burger. • Quality, Cleanliness, and Health are Important – There is a potential demand for quality positions FFHR • McDonald’s had the best atmosphere. – We need to differentiate our atmosphere, imitation is unsuccessful • Wendy’s was most frequented. – Better proximity and late night availability – BK should focus on lunch-time, evening segment
  50. 50. Strategic Objective: Increase Market Share by: • Re-positioning BK as a “progressively responsible” Fast-Food Hamburger Restaurant. • Increase corporate influence and initiatives over franchise operations. • Streamlining business model to achieve a more product-centric focus. • Expanding Globally through promotion of brand name.
  51. 51. Differentiation Strategy: • Green Team Campaign – Recyclable paper products • Quality, Sustainability, Responsibility. • Contemporary counter-front and open view into kitchen from anywhere in restaurant. • Restaurant Interior/Exteriors gives “Organic Feel” • Focus on Freshness and Quality of Beef, Produce, Beverage.
  52. 52. Burger King Lounge • Free Wi-Fi will appeal to business people. • Segmented table layout adds privacy and relaxed atmosphere. • Plants and foliage support sustainable position. • Earth-tone color-scheme aligns with message. • First Mover Advantage
  53. 53. Easy-Order Touch Screens (POS) • Self-Order touch screens at counter. • Increases order accuracy • Provides screen by screen option interface and comparable value information • Reduces unorganized menu cluster • Reduces labor costs
  54. 54. Global • Focus advertising efforts on new target market • Promote healthy BK Kids meals • Implement US Standards for emerging global franchises.
  55. 55. Objectives: 6 Month • Start Conversion of Company/ Franchise Ownership from 11.75% to 15% – For every 100 BK’s, 15 will be Company Owned. • Launch “Green Team” Campaign in new restaurants. • Launch Conversion of existing restaurants.
  56. 56. Objectives: 12 Month • Completion of Old Restaurant Conversion – 5% Franchisees renegotiated • Increase Average Gross Sales per store by 10% • 500 New Franchise Restaurants World- Wide. – Maintain Company/Franchise Ratio Goal. (15%)
  57. 57. Strategic Goal for the Future • BigBig Hairy Audacious Goal – To become largest Fast-Food Hamburger Restaurant in the world. (Currently second to McDonald’s) • As measured by: – Total number of restaurants – System-wide sales.
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