1.0 History of Global Development
BURGER KING® (also known as BK®) is founded by James McLamore and David Edgerton in 1954 and the first Burger King restaurant is in Miami, Florida. In 1957, Burger King introduces their most famous menu, the Original WHOPPER® Sandwich. Their famous products are flame-broiled hamburgers, chicken and other specialty sandwiches.
Burger King has faced with changing of ownership throughout their operations which affect the expansion of their business. (Appendix 1) Currently, BURGER KING® is the second largest fast food hamburger chain in the world measured in terms of the total number of restaurants. It is a global company which is operating in 81 countries and United States territories with a total of 12,512 restaurants. BURGER KING® divided their market into four operating segments namely (i) the U.S and Canada; (ii) Europe, the Middle East and Africa, or EMEA; (iii) Latin America and the Caribbean, or LAC and (iv) Asia Pacific, or APAC. There are increased in number of restaurants in 2011 compared to 2010 and 2009. (Appendix 2)
2.0 Industry Overview
According to Euromonitor International (2012), fast food is now world’s second foodservice category, with a growth of 6% in 2010. Recession does have impact on the consumer spending but in some markets it has helps to boost growth in fast food industry as consumers visit affordable fast food outlets rather than to expensive full-service restaurants. At the same time, it forces all fast food operators to compete vigorously to attract customers. Burger King operates largely in United States and Canada. In U.S, quick service restaurant (QSR) is the largest segment of restaurant industry and it is expected to grow at annual rate of 3% between 2011 and 2016.
3.0 Burger King’s Strategy and Performance
Market Entry Mode-Franchising
Burger King mostly expands through franchising where out of 12,512 restaurants, only 1,295 restaurants are company-owned and 11,217 restaurants are owned by franchisees. Some restaurants are operated by Burger King itself due to high attractiveness of the market and they have confidence to do well in that location. Here is the table showing the number of restaurants in different regions (Appendix 3). Burger King is facing lower risk by entering a market through franchising as they do not need to set up the business on their own and franchisee is the one who understand the whole market and going to operate the business. In addition, the capitals required by Burger King to expand and maintain their restaurants systems are funded by franchisees through payment of royalties. On the marketing aspect, most of the Burger King’s advertisements are funded by franchisees as a support to the brand by making advertising contributions. Company actively refranchising Company restaurants to new and existing franchisees to further improve their profitability and cash flows through reduced capital expenditures and increased royalty payments. In addition, Burger King actively accelerating their international expansion as part of their strategic growth strategy and to build up their global presence.
Differentiation Strategy
Burger King is using differentiation strategy as their global generic strategy. They differentiate themselves from competitors through the way of preparing its burgers by using flame-broiled method instead of grilling method. The special taste of their burgers successfully attracts customers and makes their brand well-recognised by U.S people and eventually around the world. In addition, they revolutionize the fast food industry through the introduction of HAVE IT YOUR WAY® marketing campaign where they allow customers to customise the ingredients on all the sandwiches offered. It helps to generate sales of Burger King as customers able to customise their sandwiches based on their own preferences.
Cost Cutting Strategy
Upon the acquisition by 3G Capital, the new owner has working towards cost-cutting to achieve cost efficiencies by restructuring the less profitable company-owned stores, followed by projects such as debt refinancing. As results, Burger King achieved net income with $25 million in the first quarter of 2012, compared to a loss of $5.9 million in prior year. Under the new management, the general and administrative expenses decreases by 4 percent, compared to the previous year, which indicates the efficiencies of the new Burger King Management.
Market Extension Strategy
According to Euromonitor International (2012), the rapid growth in number of outlets in Mexico has help Burger King to overtake McDonald’s in terms of value share in 2007. (Appendix 4)
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