What is in this article?:
- Burger King reaps benefits of refranchising
- Keeping 'less is more' menu strategy in 2014
The move allows the brand to focus more on its image, menu and messaging in 2014, according to executives.
Officials for Miami-based Burger King Worldwide credited the company’s global refranchising initiative with its near doubling of net income in fiscal 2013 and told investors and analysts that the nearly fully franchised model would let the chain grow profitability further in 2014.
Alex Macedo, president of Burger King’s North American system, conceded that the chain’s main competitors have significant amounts of company-owned restaurants, while Burger King has only 50 corporate stores left in its hometown market. But the nearly wholly franchised model would create the conditions Burger King needs to achieve its biggest goals for 2014, he said.
“It really allows us to provide all the support that the franchisees need in all aspects of the business, and we can focus on having the best image in the market,” Macedo said. “One: It has lower costs and high returns. It allows us to improve operations, learn very quickly about the menu like we did and adjust our strategy … and finally, it gives us time to work on our brand communication and brand messaging for the future.”
Burger King completed its global refranchising in 2013, which led to a 98.6-percent jump in annual net income, to $233.7 million, despite revenue plummeting 41.6 percent after 360 restaurants were sold back to franchisees during the year.
Burger King also opened 670 net new restaurants around the world in its latest fiscal year, a pace the brand would look to repeat in 2014, chief financial officer Joshua Kobza said.
Domestically, the brand’s major strategic initiative would be to continue reimaging and remodeling its existing base of restaurants. Burger King completed approximately 600 remodels in North America last year, to reach 30 percent of its more than 7,400 locations in the United States and Canada. The goal is to have 40 percent of the domestic system remodeled by the end of 2015, Macedo said.
“We recognize that when our guests drive down the street today, they have many dining options,” he said. “In a competitive market, having a fresh new image is one of the main ways we can differentiate ourselves.”
Macedo added that franchisees have seen an average sales lift between 10 percent and 15 percent upon completing their locations’ remodels.