Burger King Corporation

views updated

Burger King Corporation

founded: 1954

Contact Information:

headquarters: 17777 old cutler rd.
miami, fl 33157 phone: (305)378-7011 fax: (305)378-7262 url: http://www.burgerking.com

OVERVIEW

Burger King Corporation operates the second largest fast food restaurant in the United States, with 9,400 locations in all 50 states and 53 countries around the world. It is a leader in the fast food industry, with sales reaching $9.8 billion in 1997. The company operates in a mature U.S. market, meaning there is little new business being generated in the United States, and competitors continue to battle for existing business. Burger King promotes its products aggressively in the United States, while also continuing its expansion into foreign markets.

Burger King was troubled for a while by a lack of corporate direction. Franchises operate independently, and many times differently from one another, creating an image of inconsistency in food and service. With innovative ideas and aggressive advertising, Burger King managed to pull through, remaining second in its industry only to McDonald's.

COMPANY FINANCES

In 1997 Burger King's worldwide system sales reached $9.8 billion, up 8 percent from 1996. The company's sales growth in the United States was just over 20 percent, and 866 new restaurants were opened worldwide.

HISTORY

The Burger King Corporation was founded in 1954 in Miami, Florida, by entrepreneurs James McLamore and David Edgerton. McLamore and Edgerton targeted the post-war generation by offering fast food at a reasonable price. With drive-ins popping up all over the United States and offering cheap fast food, the concept was not unique. However, Burger King tried to give its restaurant a special edge, being the only fast-food chain at the time to offer comfortable eat-in dining rooms.

The Whopper—a hamburger made with sauce, cheese, lettuce, pickles, tomato, and onion—was introduced in 1957 as the burger for the bigger appetite. At that time it cost $.37, while the company's original hamburger was $.18; McDonald's hamburger was only $.15.

In 1959 McLamore and Edgerton decided to franchise the business. They acquired national and international franchising rights in 1961, and Burger King soon became a national chain. In 1967 Minneapolis-based Pillsbury Company acquired the company. At that time, it had 274 restaurant locations and 8,000 employees.

Pillsbury purchased the 274-store chain for $18 million in 1967. However, franchises were still operating independently. Franchisees, such as Billy and Jimmy Trotter, began buying as many stores as they could, and individual franchisees were becoming more powerful than the parent company. Pillsbury curtailed the expansion of the Trotter brothers through a lawsuit, but this didn't prevent other franchisees from doing the same. In 1977 Pillsbury hired Donald Smith, a former top executive with McDonald's. Smith began to apply the same management techniques used at McDonald's to organize and control the franchises of Burger King. He set ownership rules for the franchises, which made it nearly impossible for an individual franchisee to become more powerful than the parent company. Smith also replaced 8 out of 10 managers with people from McDonald's and ordered routine monitoring of each franchise with unscheduled visits.

In 1988 Grand Metropolitan PLC bought out Pillsbury in a corporate takeover. In response, Burger King franchise owners formed the National Franchise Association (NFA). The NFA revised the franchise agreement, including a process for resolving encroachment disputes and policies pertaining to the spending of national advertising funds. Originally formed out of panic, the NFA eventually formed a strong relationship with the Burger King Corporation. This relationship was important since in 1996, only 758 of Burger King's then 8,250 restaurants were operated by the company.

STRATEGY

Burger King's success was due largely to its ability to anticipate and keep up with consumer trends. In 1974 multiple lines were added to speed up service. Drive-thru windows were re-introduced in 1975 after being eliminated in the 1950s when dining rooms were added. (Drive-thru windows account for 60 percent of the company's business.) In 1978 specialty sandwiches such as fish, chicken, ham and cheese, and steak were introduced and targeted to the adult consumer. A breakfast menu was added during the early 1980s; salad bars and a "light" menu were introduced for the health-conscious crowd in 1985.

Burger King later adopted a "back-to-basics" attitude, concentrating on its original burgers, fries, and soft drinks. When McDonald's introduced its Arch Deluxe for the "grown up" taste, Burger King fought back with its "Still the One" campaign, offering the Whopper for only $.99, resulting in a significant increase in traffic for the hamburger chain. Burger King considers advertising an important element of its success and has used memorable campaigns such as "Have It Your Way" and "We Do It Like You'd Do It."

INFLUENCES

When Donald Smith left in 1980, management at Burger King became inconsistent and unstable. With the lack of an identifiable image, several advertising campaigns failed miserably. Burger King fought back with continued expansion abroad and attempts to meet consumer demands by adding and changing menu items. For example, in August 1997 the company introduced the Big King, and in December Burger King launched its new french fries, directly challenging McDonald's dominance with its advertising.

FAST FACTS: About Burger King Corporation

Ownership: Burger King Corporation is a wholly owned subsidiary of Diageo PLC, formed by the merger of Grand Metropolitan PLC and Guinness.

Officers: Dennis Malamatinas, CEO, 42; Colin Heggie, Sr. VP & CFO; Paul E. Clayton, Pres., Burger King North America, 39

Employees: 26,000 (1997)

Chief Competitors: Burger King is a fast-food chain. Its primary competitors include: McDonald's; Wendy's; and Hardee's.

CURRENT TRENDS

Despite setbacks, Burger King was competing fiercely for the number one spot in the fast food hamburger business. Even with the loss of their marketing link with the Walt Disney Company to McDonald's, Burger King reported an 8-percent increase in sales—a record $9.8 billion for fiscal year 1997. This increase and a 1.5-percent rise in same-store sales indicated that Burger King had not been significantly affected by this major loss.

PRODUCTS

In 1990 Burger King introduced the BK Broiler, a grilled chicken sandwich that sold up to a million sandwiches a day following its launch. However, the Whopper sandwich, an immediate hit since its introduction in 1957, remains one of the best known hamburger sandwiches in the world, selling more than 1.5 million every year. The Bacon Double Cheeseburger was introduced in 1982; the Croissan'wich, a breakfast sandwich, debuted nationally in 1985; and Chicken Tenders and French Toast Sticks, a new breakfast product, was introduced in 1986. In addition to its Whopper and BK Broiler sandwiches, the company offers the standard extras such as french fries and soft drinks.

Instead of introducing new products, the company decided to zero in on its core products—hamburgers, fries, and soft drinks—emphasizing their quality and value. Increased competition from supermarkets and home meal replacement outlets forced Burger King and other fast food restaurants to re-evaluate products, pricing, and service. While McDonald's intended on changing its menu, Burger King opted to plan new promotions and open more restaurants.

CORPORATE CITIZENSHIP

Burger King takes an active interest in the improvement of inner cities. CEO Robert Lowes teamed up with African-American entrepreneur La-Van Hawkins to develop Burger King franchises placed in inner city neighborhoods under the Enterprise Communities and Empowerment Zones program instituted by the Clinton Administration. The program aims to improve neighborhoods by offering jobs, along with the opportunity for workers to become owners of their own franchises. Burger King is the largest fast food franchisor participating in this program.

GLOBAL PRESENCE

Burger King continues to expand internationally at a steady rate. The restaurant's largest international market is the United Kingdom, with over 350 units. The Asia/Pacific area has 254 units, and Latin America has 272 units. Burger King adapted regionally by observing local food customs, such as complying with the kosher rules in Israel.

Throughout the 1990s international expansion continued with restaurants opening in the former East Germany, Hungary, Mexico, Poland, Saudi Arabia, Israel, Oman, Dominican Republic, El Salvador, Peru, New Zealand, and Paraguay. The biggest challenge Burger King faced globally was the careful planning and distribution of restaurants. According to Burger King's Head of Worldwide Development, David Fitzjohn, Burger King must do even more "intensive analysis of the intricacies of each country, each city, and each site."

CHRONOLOGY: Key Dates for Burger King Corporation

1954:: James McLamore and David Edgerton co-found Burger King of Miami
1957:: The Whopper makes its debut
1963:: Burger King opens its first international restaurants
1967:: Pillsbury acquires Burger King
1975:: The first European Burger King opens in Madrid, Spain
1977:: The 2,000th Burger King opens in Hawaii, putting locations in all 50 states
1988:: Grand Metropolitan PLC acquires Pillsbury and its subsidiaries
1997:: Burger King establishes the Welfare-to-Work program with assistance from the White House
1998:: Guiness and Grand Metropolitan merge to form Diageo PLC

In 1996 Burger King began aggressive expansion into Japan when it teamed up in a joint venture with Japan Tobacco Inc. The target market was teenagers with free time and extra cash. In early 1997 Burger King bought Morinaga Love, a Japanese fast food chain, planning to replace salmon and eggplant burgers with hamburgers. Burger King hoped to attract customers to the nostalgic American decor of the restaurants. Burger King plans to further develop in all areas, but anticipates considerable growth in the Middle East. Other expansion plans include Russia and China.

For the first time, in 1997, Burger King reported profits in the international marketplace. The company's performance was significantly improved in Europe (particularly the United Kingdom and Germany), where profits grew by 9 percent. Also performing well were stores in Latin America (comparable store sales for 1997 were up 6.4 percent) and the Asia/Pacific region (comparable sales rose 4 percent).

EMPLOYMENT

More than 600 people are employed by Burger King at its corporate headquarters in Miami, Florida. There are also 10 regional offices throughout the continental United States. Hiring is done through various departments, and recruiting is done through colleges and through newspaper and trade journal ads. When hiring new employees, the company seeks those with backgrounds in data processing, finance, and marketing. Burger King also hires temporary summer interns and offers a work-study program for students.

Employees are trained on the job. To support onthe-job instruction, formal classroom lectures and in-house and outside seminars are offered. Burger King continues to upgrade its training procedures. While restaurant chains were realizing the need for interactive training programs, Burger King introduced an interactive compact disc for training its employees. Through CD-player-television hookups, the compact disc enables trainees to interact with the program using wireless or hard-wired control devices.

HOLD THE PICKLES?

In an effort to differentiate its product from that of arch-rival McDonald's, Burger King emphasizes its "Have It Your Way" philosophy in its ad campaigns, and Burger King statisticians have revealed that the Whopper can be ordered in no less than 1,024 different variations.

From its humble beginnings in Miami in 1954, Burger King now boasts approximately 10,000 restaurants worldwide, bringing in $10 billion a year in sales from 1,400 customers per restaurant per day (and 60 percent of this business is drive-thru). These customers wolf down 1.6 billion Whoppers and 1.7 billion orders of fries a year (napkin consumption, however, remains a closely guarded company secret). A Whopper is now available in all 50 states, and if the local food mystifies or terrifies you while on vacation, be assured that a Whopper can be had in 56 other countries, including Peru, Singapore, and Saudi Arabia.

Periodic evaluations are given to assess employees' career developmental potential. Employees are given opportunities for advancement through trade and association participation, management training, and skills training. Burger King promotes from within, leading to higher level professional or management positions. The company offers its employees numerous benefits including life, medical, health, and dental insurance. They also offer pension, stock, and hospitalization plans, along with tuition reimbursement.

SOURCES OF INFORMATION

Bibliography

bernstein, charles. "fitzjohn navigates careful bk international growth." restaurants & institutions, 15 may 1995.

"burger king corporation." international directory of company histories, vol. ii. detroit, mi: st. james press, 1990.

dun & bradstreet information services, north america. the career guide 1997: dun's employment opportunities directory. bethlehem, pa: dun & bradstreet, inc., 1996.

dun & bradstreet information services, north america. dun & bradstreet million dollar directory: america's leading public & private companies. bethlehem, pa: dun & bradstreet, inc., 1996.

"grand metropolitan 1997 interim announcement." diageo plc, 1998. available at http://www.diageo.com/reportsaccounts/index.htm.

"grand metropolitan 1997 preliminary statement of annual results." diageo plc, 1998. available at http://www.diageo.com/reportsaccounts/index.htm.

kramer, louise. "bk franchisee association comes of age." nation's restaurant news, 10 june 1996.

——. "burger king, hawkins tap into the inner-city market." nation's restaurant news, 4 march 1996.

pollack, judann. "burger king sizzles in wake of arch deluxe." advertising age, 17 june 1996.

——. "the struggle for the next helping." advertising age, 7 october 1996.