Burger King Success Story and Case Study
Burger King Success Story and Case Study – A Short History of Burger King
The world’s one of the leading hamburger chain was founded in 1953. The company has been operating in over 70 countries and 90% are privately owned franchises. This executive summary demonstrates the brand value of Burger King and how the company has revolutionized itself over the years.
Despite the challenges and intense competition in the market, Burger King holds a strong position with the help of its successful marketing strategies. The tastes of its hamburgers are much better than McDonald’s but they are unable to make the brand perception as strong as Mcdonald’s globally. For Burger King, the move to merge with the Canadian market will bring out a potential hook for those millennials who love coffee and breakfast sandwiches.
Table of Contents
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How was Burger King founded?
The company began in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain. After Insta-Burger King ran into financial difficulties in 1954, its two Miami-based franchisees, David Edgerton and James McLamore purchased the company and renamed it, Burger King.
The predecessor to what is now the international fast-food restaurant chain Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King. Inspired by the McDonald brothers’ original store location in San Bernardino, California, the founders and owners, Keith J. Kramer and his wife’s uncle Matthew Burns, began searching for a concept. After purchasing the rights to two pieces of equipment called “Insta” machines, the two opened their first stores around a cooking device known as the Insta-Broiler.
The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to carry the device. After the original company began to falter in 1954, it was purchased by its Miami, Florida, franchisees James McLamore and David R. Edgerton.
The two initiated a corporate restructuring of the chain; the first step being to rename the company, Burger King. The duo ran the company as an independent entity for eight years, eventually expanding to over 250 locations in the United States, when they sold it to the Pillsbury Company in 1967.
Pillsbury’s management made several attempts at reorganization or restructuring of the restaurant chain in the late 1970s and early 1980s. The most prominent change came in 1978 when Burger King hired McDonald’s executive Donald N. Smith to help revamp the company. In a plan called Operation Phoenix, Smith initiated a restructuring of corporate business practices at all levels of the company.
Changes to the company included updated franchise agreements, a broadening of the menu, and new store designs to standardize the look and feel of the company. While these efforts were initially effective, many of them were eventually discarded, resulting in Burger King falling into a fiscal slump that damaged the financial performance of both Burger King and its parent. Poor operating performance and ineffectual leadership continued to bog the company down for many years, even after it was acquired in 1989 by the British entertainment conglomerate Grand Metropolitan and its successor Diageo. Eventually, the institutional neglect of the brand by Diageo damaged the company to the point where major franchises were driven out of business and its total value was significantly decreased. Diageo eventually decided to divest itself of the loss-making chain and put the company up for sale in 2000.
In the twenty-first century, the company returned to independence when it was purchased from Diageo by a group of investment firms led by TPG Capital for $1.5 billion (USD) in 2002. The new owners rapidly moved to revitalize and reorganize the company, culminating with the company being taken public in 2006 with a highly successful initial public offering.
The firms’ strategy for turning the chain around included a new advertising agency and new ad campaigns, a revamped menu strategy, a series of programs designed to revamp individual stores, and a new restaurant concept called the BK Whopper Bar. These changes re-energized the company. Despite the successes of the new owners, the effects of the financial crisis of 2007–2010 weakened the company’s financial outlooks while those of its immediate competitor McDonald’s grew.
The falling value of Burger King eventually leads to TPG and its partners divesting their interest in the chain in a $3.26 billion (USD) sale to 3G Capital of Brazil. Analysts from financial firms UBS and Stifel Nicolaus agreed that 3G will have to invest heavily in the company to help reverse its fortunes. After the deal was completed, the company’s stock was removed from the New York Stock Exchange, ending a four-year period as a public company.
The delisting of its stock was designed to help the company repair its fundamental business structures and continue working to close the gap with McDonald’s without having to worry about pleasing shareholders. 3G later took the company public again after a series of changes to its operations and structure. Burger King would eventually be merged with Canadian-based donut and coffee chain Tim Hortons, igniting a political controversy in the United States over tax inversions.
Is Burger King a public company?
Burger King shares are up nearly 90% since the company returned to the public market in the summer of 2012. Individual franchisees may vary, but shares of Carrols Restaurant Group, a relatively large, publicly-traded Burger King franchisee, are up better than 22% over the same period of time.
Burger King Marketing Strategies
THE CHALLENGES AND GOALS
The organizational goal of Burger King is to serve its customers with the best quality fast food. The brand is known to be the second-largest burger chain in the US. The recent most strategic goal adopted by the company is to buy Tim Hortons (THI). The aim is to merge with Canada’s biggest seller of Coffee and Doughnuts.
Burger King Worldwide Inc is a global chain corporation that works as a franchise and operates fast-food hamburger restaurants under the brand name of Burger King. The company offers a diversified menu item from burgers, milk shakes, soda, etc. The company achieves revenue from three sources i.e. franchise revenues, the property income that they receive from leasing or subleases to franchisees, and retail sales.
Burger King and Tim Hortons made an agreement under which the two companies will establish a new global powerhouse in the quick-service restaurant sector.
The Company constantly focuses on menu development, market penetration, and basically works on an establishment based model.
The Burger King adopts a specific culture and values that is noticeable in the form of diversified menu items they offer. They advocate the culture of “Have it your way” to attract customers.
The biggest strength of Burger King lies in its geographic expansion by operating 11,500 fast-food restaurants mostly located in over 70 countries.
The product line is highly focused on fast foods which may withdraw those customers who are conscious about their health especially children.
The current earnings growth rate is +15.96%.and the annual revenue gained last year was up to $1.1bn.
The company has a strong product offering to attract and retain loyal customers. According to the recent news, the company acclaimed that they have been attracting more customers after the launch of Satisfries, in North America. The Satisfries are low calories French fries that have got 20% lower calories than regular fries. This brought an incremental change in the customers who would not think of Burger King before.
McDonald’s’ is the world’s largest chain of fast-food restaurant that serves around 68 million customers worldwide. The secret behind McDonald’s success is the strategic competitive advantage and remarkable supply chain. They offer the food at the lowest price possible comparatively to its rivals and have a strong distribution channel as well.
STRENGTHS OF MCDONALDS
• Largest fast food market share worldwide.
• Diversified product line.
• Strong brand presence.
• A growing middle class has a massive customer loyalty.
• Unhealthy food menu.
• Negative image for introducing unhealthy food items in their menu that causes obesity.
It has market capital of $91.84BN.
A huge joint venture between Tim Hortons and Burger King will take place that aims to achieve $23billion sales.
US, UK, Canada etc.
SOCIAL AND CULTURAL ENVIRONMENT
The Social-cultural factors vary from country to country. In an Islamic Country the company has to be careful about the content of food such as the burger king only serves halaal food to the Muslim countries and refrain from pork meat.
The Company has recently planned to add a mobile payment option in all its domestic stores. The application will help to provide coupons and nutrition facts.
• Geographic Diversification: Burger King has adopted a geographical strategy by expanding its business in over 70 countries where 4538 are located internationally in Asia, Middle East etc.
• Strong brand presence
• Diversified product offerings.
• Advertising campaigns are appealing.
• Some people avoid Burger King because of its unhealthy food items.
• International appeal is quite low.
• Franchise management is weak.
• Market expansion.
• New Product Development, catering to the needs of the consumers like new healthy menu etc.
• Food costs get high during inflation period.
• Fierce Competition with McDonalds, Hardees, KFC.
The Burger King has developed three market segments for its customers such as Kids, African- American teenage crowd, working women. For kids, they have formed a full developed integrated new products, menus, media and advertising. The working women segment is specifically based on the menu products like chicken tenders, chicken sandwiches, and salads.
Burger king’s new move to merge with Tim Hortons is considered to be a growth strategy from both the brands. However, some people have disapproved this stance of Burger King as it’s a tax aversion strategy by the company. The company denied this rumor and stated that they want to bring together both the companies under one flag to serve even better.
INTEGRATED DIGITAL MARKETING STRATEGY
The digital marketing is a new target move and the company has been constantly innovating through enhancing all the channels of communication to serve the customers with the best possible experience.
MARKETING MIX (4P’S)
• Began the business with burger and fries.
• Adaptive strategy.
• Diversification strategy tailoring the needs of the customers.
• Psychological marketing strategy.
• The company continues to sell the new premium burgers, the Steakhouse XT at $3.99.
• Burger King receives its revenues from three sources: sales at its own restaurants, property income and the franchise fees.
• The company is operating in various prime locations mostly in the form of franchises.
• The launch of $1 big value meal.
• The company used the term of “Next big move” to showcase the scheduled promotional tours in urban communities around the country.
In the first half of 2014, the Burger King’s global unit count grew to more than 5%, previously expanding into 682 locations and to more than 13,808 units in 2013.