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"The home of the Whopper" – Is Playing Well

November 28, 2013 | About:
abirk

abirk

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Consumers’ demands regarding food are ever changing. People are demanding healthier options even in fast food. So, to strive amid this competitive market one must fulfil their customers’ needs . Burger King Worldwide Inc (BKW) aka "The home of the Whopper" is changing its business plans as well as menu for both of its valued investors and customers. The king’s main focus is on franchising as it is the best way to maximize sales. About 99% of all Burger King locations are owned and operated by independent franchises. Worldwide, there are more than 13,000 Burger King restaurants in 91 countries and territories.

Strong Figures

The company’s global comparable sales increased 0.9% and system-wide sales growth of 4.9% was attributable to 592 net restaurant openings for the trailing twelve month period. Adjusted Net Income and Adjusted Diluted EPS increased 32.7% and 31.6%, respectively, compared to the prior year, and Adjusted EBITDA increased 16.7% on an organic basis to $176.0 million . Adjusted EBITDA margin increased 2,822bps to 64.0%. Net restaurant growth of 133, a 111.1% increase from the prior year, and increased dividend from $0.06 per share in the third quarter to $0.07 per share for the fourth quarter. U.S. and Canada comparable sales growth declined (0.3%) in the quarter due to continued softness in consumer spending and ongoing competitive headwinds .

In this fast food industry McDonald's (MCD) is leading ahead of Burger King in terms of locations and visitors. Another competitor of this Miami based company is Wendy’s (WEN). McDonald’s also reported a rise of 0.9% in global comparable sales. Wendy’s on the other hand doesn't report global sales, but in its North American segment, the company posted a 3.2% increase in comparable-store sales. Burger king has a gross margin of 63% and operating margin of 45% which beats both McDonald's and Wendy's.

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Graph from StockCharts.com

What to Expect?

Keeping the consumers’ health concerns in mind, recently, the king introduced SATISFRIES- french fries with 30% less fat and 20% fewer calories than its current fries, and 40% less fat and 30% fewer calories than McDonald's fries. Alex Macedo, president of Burger King North America said that small change create a big impact. After Satisfries , the king announced the introduction of the BIG KING sandwich, which will compete with the BIG MAC of McDonald’s. As I said earlier that consumers’ demands are ever changing therefore BIG KING may be a serious threat to BIG MAC.

This is not the end, as the king has also introduced the BBQ Rib Sandwich for only $1. Innovation and value are important to Burger King, and therefore it is offering such a low price item to its valued customers. BBQ Rib Sandwich will compete with McDonald’s McRib sandwich.

On 26 th November, Burger King announced that it is partnering with restaurant operator Groupe Olivier Bertrand to build on its three French locations. The company is also signing deals to expand its wings in India, South Africa and China. Moreover, Burger King Canada has introduced its latest product innovation, crinkle-cut fries called Gratifries, in a new campaign.

On a Concluding Note

In order to improve brand perception, Burger King is modernizing its restaurants . Because of the remodelling procedures adopted by the company it has been able to increase its customer base. The king is thereby consistently trying to achieve its slated 40% of the re imaging program by 2015. This re-imaging program will increase the overall comparative same store sales. In the recent quarter, Burger King reported a 2.4% increase in sales from Europe, Middle East, and Africa. On the other hand, McDonald's sales in Europe rose 0.2% in the same period.

Constant innovation in menu, store remodelling, and franchise program (as franchises are the best way to understand the local tastes and preferences) pushes this giant to gain a better position than McDonald’s and Wendy’s. I am therefore pretty bullish about this company as it won’t let its valued investors as well as customers down in the near future.

Rating: 4.3/5 (11 votes)

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