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Burger King’s Profitability Improves, And Is Upbeat About the Future

August 15, 2014 | About:
Quantum Research

Quantum Research

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Burger King (BKW) created new records in the second quarter of the year. The profits climbed up to 19% after the earnings got released on Friday, thus strengthening its fast food chain network. The improvement in profit is mostly attributable to the company’s effort to lower operating expenses.

A brief look at the quarter

In the second quarter this year, the company posted a total earning of $75.1 million, up 19% from $62.9 million a year ago. The new menu was also one of the reasons for the earnings growth, despite pathetic weather conditions in North America, which is its biggest market. However, revenue for the period plunged 6.1% to $261.2 million compared to $278.3 million reported in the comparable period a year ago. This was lower than Wall Street expectation of $262.18 million. The drop in revenue is owing to the net refranchising of as many as 360 restaurants.

However, the company did well at keeping costs low. Operating costs of the fast food major declined 24.4% to $109.7 million compared with $145.1 million registered a year earlier. This helped the company post a remarkable rise in earnings. CEO Daniel Schwartz is upbeat regarding the rest of the year which is expressed in the following words:

"We plan to deliver another strong second half of the year as we capitalize on the positive momentum we have generated through the continued efforts of our exceptional franchisees, partners, and employees."

Tough competition

The last six months have been a tough time for all fast food brands after the arrival of more casual restaurants like the Panera Bread and the Chipotle Mexican Grill, which has created a new enthusiasm in the youngsters to try out something different. The breakfast race was also on its way, making all fast food brands introduce new items to sustain in the race. Starbucks (SBUX), Dunkin Donuts (DNKN) and McDonald’s (MCD) are the competitors with Burger King in the breakfast market share.

Burger King has 13,000 outlets all over the globe, which is dwarfed by the 35,000 locations of McDonald. However, the quality of its offerings makes Burger King such a well-known brand among consumers. Burger King’s outlets in Turkey, the United Kingdom and Spain did really well in this quarter. Sales in outlets in Africa, Middle East and Europe rose 0.9% above the normal rate. Asia brought in the maximum sales in this period with sales rising up to 3.7%. Burger King managed to defeat the other fast food brands in the race using its strategy of opening more restaurants by striking deals with the local operators.

Summing thoughts

Burger King is one of the oldest and most reputable fast food chain brands. A mouthwatering menu and increasing franchisees are the key reasons for the growth of the company. They have launched 131 new restaurants in the second quarter and plan to launch more 682 restaurants in a year’s time. The executive team of the quick service giant are consistently putting in efforts and working diligently to take on the biggies of the fast food industry. It remains to be seen how the company manages to emerge stronger over existing players and works to increase its market share.


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