Simplicity reigns at Burger King
by Monica Watrous
MIAMI — Two core principles drive plans for Burger King Worldwide Inc. in 2014: improving food and service for customers, and maximizing profitability for franchisees.
“All initiatives you will see us taking in the coming year will be focused on these two core principles,” said Daniel Schwartz, CEO, during a Feb. 13 earnings call with analysts.
A new focus on fewer, better launches improved sales trends in 2013. In that spirit, the fast-food chain said it will continue to launch products with minimal operational complexity. Debuting in January was a spicy chicken sandwich that offers a new flavor twist on an existing product.
“Despite its fresh new taste, the spicy chicken patty is cooked the exact same way as the original chicken patty, and the sandwich is assembled exactly the same way as our longtime favorite original chicken sandwich,” said Alex Macedo, executive vice president and president, North America. “We believe this simplifies execution for our crew members, and drives profitability for our franchisees. When it comes to innovation, this will be our formula as we continue to build the brand — deliver great products that address our consumers and our franchisees' needs.”
Breakfast and chicken represent opportunities for forthcoming innovation, the chain said. In addition to updating its menu strategy, Burger King also is re-imaging some of its North American restaurants as an effort to remain competitive.
“We recognize that when our guests drive down the street today, they have many dining options,” Macedo said. “One of the main reasons that they will choose Burger King over one of those other options is because they see a brand-new exterior with a prominent sign, reflective of the great-tasting food and quality service they will receive inside the restaurant. In a competitive market, having a fresh, new image is one of the main ways we can differentiate ourselves.”
With 600 remodels completed in 2013, the Burger King system is approximately 30 percent updated and on track to reach its target of 40 percent of the U.S. and Canada restaurants by the end of 2015.
“More importantly, our franchisees continue to realize 10 percent to 15 percent average sales uplift on remodels, which we believe reflects the attractive business case for re-imaging,” Macedo said.
For the year ended Dec. 31, 2013, net income nearly doubled to $233.7 million, equal to 67 cents per share on the common stock, up from $117.7 million, or 34 cents per share, in fiscal 2012. Net revenues for the year declined 42 percent to $1,146.3 million from $1,970.9 million in the previous year. Excluding impacts of refranchising and currency movements, revenue increased 5.2 percent year-over-year.
Fourth-quarter income rose 37 percent to $66.8 million, or 19 cents per share, from $48.6 million, or 14 cents per share, during the prior-year period. Revenues totaled $265.2 million, down 34 percent from $404.5 million in the same quarter of the previous year, primarily due to net refranchising of 360 company-owned restaurants during the year.
System-wide sales grew 5.7 percent in the fourth quarter and 4.2 percent for the year, while comparable sales grew 1.7 percent for the quarter and 0.5 percent for the year.
During the year, Burger King completed its global refranchising initiative and added 670 net units internationally. The company also signed joint venture agreements to begin large-scale development in France and India.
“Our 2014 strategic priorities remain the same,” Schwartz said. “We need to drive strong comparable sales, restaurant profitability, and expand our brand presence around the globe. All of these initiatives are focused on two underlying goals — ensuring that our guests are always having great-tasting food and excellent service, and that our franchisees see this translate into strong financial performance. We have the right team in place to capitalize on our momentum from 2013, and make 2014 another great year for the Burger King brand.”