Burger King makes a comeback
Nov. 5, 2014
by Monica Watrous
|The relaunch of Chicken Fries lifted Burger King to its best financial quarter.
MIAMI — On the comeback of a menu item with a cult following, Burger King Worldwide delivered its best quarter of comparable sales growth in the United States since 2012. Chicken Fries, originally introduced in 2005 and removed from the menu in 2012, returned for a limited time during the summer in response to demand from social media users.
“Earlier this year, our digital marketing team started doing some social listening and found out that our guests were mentioning Chicken Fries all the time on the Internet,” said Alex Macedo, president, North America, during a Nov. 4 earnings call with financial analysts. “To be exact, there was one social mention to bring back Chicken Fries every 40 seconds in January of this year.”
The relaunch strategy for Chicken Fries, which are long, thin strips of breaded chicken, was centered almost exclusively on digital and social media, with announcements on Burger King’s Twitter, Facebook and Instagram pages.
“Within the first 10 days of the campaign, Chicken Fries had been mentioned over 1 million times on Twitter,” Macedo said.
The burger chain’s newly adopted approach to menu innovation helped drive a 3.6 percent increase in comparable sales in the United States and Canada during the quarter, which compared with a loss of 0.3 percent in the same period of the previous year. Just over a year ago, Burger King initiated its strategy of “fewer, more impactful launches” in an effort to reduce complexity for its franchisees.
“While it has been great to see sales results grow consistently, what is even more telling of the success of this strategy is the improved margins our franchisees are seeing,” Macedo said. “Our initiatives have helped to reduce waste in our kitchens, simplify crew training, and improve overall restaurant operations.”
New menu items during the quarter included the Mushroom Swiss Bacon Whopper and A.1. Ultimate Bacon Cheeseburger. The chain’s King Deals value menu also contributed to positive sales and traffic.
On Aug. 26, Burger King entered into an agreement with Tim Hortons to create the world’s third largest quick-service restaurant company. Expenses related to the proposed transaction weighed on Burger King’s earnings during the quarter. Burger King reported a loss of $23.5 million, which compared with net income of $68.2 million in the prior-year quarter. The company expects the transaction will close late this year or early next year. Revenues for the quarter rose 1.3 percent to $278.9 million.
System-wide comparable sales increased 2.4 percent in the quarter, driven by growth in the United States and Canada, Europe, the Middle East and Africa, and Asia Pacific. Strong comparable sales growth coupled with the addition of 701 units over the trailing 12-month period drove a 7.7 percent increase in system-wide sales during the quarter. Burger King added 152 net new restaurants during the quarter, marking a 14.3 percent increase from the previous year.
“The third quarter represented a key step forward in a long-term strategic vision,” said Daniel Schwartz, chief executive officer. “In North America, we delivered our fourth consecutive quarter of positive comparable sales growth and our best quarter since 2012. Internationally, we continue to accelerate unit growth and are excited to be entering our 100th country. And now, with the announcement of the Tim Hortons transaction, we are poised to bring an undeniable market leader to our global growth platform.”