Burger King (BK) is an American multinational chain of hamburger fast food restaurants. Headquartered in Miami-Dade County, Florida, the company was founded 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". Over the next half-century, the company changed hands four times, with its third set of owners, a partnership of TPG Capital, Bain Capital, and Goldman Sachs Capital Partners, taking it public in 2002. In late 2010, 3G Capital of Brazil acquired a majority stake in the company, in a deal valued at US$3.26 billion. The new owners promptly initiated a restructuring of the company to reverse its fortunes. 3G, along with partner Berkshire Hathaway, eventually merged the company with the Canadian-based doughnut chain Tim Hortons, under the auspices of a new Canadian-based parent company named Restaurant Brands International.
The 1970s were the "Golden Age" of the company's advertising, but beginning in the early 1980s Burger King advertising began losing focus. A series of less successful advertising campaigns created by a procession of advertising agencies continued for the next two decades. In 2003, Burger King hired the Miami-based advertising agency Crispin Porter + Bogusky (CP+B), which completely reorganized its advertising with a series of new campaigns centered on a redesigned Burger King character nicknamed "The King", accompanied by a new online presence. While highly successful, some of CP+B's commercials were derided for perceived sexism or cultural insensitivity. Burger King's new owner, 3G Capital, later terminated the relationship with CP+B in 2011 and moved its advertising to McGarryBowen, to begin a new product-oriented campaign with expanded demographic targeting.
Burger King's menu has expanded from a basic offering of burgers, French fries, sodas, and milkshakes to a larger and more diverse set of products. In 1957, the "Whopper" became the first major addition to the menu, and it has become Burger King's signature product since. Conversely, Burger King has introduced many products which failed to catch hold in the marketplace. Some of these failures in the United States have seen success in foreign markets, where Burger King has also tailored its menu for regional tastes. From 2002 to 2010, Burger King aggressively targeted the 18–34 male demographic with larger products that often carried correspondingly large amounts of unhealthy fats and trans-fats. This tactic would eventually damage the company's financial underpinnings, and cast a negative pall on its earnings. Beginning in 2011, the company began to move away from its previous male-oriented menu and introduce new menu items, product reformulations and packaging, as part of its current owner 3G Capital's restructuring plans of the company.[4]
As of December 31, 2018, Burger King reported it had 17,796 outlets in 100 countries.[5][6] Of these, nearly half are located in the United States, and 99.7% are privately owned and operated,[6] with its new owners moving to an almost entirely franchised model in 2013. Burger King has historically used several variations of franchising to expand its operations. The manner in which the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licenses on the company's behalf. Burger King's relationship with its franchises has not always been harmonious. Occasional spats between the two have caused numerous issues, and in several instances, the company's and its licensees' relations have degenerated into precedent-setting court cases. Burger King's Australian franchise Hungry Jack's is the only franchise to operate under a different name, due to a trademark dispute and a series of legal cases between the two.
History
The predecessor to Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King.[7] After visiting the McDonald brothers' original store location in San Bernardino, California, the founders and owners (Keith J. Kramer and his wife's uncle Matthew Burns), who had purchased the rights to two pieces of equipment called "Insta-machines", opened their first restaurants. Their production model was based on one of the machines they had acquired, an oven called the "Insta-Broiler". This strategy proved to be so successful that they later required all of their franchises to use the device.[8][9] After the company faltered in 1959, it was purchased by its Miami, Florida, franchisees, James McLamore and David R. Edgerton. They initiated a corporate restructuring of the chain, first renaming the company Burger King. They ran the company as an independent entity for eight years (eventually expanding to over 250 locations in the United States), before selling it to the Pillsbury Company in 1967.[8]:28
.svg){kind=logo}
Pillsbury's management tried several times to restructure Burger King during the late 1970s and the 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",[9]:118 Smith restructured corporate business practices at all levels of the company. Changes included updated franchise agreements,[10] a broader menu[9]:119[10]:66 and new standardized restaurant designs. Smith left Burger King for PepsiCo in 1980[11] shortly before a system-wide decline in sales.
Pillsbury's Executive Vice President of Restaurant Operations Norman E. Brinker was tasked with turning the brand around, and strengthening its position against its main rival McDonald's. One of his initiatives was a new advertising campaign featuring a series of attack ads against its major competitors. This campaign started a competitive period between Burger King, McDonald's, and top burger chains known as the Burger wars.[12] Brinker left Burger King in 1984, to take over Dallas-based gourmet burger chain Chili's.[13]
Smith and Brinker's efforts were initially effective,[14] but after their respective departures, Pillsbury relaxed or discarded many of their changes, and scaled back on construction of new locations. These actions stalled corporate growth and sales declined again, eventually resulting in a damaging fiscal slump for Burger King and Pillsbury.[15][16] Poor operation and ineffectual leadership continued to bog down the company for many years.[16][17]
Pillsbury was eventually acquired by the British entertainment conglomerate Grand Metropolitan in 1989.[18][19] Initially, Grand Met attempted to bring the chain to profitability under newly minted CEO Barry Gibbons; the changes he initiated during his two-year tenure had mixed results, as successful new product introductions and tie-ins with The Walt Disney Company were offset by continuing image problems and ineffectual advertising programs.[20] Additionally, Gibbons sold off several of the company's assets in attempt to profit from their sale and laid off many of its staff members.[21][22][23]
After Gibbon's departure, a series of CEOs each tried to repair the company's brand by changing the menu, bringing in new ad agencies and many other changes.[24][25][26] The parental disregard of the Burger King brand continued with Grand Metropolitan's merger with Guinness in 1997 when the two organizations formed the holding company Diageo.[27] Eventually, the ongoing systematic institutional neglect of the brand through a string of owners damaged the company to the point where major franchises were driven out of business, and its total value was significantly decreased.[28] Diageo eventually decided to divest itself of the money-losing chain and put the company up for sale in 2000.[29][30]
The twenty-first century saw the company return to independence when it was purchased from Diageo by a group of investment firms led by TPG Capital for US$1.5 billion in 2002.[20][31] 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.[32][33] The firms' strategy for turning the chain around included a new advertising agency and new ad campaigns,[34][35][36] a revamped menu strategy,[37] a series of programs designed to revamp individual stores,[38] a new restaurant concept called the BK Whopper Bar,[39] and a new design format called 20/20.[39] These changes successfully re-energized the company, leading to a score of profitable quarters.[40] Yet, 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.[40][41] The falling value of Burger King eventually led to TPG and its partners divesting their interest in the chain in a US$3.26 billion sale to 3G Capital of Brazil.[42][43] Analysts from financial firms UBS and Stifel Nicolaus agreed that 3G would have to invest heavily in the company to help reverse its fortunes.[43][44] 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.[45][46] 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.[44] In the United States domestic market, the chain has fallen to third place in terms of same store sales behind Ohio-based Wendy's. The decline is the result of 11 consecutive quarters of same store sales decline.[47]
In August 2014, 3G announced that it planned to acquire the Canadian restaurant and coffee shop chain Tim Hortons and merge it with Burger King with backing from Warren Buffett's Berkshire Hathaway. The two chains will retain separate operations post-merger, with Burger King remaining in its Miami headquarters.[48] A Tim Hortons representative stated that the proposed merger would allow Tim Hortons to leverage Burger King's resources for international growth. The combined company will be the third-largest international chain of fast food restaurants.[49][50] The deal lead to a controversy over the practice of tax inversions, in which a company decreases the amount of taxes it pays by moving its headquarters to a tax haven, a country with lower rates but maintains the majority of their operations in their previous location. As a high-profile instance of tax inversion, news of the merger was criticized by U.S. politicians, who felt that the move would result in a loss of tax revenue to foreign interests, and could result in further government pressure against inversions.[50][51][52][53]
In 2019 Burger King reported that it planned to close up to 250 low-volume locations per year, with closures coming into effect in 2020.[54]
In February 2021, Burger King began testing a customer loyalty rewards program called "Royal Perks" in Los Angeles, Miami, New York City, New Jersey and Long Island.[55]
Structure and operations
Burger King Holdings is the parent company of Burger King, also known as Burger King Corporation and abbreviated BKC, and is a Delaware corporation formed on July 23, 2002.[1]: A subsidiary, it derives its income from several sources, including property rental and sales through company owned restaurants;[1]: however, a substantial portion of its revenue is dependent on franchise fees.[1]: During the transitional period after the acquisition of the company by 3G Capital, Burger King's board of directors was co-chaired by John W. Chidsey, formerly CEO and chairman of the company, and Alex Behring, managing partner of 3G Capital.[56] By April 2011, the new ownership completed the restructuring of Burger King's corporate management and Chidsey tendered his resignation, leaving Behring as CEO and chair.[57]
The company operates approximately 40 subsidiaries globally that oversee franchise operations, acquisitions and financial obligations such as pensions.[1]:Exhibit 21.1 One example of a subsidiary is Burger King Brands, Inc. which is responsible for the management of Burger King's intellectual properties. A wholly owned subsidiary established in 1990,[58] Burger King Brands owns and manages all trademarks, copyrights and domain names used by the restaurants in the United States and Canada. It is also responsible for providing marketing and related services to the parent company.[59]
In 2011, the majority of Burger King restaurants, approximately 90%, were privately held franchises.[60] In North America, Burger King Corporation is responsible for licensing operators and administering of stores. Internationally, the company often pairs with other parties to operate locations or it will outright sell the operational and administrative rights to a franchisee which is given the designation of master franchise for the territory. The master franchise will then be expected to sub-license new stores, provide training support, and ensure operational standards are maintained. In exchange for the oversight responsibilities, the master franchise will receive administrative and advertising support from Burger King Corporation to ensure a common marketing scheme.[61][62] The 3G Capital ownership group announced in April 2011 that it would begin divesting itself of many corporate owned locations with the intent to increase the number of privately held restaurants to 95%.[60] As of 2016, the percentage of privately owned Burger King establishments grew to 99.5%.[6]
As the franchisor for the brand, Burger King Holdings has several obligations and responsibilities; the company designs and deploys corporate training systems while overseeing brand standards such as building design and appearance.[38][63][64] The company also develops new products and deploys them after presenting them to its franchises for approval per a 2010 agreement between itself and the franchise ownership groups.[60] Burger King has limited approval over franchise operations such as minimum hours of operation and promotional pricing.[65][66] Additionally, Burger King designates approved vendors and distributors while ensuring safety standards at the productions facilities of its vendors.[1]:
Burger King is headquartered in a nine-story office tower by the Miami International Airport in unincorporated Miami-Dade County, Florida.[67] Elaine Walker of the Miami Herald stated that the headquarters has a "Burger King" sign that drivers on State Road 836 "can't miss". In addition, the chain planned to build a neon sign on the roof to advertise the brand to passengers landing at the airport. On Monday July 8, 2002, 130 employees began working at the Burger King headquarters with the remainder moving in phases in August 2002. Prior to the moving to its current headquarters in 2002, Burger King had considered moving away from the Miami area to Texas; Miami-Dade County politicians and leaders lobbied against this, and Burger King stayed.[68] In August 2014, the future of the company's Miami headquarters was again in doubt as reports surfaced that Burger King was in talks about buying the Canadian restaurant chain Tim Hortons, with a view to relocating its headquarters to Canada where the corporate tax rate was lower.[69][70] The merger between Burger King and Tim Hortons created the fast food company now known as Restaurant Brands International Inc.[71]
The company's previous headquarters were in a southern Dade County campus located on Old Cutler Boulevard in the Cutler census-designated place.[72][73] The former Burger King headquarters as of 2007 houses rental offices for several companies
No comments: