Activities

Burger King, which was founded in Miami in the 1950s, is one of the world’s leading operators and franchisers of fast-food restaurants and is the second largest restaurant group in the UK. The restaurants exist in three formats: as sit-down and drive-through restaurants and as counter-service outlets in shopping centres and motorway service areas. Around 90% of Burger Kings around the world are owned by franchisees.

Timeline

• 1950s: David Edgerton opens Insta Burger King in Miami, Florida in March 1957. Three months later he links up with James McLamore to form the Burger King of Miami corporation, which becomes South Florida Restaurants in 1956. A year later, the signature flame-grilled Whopper joins the menu and the group becomes the first fast-food operation to introduce dining rooms.
• 1961: McLamore and Edgerton acquire national and international franchise rights to the company, which now has 45 restaurants in Florida and the South-east United States.
• 1963: The company changes its name to Burger King Corporation (BKC) and opens its first restaurants outside the USA in Puerto Rico.
• 1967: The Minneapolis-based Pillsbury Company pays $18m for Burger King, which now has 274 restaurants employing 8,000 staff.
• 1975: Burger King introduces its first drive-through restaurant and opens its first European outlet in Madrid.
• 1977: BKC opens the first UK Burger King in Coventry Street, London.
• 1988:  Grand Metropolitan plc buys the Pillsbury Company. The following year it acquires Wimpy Restaurants and converts nearly 100 Wimpy counter-service units into Burger Kings. By 1990, 200 Wimpy restaurants have been converted into Burger Kings.
• 1997: Grand Metropolitan merges with Guinness to form Diageo, which puts Burger King on the market in July 2000.
• 2002: In December, Diageo sells the Burger King Corporation for $1.5b (knocked down from an original $2.26b) to a venture capital consortium comprising Texas Pacific Group, Bain Capital and Goldman Sachs Private Equity Group. The deal brings the group into private ownership for the first time in 35 years.
• 2004: The UK company announces an expansion drive focused around a new, smaller restaurant format.
• May 2006: Burger King Corporation floats on the New York Stock Exchange, raising $425m from the placement of 25 million shares priced at $17 each. The share offer represents a 19% stake in the company.
  

Operating data

In the year ending 30 September, 2004, Burger King had system-wide sales of $11.1b, which was unchanged on the 2003 figure. Sales in the US totalled $7.7b (2003: $7.9b) while international sales reached $3.4b (2003: $ 3.2b)

Number of restaurants: 11,201 (in 50 US states and 61 countries worldwide)
US restaurants: 7,956 (617 company-owned, 6,979 franchised)
International restaurants: 3,605 (448 company-owned, 3,157 franchised)

Total number of UK restaurants:  654 (73 company-owned)
Number of drive-through restaurants: 139

Number of employees: more than 340,000 worldwide (including franchisees and their staff)
UK employees: around 2,730 (excluding franchisees)

Burger King serves approximately 1,011 customers per restaurant per day, or 11.1 million worldwide. Each year, it sells 2.1 billion hamburgers.

Drive-through sales represent 58.3% of Burger King’s worldwide business, while take-out accounts for 18.9%.

Strategy

The UK company plans to spend between £3m and £4m over the next three years to expand
its restaurants from 700 to 1,000 sites, with the focus on a new, smaller format of restaurant.

Source: Caterer & Hotelkeeper, May 2004

Chief executive

John Chidsey

Key directors

President EMEA region: Steve Desutter
Senior vice-president European franchise markets and the UK: Martin Brok
Finance director: Henning Sveder
Marketing director: Dawn Foster
Human resources director: Martin Kersey

Contact

Charter Place
Vine Street
Uxbridge
Middlesex
UB8 1BZ

Tel: 01895 206 000
Fax: 01895 206 161

E-mail:
Website: http://www.burgerking.co.uk

Commentary

Burger King entered the current century under a cloud of uncertainty. In July 2000, owner Diageo declared that it wanted to focus on its drinks business and hive off Burger King via a flotation, a management buy-out or a straight sale.

Two years later, in July 2002, it announced a $2.3b sale to a consortium of venture capitalists. But the deal had collapsed by November thanks to the difficult trading conditions facing Burger King and other fast-food chains. Burger King was performing badly, particularly in the States, and profits fell by 10% during its final year of ownership by Diageo.

The sale was salvaged by the end of the year, but at the knock-down price of $1.5b. Development slowed down and the group ended 2004 with around 11,200 restaurants worldwide, down from 11,445 in 2002.

Expansion is now back on the menu and the UK arm is pumping up to £4m in a drive to grow from 700 to 1,000 sites by 2007. But the group is now looking for smaller venues after trials revealed that restaurants one-third smaller than average were generating the same level of sales as their full-size precursors while saving 30% in property costs. The new format restaurants start in size from 500 sq ft for high street venues and 1,500 sq ft for drive-thrus, compared to the norm of 1,500 and 2,750 sq ft respectively.

The chain introduced a Veggie Burger and a Chicken Whopper in 2002, and has recently added Tendercrisp and Spicy Tendercrisp chicken sandwiches to the menu, although the UK has not adopted the Angus Burger developed in the States. The USA is currently exploring 30 potential new products, compared to just one before the takeover.

Perhaps the group’s biggest challenge lies with the debate on child obesity, health and nutrition, all factors which helped knock it out of Interbrand’s ranking of the world’s top 100 brands in 2004.