Burger King on solid ground after slowing pace of product launches

Burger King has experienced improved comp sales and restaurant-level growth since shifting its product rollout strategy in 2013.

This morning, the company announced it turned in a 0.5 percent increase in global comp sales in 2013, and positive Q4 sales growth of 0.2 percent in North America and Canada, despite a strong prior year comparison (of 3. 7 percent).

On the company's earnings call, CEO Daniel Schwartz said the company is making "large strides in achieving its long term goals," and that its four pillar strategy is starting to pay off. Part of that strategy is the slower pace of product introductions after a busy 2012.

"We have committed to introducing fewer, more impactful products that are operationally simple, that drive sales and traffic, and that add minimal complexity to the kitchen," he said.

For example, Burger King introduced just two new products in Q4 and, in early July, added the spicy original chicken sandwich.

"The spicy chicken sandwich patty is cooked the same way as the original chicken patty. The sandwich is assembled the exact same way. This twist on a classic highlights our commitment to minimizing operational complexity while still addressing consumer need," said Alex Macedo, president of North America operations. "When it comes to innovation, this will be our formula — great products that address consumers' and franchisees' needs."

Also driving sales in Q4 was the brand's new Satisfries, introduced at the end of Q3. Macedo said they continue to drive traffic and are incremental to classic French fry purchases.

"They also differentiate the brand as a true innovator in the QSR industry," he said. Because of the sharper focus on simplifying back-of-the-house operations, Burger King experienced sequential growth quarter by quarter throughout 2013.

Global highlights

Additionally, the company opened 670 net new restaurants globally during 2013, which is nearly four times more than just a few years ago.

"We continue to believe there are ample opportunities to grow in existing markets and expand into new markets," Schwartz said. Examples of the brand's newer markets include France and India.

The company also completed its global refranchising initiative last year.

"This allows us to put the operations into the hands of world-class franchisees who we believe have the experience to take the brand to new heights," Schwartz said. "It allows us to go out and provide support for our franchisees in all aspects of the business, to focus on our four pillars, to improve operations and to learn quickly about the menu. And it gives us time to work on brand communication and marketing."

Reimaging

Burger King also continues to reimage its restaurants, which is resulting in 10 to 15 percent sales lifts for franchisees, according to Macedo.

"It is a great way of ensuring the Burger King brand stays current. When our guests drive down the street, they have many dining options. One of the main reasons they choose Burger King is because they see a new exterior with a prominent sign reflective of the great tasting food and quality service they'll receive inside," he said. "Having a fresh new image is one of the many ways we can differentiate ourselves."

Approximately 600 restaurants were remodeled in 2013, and about 30 percent of the system is now updated. This is compared to 11 percent two years ago. The company is on track to hit 40 percent by the end of 2015.

Operations

Executives also touted the company's Coaches Program, implemented over a year ago, which place trainers into each restaurant to focus on guest satisfaction elements, such as cleanliness, friendliness, accuracy and speed of service. Macedo said since the program's inception, guest satisfaction scores have steadily improved and the gap between the top and bottom performing restaurants has narrowed.

"There has been a15-percent uplift in the guest satisfaction scores of the bottom performing restaurants compared to 2012," he said. Overall, guest satisfaction scores were up by more than 2 percentage points across the system year over year.

"We still have a long way to go, but the initiatives have so far been successful," Schwartz said. "And they're ensuring consistency across our system."

Read more about operations management.

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