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Burger King turned in its fifth consecutive quarter of systemwide comparable sales growth, signifying that its turnaround strategy is gaining ground.
Burger King put the strategy into place when 3G Capital bought the brand in the fall of 2010. It includes a four-pillared approach focused on menu, marketing and communications, image and operations.
To achieve improvement in operations, Burger King has rolled out a new "operations performance index" (OPI) which ranks restaurants from a guest perspective and through internal metrics, including coach visits and speed of service. The OPI is weighted as such:
During the Q3 earnings call Monday, North American president Steve Wiborg outlined the company's new field structure, which includes 60 "Sales, Profit and Operations" coaches who are working with restaurant teams to improve performance and deliver a consistent experience across the system.
"We're investing further resources to strengthen our field team and increase touchpoints with system restaurants, and working to standardize restaurant crew training and improve new product rollout," he said.
Many of the coaches are still in training and will be in the field in Q4.
Speed of service during Q3, Wiborg said, slowed marginally because of new product rollouts. This is something the company expects will be improved upon in the coming months as crews accumulate more experience with new products.
"Our average speed is likely to remain slightly higher (than competitors) because of our made-to-order service model, but we still have work to do to reduce wait times," Wiborg said.
The company's menu initiatives have been broad, including a comprehensive launch in April, a summer barbecue-themed launch and numerous new chicken offerings to mark the beginning of fall. Wiborg said all of the chain's new items have been making meaningful contributions to company sales without cannibalizing existing items.
The summer lineup had a positive impact on average check, while new premium products created a trade-up effect to provide a balance with BK's value-based promotions.
"We're also pleased with our promotions, such as the $1 smoothies and 50-cent ice cream, that have been used in an increasingly deliberate manner to drive traffic and create ongoing awareness of our menu platforms" Wiborg said.
Burger King added Cinnabon to its breakfast lineup in early August and the move has also helped average checks. Wiborg said this has been a highly incremental product for the brand thus far.
Marketing/communications and image
A main objective with the menu expansion is to appeal to a broader consumer audience, including women, families with children and seniors.
"We've historically been focused on a very narrow customer base and we've seen progress in broadening our audience to bring a more diverse customer into our restaurants," Wiborg said. "Our data shows that our change in marketing has been successful and our mix of women and customers age 50 and older increased further in the third quarter after improvements were made in the second quarter."
The marketing messaging is now focused on taste. Wiborg said this is a key differentiator for the brand because of its flame-broiled platform. The company will also continue to capitalize on its strong social media presence.
"Our Facebook page reached nearly 6 million likes without any investment. We'll begin to explore promotional strategies that leverage that network of fans," he said.
On the reimaging front, Burger King has received 350 commitments toward the effort recently, and the company is on track to have more than 40 percent of its North American system in the modern image within three years.
Those restaurants already in the new image are experiencing sales lifts of 10 to 15 percent, Wiborg said.
Burger King's international system contributed mostly positive news during the quarter, including new master franchise and development agreements in Malaysia and Singapore.
In Europe, the Middle East and Africa, comp sales were up 1.8 percent, driven mostly by a double-digit increase in the company's Russian market.
Latin America and the Caribbean delivered comp sales growth of 2.7 percent, despite challenging prior year comparisons in each of the company's key markets. Burger King Worldwide has implemented new value initiatives in Brazil and Mexico in October to balance its menu options and complement premium offerings such as the Picanha burger in Brazil, and is seeing initial signs of success in driving incremental traffic.
Asia/Pacific's comparable sales declined by 2.2 percent, driven by weaker results in Australia and Korea as well as a particularly challenging prior year comparison in New Zealand, which hosted the rugby world cup in 2011.
As part of BKW's global refranchising strategy, the company refranchised 221 company-owned restaurants during the quarter, including 182 restaurants in the U.S. and 39 restaurants internationally.
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