Article

Burger King revamps marketing plans

Quick-service chain burger giant wants to broaden its consumer focus beyond the 18-to-35-year-old male.

April 7, 2011 by Alicia Kelso — Editor, QSRWeb.com

Burger King Corp. held a conference call Thursday to discuss sales figures for the last six months of 2010, as well as its plans moving forward. Full first quarter results will be released in May.

The call was conducted by Daniel Schwartz, the company's chief financial officer, who said global same-store sales were down 2.8 percent. Negative trends were particularly evident in North American units.

Schwartz also discussed Burger King's restructuring initiatives and objectives, put in place shortly after the company's ownership transition in the fall to 3G Capital.

"We are focused on global restructuring and other cost reductions, turning around same-store sales and refining growth plans. Our global restructuring plan resulted in workforce reduction with a goal of driving efficiencies and creating fiscal resources that will be reinvested into the business," Schwartz said.

In total, Burger King opened 45 net new restaurants during the period and now stands at a global count of 12,251 units. This is 173 more than on Dec. 31, 2009. Most of this growth came from outside of North America, particularly in Turkey and Brazil.

Burger King will accelerate the pace of its net global growth and would like to franchise up to 50 percent of its restaurants in the next few years.

From a sales growth perspective, systemwide comparables were down 3.7 percent, driven mostly by negative comp sales in the U.S. and Canada as a result of decreased traffic.

"Although traffic was lower, the average check increased from the prior year," Schwartz said. "Comps from our nine new breakfast products were popular. Sales grew at the launch (during Q410) and continued to grow into the first quarter. We're happy with the initial (breakfast) launch."

Negative sales in the U.K. and Germany dropped European results to -1.8 percent, however sales in The Netherlands, Australia and China helped offset this a bit with strong performances. Latin America was also strong, up 5.6 percent with Brazil, Puerto Rico and Argentina performing especially well.

3G Capital put a zero-based budgeting program into place that will ideally result in a substantial reduction in expenses, he added. Some benefits from this program were already visible during the first quarter.

Marketing and image shift

Burger King is in the process of shifting its focus to a sales-driven, marketing culture. In doing so, the company is performing an in-depth consumer analysis in the U.S. to improve marketing effectiveness, Schwartz said.

This includes turning the spotlight on core products, enhancing ingredients and leveraging its flame-broiling and guest customization components.

Schwartz said the recent launches of the BK Stuffed Steakhouse Burger, the BK Stacker Line and the Chicken Tenders are part of this added-value strategy.

Such a shift also broadens the chain's demographic focus.

"Historically, the company targeted the heavy user, males 18 to 35 years old. This was not representative of our overall average consumer, which is much more diverse," Schwartz said. "The idea is to more effectively target all the guests coming to our restaurants, not just one subset."

The marketing direction change comes shortly after Burger King parted ways with Crispin Porter + Bogusky, its AOR since 2004. Crispin is credited for creating some of Burger King's most unusual marketing schemes, including the Subservient Chicken, the award-winning Whopper Freakout and the Burger King king.

Perhaps the most surprising announcement from the call was the anticipated change in Burger King's 20/20 remodeling program, which just debuted last year.

Although the company believes its global 20/20 restaurant image program is the future of the brand, and has far resonated with guests, Burger King is currently testing remodeling options that are more cost-effective for free-standing restaurants in North America.

This new remodeling option will continue to maintain the contemporary elements of the 20/20 image. The 20/20 design features a modern, industrial look, with metal, exposed brick, hardwood floors, flat-screen televisions and rotating flame-shaped chandeliers. The remodel plan was initially met with some contention from franchisees, who considered its average $500,000 to $600,000 price tag to be too steep.

Schwartz said the company plans to announce an update on these tests within the next month or two.

"We have a new perspective on value that we believe will drive traffic," Schwartz said. "We are committed to building our brand for the long run."

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