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Burger King won't abandon value as it ramps up premium rollouts
August 25, 2009
Burger King anticipates its new batch broiler, which is expected to be in all U.S. stores by January 2010, to be "a game changer in the fast food hamburger restaurant sector," said Burger King Corp. chairman and CEO John W. Chidsey in yesterday's earnings call to investors. With the broilers in place, the Steakhouse XT, XT for extra-thick burgers, will launch nationally in February.
"Although we must be nimble and responsive to the current consumer environment, it is imperative that we also stay focused on growing the brand over the longer term," he said. "And we believe products cooked out on the new batch broiler will provide us with a unique competitive advantage over our peers for years to come."
As Burger King works to improve U.S. same-store sales in an anticipated, continuing challenging environment, the company plans to focus on its value menu as well as its premium products. In its focus on value, the company has more than 40 U.S. markets offering the $1 Double Cheeseburger. Burger King franchisees last month rejected the company's attempt to put the $1 Double Cheeseburger nationwide for a limited time. Marketing in those areas includes playing up Burger King's Double Cheeseburger as larger, superior tasting, flame-broiled product vs. McDonald's.
Burger King president of global marketing, strategy and innovation Russ Klein said those markets with the $1 Double Cheeseburger have shown "a pretty steady check performance."
Chidsey said the mix of value and premium is part of the company's "flex strategy. You know we'll flex premium when we can, and we'll flex value when we need to."
Product tests, franchisee relationships
Chidsey told analysts that tests of the chain's bone-in ribs product are going well, and the company is pleased with guest satisfaction and the average check in test markets. The company also is testing "two for" deals in order to be competitive in its mid-tier strategy.
Chidsey also addressed analysts' inquiries regarding media reports of strained franchisee relationships, including a renewed lawsuit over late night hours, saying the company is increasing its communcation efforts with franchisees and working more closely with them to help them manage the financial stress of the times.
"Stakeholder management is important to us," he said. "It's important for us to bring everybody along, and it's particularly difficult to bring everybody along when there is the kind of anxiety and fear that there is right now with the economic environment."
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