News

Extreme makeover: Burger King's new owners may face costly reimaging

September 22, 2010

Brazilian investment company 3G Capital's $4 billion purchase of Burger King may be getting even more expensive.

According to Bloomberg, the burger chain, and its franchisees, may be stuck with a whopper of a renovation bill.

John Chidsey, former CEO (before the buyout) and current co-chairman of the board, told analysts that a majority of the 7,200 units in the United States needed remodeling. Eighty-five percent of restaurants still have to be modernized with the company's 20/20 design concept, predicted to cost at least $500,000 each.

When the dust clears on those renovations, the tab could total more than $3 billion.

The 20/20 design is a dramatic change from Burger King's dated layouts put into place in the late 1990s. The modernization includes warm colors, industrial components, lounge and bar seating and digital order screens.

But slow sales from an unpredictable economy have some franchisees balking at such an exorbitant makeover cost. 3G Capital may need to pitch in and help, according to the Bloomberg story.

Analysts have claimed the antiquated design of Burger King units has put the chain at a disadvantage against other chains, including McDonald's, which began its redesign effort in 2004 to more of a casual dining atmosphere.

From the story:

3G Capital may need to chip in funds through Burger King to spur remodeling, said Jordan Krolick, president of the Marietta, Georgia-based consulting firm Tound & Drowth LLC. “It’s the hidden cost in any restaurant acquisition, and should be planned for as an addition to the initial investment,” said Krolick.