Financing

Burger King, an international powerhouse, looks to translate some of that success back home

The Miami-based burger chain is thriving outside the U.S. as operators push growth. But it is pulling back domestically as it works on a comeback.
Burger King international
Burger King is a $1 billion brand in each of four markets, including Australia, where it is known as Hungry Jack's. | Photo: Shutterstock.

By most measures, Burger King in the U.S. is making improvements. The chain’s same-store sales rose 8.3%. Its promotions, including its Whopper Jr. Duo value offer and its Spiderverse Whopper, attracted younger customers and drove average check. Operator profitability improved.

And yet it was nothing compared with the chain’s international markets. System sales rose 18.4% at Burger King international, well over double the growth of its domestic counterpart despite more difficult comparisons. The company added $500 million in incremental sales internationally over the past year.

Nearly 60% of Burger King’s worldwide sales last quarter came from its international markets. And four markets—Australia, France, Germany and Spain—each generate $1 billion in system sales.

“If you go to Burger King restaurants outside the U.S., they look terrific,” Patrick Doyle, chairman of Burger King parent Restaurant Brands International, told investors on Tuesday. “The food offering, the menu looks great, operations are great. They are very digitally focused.”

“We’ve clearly got things figured out at Burger King outside the U.S.,” he added. “I think there’s a great opportunity to bring those learnings” back to the U.S.

Burger King is hardly the only brand thriving internationally and not doing quite so well domestically. KFC, for instance, is a completely different brand outside the U.S. and China is now its biggest overall market.

As this happens, some companies start looking for ways to translate some of the innovations they make outside the U.S. back to their home markets.

Burger King has been an international juggernaut for the past decade-plus. At the end of 2011, for instance, the chain operated 5,012 of its 12,512 restaurants in international markets. Burger King now operates 600 fewer restaurants domestically and more than 12,000 outside the U.S.

As such, those restaurants are newer and more digital. “If you go to some of our restaurants, whether it’s in Asia or Europe, increasingly in Latin America, they are much more digital, especially the in-restaurant transactions, which are almost entirely run through kiosks,” CEO Josh Kobza told investors. “Some of those learnings are absolutely impacting how we think about where the BK U.S. business can go, and really the opportunity for that business to move the brand perception and quality of operations.”

The freshness of the restaurants in international markets and their use of digital strategies improve the brand perception.

Figuring that out in the U.S. could be paramount. Much of Burger King’s 6,900 domestic restaurants remain older and in difficult markets. The company has shrunk its unit count by 2.2% over the past year, or 158 locations. Some large franchisees have filed for bankruptcy, closing restaurants in the process, including Toms King and Meridian Restaurants. A third did not file for bankruptcy but closed numerous locations in Michigan.

The company in many respects is OK with this because the closures are typically in markets where it’s been difficult to generate a profit, either because the markets were low-income or predominantly rural. “Our total net restaurant count declined 2.2% year-over-year as we carry out our commitment to enhance the overall health of the system,” Kobza said.

At the same time, the chain is helping fund remodels in a bid to improve the asset base. RBI is spending $200 million to help franchisees fund remodels and another $50 million on short-term elements such as technology. Three quarters of the projects are full remodels or scrape-and-rebuilds.

“At Burger King U.S., it’s all about operational execution and modernization,” Doyle said. “We already have our $400 million Reclaim the Flame investment being put to work. And I think long-term, there is more we will consider doing, especially around digital-centric remodels.”

One of the short-term strategies the company is considering adopting in the U.S. involves kiosks. More fast-food brands are looking into kiosks, believing that they’re finally winning over once-skeptical consumers, providing in-store digital transactions. Shake Shack, Habit Burger and Taco Bell, among others, have rapidly adopted kiosks.

Those devices are popular in international markets. And now Burger King hopes to adopt them here, testing them out in company locations. “We’re spending a bit more time on kiosks,” Kobza said. “That will be an interesting avenue to explore further.”

Said Doyle: “The Burger King business outside the U.S. is overall in great shape, and we certainly want to bring some of that back to the U.S.”

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