Editor’s note: This is a follow-up to our interview with Restaurant Brands International Executive Chairman Patrick Doyle last week. You can check that story out here.
A typical Burger King restaurant last year generated $1.6 million in revenue and about $200,000 in profit, numbers that might not stick out on the surface, but for one thing: We know them.
Shortly after he took over as executive chairman of Restaurant Brands International, the company that owns Burger King, Patrick Doyle began reporting those profitability figures, as well as those from its other chains Tim Hortons, Popeyes Louisiana Kitchen and Firehouse Subs.
There are no requirements for franchisors to report per-store financials of any sort, let alone profitability. And most of them shy away from doing so. Fear of litigation is one reason. Or perhaps the numbers aren’t great. Or maybe they just don’t collect the data, which might be the most disturbing reason of all.
RBI reports the data, to effectively put the company’s money where its mouth is. A lot of industry executives say they are focused on profitability—just about every franchise CEO says so. But it’s difficult to take such profitability promises seriously when the data on said profitability isn’t available.
To franchisees of the brand, however, reporting that data matters. It means the talk more than just lip service.
“When Patrick told me that this was his focus, that it would be the focus of his management team, and he was going to publicly report it, I said, ‘Well, Patrick, you got balls,’” franchisee Dan Fitzpatrick said in an interview. “This business is tough. To make a commitment like that, publicly reporting on it, holding it up internally, externally, he’s got to be given a lot of credit for it.”
Cash flow, as we say all the time, is key for franchised brands. If profitability is substandard, then operators struggle to remodel locations or build new units. They’re more likely to push back against corporate ideas. And they certainly don’t like discounts and have a diminished ability to fund them. I will never get why Wall Street doesn’t just up and demand it of all of them.
“It’s oxygen,” Fitzpatrick said. “It’s mother’s milk. It’s however you want to frame it. But it’s endemic to everything we’re doing.”
Burger King, as much as any other major, publicly traded franchise, has had challenges with operator profitability. Fitzpatrick, a longtime Burger King franchisee and one of the brand’s most prominent operators, said most of the chain’s CEOs in his time with the brand did not focus on those profits.
Fitzpatrick, in fact, called out former CEO John Chidsey for that lack of profitability focus. Chidsey led Burger King during the Great Recession, when the company and its franchisees were at odds over issues such as the $1 Double Cheeseburger. That era also saw a number of major operators file for bankruptcy and close stores.
In 2010, 3G Capital took over and, at least in theory, was supposed to fix that problem. Sales did improve coming out of the recession. But 3G also aggressively refranchised corporate stores. A number of those franchisees amassed huge swaths of restaurants, often bought with excessive leverage and spread across a vast area.
That leverage and those large swaths of stores became a major burden more recently as the pandemic hit, and then the brand’s sales suffered coming out of the pandemic. Multiple, large-scale franchisees filed for bankruptcy in 2023. Others closed hundreds of stores. Some of the other big franchisees were in danger of landing in the same spot.
“That wasn’t really helpful for the brand,” said Fitzpatrick. He is a larger operator, but his company has operated for 40-plus years. But, it turns out, amassing massive numbers of restaurants in one fell swoop doesn’t always work.
The first set of profitability data that RBI reported for Burger King in the Doyle era largely explained that problem: A typical Burger King franchisee that year made $140,000 in profits. As one McDonald’s operator pointed out to me, it was small enough that one or two pieces of equipment largely wiped out that profitability. And that was the average.
Burger King’s biggest problem over the years has been a tired store base, coupled with weak operations. But the brand has had such serious profitability problems over the years that operators would often cut back on staffing and put off capital improvements or outright refused to remodel units. And it worsened the chain’s financial challenges.
Profitability improved to $200,000 per store in 2023 and then again in 2024. Flat profitability last year might be better than it seems on the surface, given industry challenges and a consumer focused on value offers.
Burger King has been shifting its entire franchising strategy dramatically over the years. The company is spending more than $2 billion to bolster the brand and remodel restaurants. And it is changing the bigger-is-better strategy deployed by previous regimes.
Burger King last year bought Carrols and is operating the restaurants, but it ultimately plans to refranchise the in several smaller deals once the stores have been remodeled.
And the company is focused more intently on remodels. Indeed, some of the more than $500 million in remodel assistance is directed at the best operators.
Operations is important. “If you’re going to achieve cash flow, part of it is running a good, sharp operation that’s disciplined and tightened to the point that you need to be able to make money,” Fitzpatrick said. “That goes hand-in-hand with operating at a higher level.”
All these major changes mean Burger King remains a work in progress. The $1.6 million average unit volume Burger King generated in 2024 was less than Wendy’s ($2 million) and less than half that of McDonald’s ($4 million). Fix that and a lot of those profitability problems go out the window.
And last year wasn’t exactly helpful, as the industry environment turned against fast-food brands.
Burger King did close locations last year, finishing with 62 fewer restaurants than it operated a year earlier. But, said Doyle, “Most of our troubled situations are behind us.”
Or, as Fitzpatrick said, the company is headed in the right direction. “We’re not where we want to be,” he said. “But we sure as hell aren’t where we were. And there’s more to come.”