Burger King has enjoyed stronger sales in its U.S. market in recent quarters as the company’s marketing has resonated and efforts to improve operations have taken hold.
But those efforts apparently ran into a buzzsaw known as the 2024 domestic fast-food market, where the bulk of restaurant chains are struggling to tread water as diners cut back on the frequency of visits to their local drive-thrus.
On Thursday, Toronto-based Restaurant Brands International (RBI), parent company to Burger King, said that the chain’s same-store sales declined 0.1% in the second quarter.
It wasn’t alone: Firehouse Subs reported the same same-store sales result. Popeyes’ same-store sales slowed to a 0.5% decline. Only Tim Hortons, in Canada, seemed to do fine, with same-store sales up 4.6%. Outside of RBI, of course, top-line results have been negative far more than they’ve been positive.
“We clearly saw softer sales than expected across our businesses in Q2,” Executive Chairman Patrick Doyle told analysts on Thursday. “And it’s not yet clear when we’ll see the category strengthen.”
The results prompted Burger King to extend its $5 Your Way bundled meal offer into October. The chain reintroduced that offer in June, just before McDonald’s introduced its own $5 bundled meal as the quick-service industry worked to get customers back in the door with more value-oriented marketing.
Josh Kobza, RBI’s CEO, said the company still outperformed the quick-service burger segment in terms of both sales and traffic, which he said was due to “our responsible approach to everyday value” and its focus on operational improvements.
Indeed, quick-service burger chains have seen perhaps the most dramatic shift in sales in recent quarters.
Average same-store sales among the four publicly traded quick-service burger chains have slowed from 5.2% in the third quarter of 2023 to a decline of 0.6% last quarter.
Those chains tend to be almost symbolic of the quick-service sector as a whole. Fewer customers today consider fast-food to be an “affordable” meal than they did before the pandemic, according to data from Restaurant Business sister company Technomic.
That’s tough timing for Burger King. The Miami-based chain struggled coming out of the pandemic, prompting a trio of major bankruptcies among its largest franchisees, along with hundreds of store closures.
RBI in turn overhauled management, focused on operations and invested $700 million in marketing and remodels. It also agreed to buy Carrols Restaurant Group in a deal valued at $1 billion, not including the cost of some 600 remodels of those stores.
The company had shown some results, including same-store sales that have outpaced McDonald’s in each of the past three quarters, including the most recent period.
Executives said there are still things they can do to generate sales. “We feel really good about the different value levers that we have in the U.S.,” Doyle said. “They’re levers that we’ve been pulling for a while.”
In addition, he said, the category’s value push could help with traffic in the long run, by focusing attention on the lower-priced offerings that are available. “We need the category to be healthy,” Doyle said. “And the fact that there is a lot of messaging right now around that $5 price point, I think is overall a positive for the category.”
It’s worth noting, however, that “the Canadian market is no easier,” Doyle said, and yet Tim Hortons’ same-store sales there rose 4.6%, easily besting the category. “Tims’ performance has been remarkable,” Kobza said. “Even in a somewhat challenging consumer environment, they’re outperforming the industry by a wide margin.”
Still, given the difficult environment, RBI expects system sales to be short of its long-term targets this year. The company has taken some steps to reduce costs and protect profitability. But expect the top line to be challenging for a while.
How long remains uncertain.
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