Entering South African market with booming opportunities
Burger King Worldwide Inc (NYSE:BKW) has been re-imaging its restaurants since 2011. It has observed a 15% surge in sales of re-imaged restaurants, because of its improved ambiance. The company’s goal is re-imaging 40% of its restaurants by the end of 2015. In 2012, it remodeled 600 restaurants in the U.S. and Canada, which comprises 19% of the company’s restaurants. Additionally, the company is re-imaging approximately 520 restaurants this year. With the new look, Canada and the U.S sales are expected to increase by 10%-15%.
With a growing middle class and large fast food market in South Africa, worth $1.9 billion, the company opened its first restaurant in Cape Town in May 2013. Sales we so encouraging that the company plans to open 12 new restaurants by the end of 2014 in South Africa. Therefore, the company expects unit growth of 5% from 2013 to 2015.
Due to the above strategies, analysts expect Burger King Worldwide Inc (NYSE:BKW)’s EPS to grow from $0.33 in 2012 to $0.69 in 2013, followed by $0.84 in 2014.
International expansion for further revenue
Over the past two years, The Wendy’s Co (NASDAQ:WEN) has been investing in its image activation strategy to re-image its restaurants globally. Re-imaged restaurants witnessed 20% more revenue, as compared to previous revenue with their traditional outlook. It will continue to re-image its 200 restaurants in 2013, followed by 800 restaurants in 2014. For this, it will invest $500 million over the next three years, out of which it will invest $145 million in 2013.
The company’s strong ongoing cash flows will finance this ongoing program. Its new re-imaged restaurants should derive incremental sales. Its total revenue is expected to increase from $2.5 billion in 2012 to $2.58 billion in 2013, followed by $2.68 billion next year.
The company’s international restaurants consist of barely 7% of its total units. The Wendy’s Co (NASDAQ:WEN) is continuously looking to expand its footprint internationally. It opened 24 restaurants in 2012, and it plans to open more than 700 restaurants outside the U.S. by the end of 2016. In accordance with this plan, it will open 45 new restaurants internationally by the end of this year.
Shifting towards company-owned business, rather than franchisees
To enhance the customer experience, Brinker International, Inc. (NYSE:EAT) has re-imaged 375 company-owned restaurants in the last two years under the brand Chili’s Grill & Bar. Further, it plans to re-image the remaining 445 restaurants by the end of 2014. For this, it will remodel approximately 70 restaurants per quarter. Brinker International, Inc. (NYSE:EAT) will invest approximately $200 million in this remodeling process. By doing this, it is expecting to increase customer footfall in its restaurants, which could increase remodeled restaurants’ sales by 3%.
Over the past 20 years, Canadian customers developed preference towards Brinker International, Inc. (NYSE:EAT)’s Chili’s Grill & Bar. These restaurants are franchised restaurants. Now, the company is moving from franchisees to company-owned restaurants. In June 2013, it acquired 11 franchised restaurants in Alberta, Canada, from its franchising partner Speedy Creek. With Speedy Creek’s proven positive results, Brinker International, Inc. (NYSE:EAT) will continue to operate the restaurants in a similar fashion. These franchised restaurants generate approximately $35 million of revenue annually. Instead of receiving only royalty fees, this whole amount will now contribute to the company’s revenue.
Brinker International, Inc. (NYSE:EAT)’s 97% of the restaurants operate under the brand name Chili’s Grill & Bar. Adopting various strategies under this brand will enhance the total revenue of the company to a large extent. Its total revenue is expected to increase from $2.8 billion in 2012 to $2.9 billion in 2014.
Conclusion
Restaurant remodeling leads to enhanced customer experience, which in turn increases the company’s revenue. All the above companies are adopting image activation strategies for increasing their revenue. Each company will look different in the coming years, which should enhance long-term growth. In addition, each company is expanding to enlarge its footprint. Looking at their strategies, I recommend a buy for all three stocks.
The article Will Restaurant “Re-imaging” Increase Revenue? originally appeared on Fool.com and is written by Shweta Dubey.
Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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