Burger King Worldwide Inc (NYSE:BKW) was founded in 1954 and is a prominent name in the fast-food restaurant sector being the world’s second largest fast food hamburger restaurant chain (by number of restaurants).
The company has a global presence with operations spreading across the U.S, Canada, Europe, Middle East, Africa and Asia-Pacific.
Although presently, the company’s revenue streams majorly include Franchise Revenues (royalties on margin of sales by franchisees and fees recovered from them), Property Income (income from properties leased out to franchisees) and Retail Sales (at company’s restaurants); but going forward, the company plans to incorporate a 100% franchised business model.
A look at the numbers
The company did well in the last fiscal year, with a 3.2% year-over-year growth in total revenues. The adjusted operating income rose 11.5 % reaching an impressive $ 652.1 million. The company opened 485 new restaurants, making the total count reach an astounding 12,997. In addition, taking its planned strategy forward, the company successfully refranchised 871 restaurants achieving a 97 % franchised business model.
Moving forward, the first quarter of 2013 saw a slight dip in global revenues of the company to the tune of 1.4 % year-over-year owing to challenging economic scenario. Nevertheless, the company achieved a year-over-year growth in adjusted operating profits of 4.5% on an organic basis depicting the company’s operational efficiency.
Analyzing the strategy
Burger King Worldwide Inc (NYSE:BKW) believes that a 100% franchised business model would allow it to focus on brand development and other value adding initiatives such as menu innovation thereby enabling it to develop a competitive advantage over its peers.
The company works in the direction of strengthening four strategic dimensions which form the core drivers of its revenue being Menu, Marketing Communications, Operations and Image.
In a bid to broaden its customer base and accelerate revenues, the company has developed a well-rounded strategy to pitch its sales. Ranging from remodeling its menu to devising an aggressive marketing plan of action to launching an image makeover, the company is dedicated to steer ahead in the competitive plane. Furthermore, the company has taken significant steps to ensure ultimate satisfaction to consumers by introducing restaurant crew training and other measures aimed at achieving operational efficiency.
It is noteworthy that the company has successfully achieved a 10-15% increase in sales owing to re-imaging of its restaurants translating into better return for its franchisees and over-all contribution to the company’s revenues.
The expansion strategy
With the goal of achieving inorganic growth and secure access to newer markets, the company has been actively engaged in entering into strategic partnerships. The company plans to capture high growth developing markets in order to benefit from the emerging opportunities in this space owing to higher disposable incomes and the rise of the middle class.
The past fiscal year saw the company enter into joint venture agreements to penetrate China, Russia, South Africa, Central America and Mexico.
The above move evidences the company’s rapid expansion plans which makes way for robust growth in the future of the company owing to wider markets, larger customer base and diversification.
Industry outlook
Food inflation, economic downturn and rising health consciousness have negatively impacted the fast-food industry in the recent past. Nevertheless, the emergence of the new age working class who live life on the go caused a rise in demand for a quick bite options. Moreover, the emergence of developing economies as huge markets saved the industry from suffering major set-backs due to recession.
The concept of “food-on-the-go” forms the most unique selling point of this industry and hence the players in the fast-food segment have a lot to look forward to.
