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Burger King: Remodeling Plans Central to Brand's Turnaround Efforts

RJ Hottovy
Sep 16, 2022
Burger King: Remodeling Plans Central to Brand's Turnaround Efforts

Key Burger King/Restaurant Brands International Metrics

Last week, Burger King unveiled details of its "Reclaim the Flame'' plan to accelerate sales growth and improve franchisee profitability. The plan includes Burger King investing $400M over the next two years, comprising two key pillars: $150M in advertising and digital investments ($120M in advertising fund investments, and $30M in mobile app enhancements) and $250M earmarked for a "Royal Reset" including restaurant technology, kitchen equipment, building enhancements and high-quality remodels and relocations. (The investments are incremental to ongoing franchisee efforts to modernize stores). When coupled with Burger King’s brand re-positioning plan, menu enhancements, and operational enhancements, the goal is to attract more visits back to the brand over time.

  • This announcement isn’t terribly surprising given Burger King’s difficulties in keeping up with visitation trends across the QSR category. Below, we’ve presented YoY visitation trends for Burger King compared to other leading QSR brands. Burger King has underperformed its direct burger category peers, but the category as a whole.

  • $200M of the $250M earmarked for Burger King’s "Royal Reset" initiative will be allocated to approximately 800 restaurant remodels over the next two years (with individual store remodel investments ranging from $500K to $1.8M). Historically, management has offered franchisees advertising and royalty rate discounts as incentives to participate in remodeling efforts (which typically happen at QSR chains every 7 years or so). With this program, the company will provide "more substantial baseline incentives, access to additional contributions in exchange for a higher royalty rate election, and funding of these incentives in upfront cash at the time of remodel completion." In its release discussing the remodeling program, the company noted that remodeled stores typically see a year-one sales lift of approximately 12% and sustained comparable sales outperformance relative to non-remodeled locations of 2%. As these remodel efforts accelerate, we will provide updates on the visitation lifts.

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RJ Hottovy

Head of Analytical Research, Placer.ai

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for nearly 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank.

R.J. also brings a wealth of experience with early-stage investments as an investment committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he has advised over 50 foodservice and foodservice tech companies on more than $200 million in early-stage capital raises and M&A transactions.

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