|Industry||Fast food chain|
|Headquarter||Miami, Florida, U.S.A|
|Revenue||USD 1.78 billion (2019)|
|Competitors||McDonald, Wendy’s, KFC|
Burger King is the second-largest fast-food brand in the world, operates more than 17,800 locations in more than 100 countries in the world. Burger King follows a franchise model where independent franchisees own and operate each restaurant, many of them are family-owned operations that have been in the business for a long time. In 2014, Burger King merged with the Canadian café chain Tim Hortons to form Restaurant Brand International (RBI). In 2017, RBI acquired Popeye Louisiana Kitchen for USD1.8 billion. Today we are going over a SWOT analysis of the company.
Burger King Strengths 2020:
- Strong brand recognition through a large network of franchise restaurants.
Burger King’s operation can be dated back to 1954 when the first restaurant was opened in Jacksonville, Florida. Since then, the brand has expanded to more than 17,800 locations in about 100 countries. Burger King’s logo is one of the most iconic symbols in the fast-food industry, perhaps only second to the golden arch of McDonald’s. Burger King has the Whopper burger, the BK’s equivalent of Big Mac, that many customers swear loyal to.
- Successful franchising is the bare bone of Burger King’s operation.
Given that about 99% of Burger King’s locations are franchising instead of company-operated ones, the company would have fewer concerns about the day-to-day operation of each location. Instead, revenue can be smoothed out by collecting monthly rent and royalty fees based on the percentage of sales. In addition, branching out internationally using franchising would soften the culture shock in operating in a new country and render the adaptation to local tastes easier.
- Solid financial performance.
Since 2016, one year after the merger with Tim Horton to form RBI, Burger King’s annual revenue has grown, on average, 5% year-over-year. The company is currently outperforming its two biggest rivals, McDonald’s and Wendy’s in terms of revenue growth.
- Food quality is consistent.
Burger King works with local and global suppliers to ensure a consistent, quality product. Its international network of franchise operators is controlled to ensure that a Whooper purchased in Pittsburgh tasted the same as the one bought in Tokyo. This is a big plus to travelers in a foreign country when they are not adventurous enough to try local food.
Burger King Weaknesses 2020:
- Inability to compete with Wendy’s in breakfast items sales.
Wendy’s breakfast sales quickly jumped to 8% in the chain’s 2Q sales despite it was only launched shortly before the pandemic which suppressed the number of morning commutes. Wendy’s strong consumer-motivation scores could be an indicator that the chain will continue to be the major player during the morning hours, harming breakfast sales from Burger King, which made up 15% of total sales before the pandemic.
- Reliance on franchisees
It will likely cause margins to shrink as franchisors are forced to support franchisees that entered the current pandemic financially strapped due to remodels and tech upgrades. Due to the 2020 pandemic, many chains including Burger King, allow franchisees to defer the 2Q2020 rent and royalty payment. However many will have a problem paying them, causing bad debt expenses to rise.
- Unstable ownership causes a lack of long-term strategies.
Burger King, since 1954, has changed hands from at least six owners for different reasons, was twice listed on and taken off the stock market, and has had more than 20 CEOs. Such an uncertain corporate structure would inhibit any attempt to form a long-term plan for the company.
Burger King Opportunities 2020:
- Expand internationally using strong master-franchise relationships.
The company’s global expansion will continue in 2021 after taking a pause in 2020. Its appearance outside of the U.S is more than double from 4,700 to 11,500 units during the 2010-2019 period. Strong development is expected in the keys markets of China, Brazil, and Europe. Burger King fuels this expansion by pairing local restaurants with financing partners to create a master-franchise joint venture.
- Introduce healthier items to the menu to attract new customer bases and change the image of the company of being an “unhealthy” food chain.
At the moment, Burger King has two salads that could be considered as “healthy food”. Healthy items should be expanded beyond salad so that health-conscious customers can buy a whole meal at Burger King and somewhat changing the current image of the company.
- Apply technologies in enhancing customer experience in-store.
McDonald’s offers self-serving kiosks in many retail locations where customers can customize and pay for their orders without talking to an employee. Burger King could employ a similar technology to speed up the ordering progress and use the data collected from the orders to learn about customers’ preferences.
Burger King Threats 2020:
- New regulations from governments around the world put restrictions on fast food to curb out obesity.
The U.S government requires restaurants, including fast-food chains, to list their menu items along with calories figure. The calorie count can discourage many customers from buying when they see how many calories they are about to consume. Regulations on fat and sugar content will cost Burger King to reformulate its food and request them with suppliers.
- The company’s use of boxes, wrapper, cup, and straw is not sustainable for the environment, and generate tons of waste every year.
Burger King should replace their current package’s material with environmental-friendly ones to avoid posing a negative image to customers.
- Same-store sales will likely decline
As Wendy’s and McDonald’s gain market share on breakfast and celebrity ties-in. Also, fewer morning commutes could result in falling morning sales for Burger King.
Burger King SWOT Analysis Conclusion:
Operating in a mature, competitive fast-food industry, Burger King is doing okay competing for sales and market shares with other big brands, including the giant McDonald’s. The company has plenty of growth opportunities internationally, especially in emerging markets, assisted by alliances with local ventures. However, new trends towards healthy eating, vegan diet, and sustainability might threaten the sales if Burger King does not respond with creative solutions.
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Halen, M. (2020). Restaurant Brands Research. Bloomberg Intelligence.
Restaurant Brands. (2019). Annual Report .