Burger King unveils $400 million plan to revive U.S. sales with investments in renovations and advertising

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  • Burger King will spend $400 million over the next two years advertising and renovating its restaurants as part of a strategy to revive lagging US sales.
  • The American menu of the network will also undergo changes.
  • The strategy has received support from US franchisees who will have to contribute to the strategy.

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On Friday, Burger King said it plans to spend $400 million over the next two years advertising and renovating its restaurants as part of a broader strategy to revive lagging US sales.

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Restaurant Brands International presented a plan to rebuild its US business in Las Vegas at its annual franchisee convention. The investment is expected to impact adjusted earnings per share in 2022 and 2023 by 10-12 cents per year. The company expects that the investment will begin to pay off by 2025.

Wall Street analysts polled by Refinitiv expect 2023 earnings per share to be $3.24.

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In the second quarter, Burger King reported solid sales growth in the US, lagging behind rivals McDonald’s and Wendy’s. The burger chain has been reporting low U.S. sales over the past year, raising concerns among Restaurant Brands CEO Jose Sila. During his tenure as CEO, Seal also spearheaded efforts to resurrect Canadian demand for Tim Hortons, a subsidiary of Burger King.

A year ago, Seale also named former Domino’s Pizza chief executive Tom Curtis as the new president of Burger King restaurants in the US and Canada. Early changes at Burger King included shrinking its menu to speed up travel times and cutting back on paper coupons to encourage customers to use its mobile app.

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Now Burger King is gearing up for even bolder changes. He plans to spend $200 million to renovate approximately 800 locations. Another $50 million will be used to upgrade about 3,000 restaurants with technology, kitchen equipment and building improvements. The company has over 7,000 Burger King restaurants in the United States.

According to Burger King, remodeled restaurants have historically seen first-year sales increase by an average of 12%, and over time they outperform older establishments. The company hopes that being more selective and strategic with its projects will lead to even more sales growth, although it may take longer to see results.

“Perhaps we will see updates start to hit the market in mid-2023 and beyond. It really should be a gradual development of the business over a couple of years,” Seal told CNBC.

Burger King will also increase its US advertising fund budget by 30% with a $120 million investment over the next two years. These investments will begin in the fourth quarter.

“We expect this to impact next quarter sales,” Seal said.

An additional $30 million will be spent through 2024 to improve the mobile app, more than the digital fee franchisees pay the company for the technology.

The Burger King menu will also undergo changes. The company said it has developed a multi-year plan to improve the menu, which includes developing new Whopper flavors, betting on the Royal Chicken Crispy sandwich and investing in additional employee training.

Influence of the franchisee

Franchisees, who operate 93% of the company’s restaurants in the United States, have supported this strategy, according to Burger King. Operators will contribute their own money along with the company for renovations and advertising.

Curtis and h.The team brought together a group of franchisees from different regions with experience to develop a strategy over the past three to six months.

“There were a lot of long nights and plane flights,” Curtis said.

In addition to the money they receive from Burger King, franchisees upgrading their restaurants are expected to receive comparable money.uhinvestments to finance projects.

The company is also changing its incentive structure to encourage operators to undertake larger renovations, which can be costly and typically require temporary site closures. In the past, Burger King operators who remodeled their restaurants received advertising rebates and royalties for up to seven years.

The new program will provide franchisees with cash upon project completion and allow them to choose how much rebate they will receive on the royalties they pay to the company.

However, if profitability targets are met, Burger King franchisees will have to pay higher ad fund fees.

Credit: www.cnbc.com /

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