Burger King | Restaurant Brands International (US)

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Burger King is the world's #2 hamburger chain after McDonalds, but years of under-investment had left it struggling in its rival's shadow by the early 2000s. Many consumers argued that Burger King tasted better than McDonalds, but lacked the latter's polish, administrative strength and marketing muscle. A deal was finally agreed late in 2002 to free the chain from the corporate portfolio of of then-owner, the drinks giant Diageo. Independent again for the first time since the 1960s, the #2 finally had the chance to give Big M a run for its money. Performance improved slowly but steadily between 2002 and 2010, enhanced by offbeat and unusual marketing aimed at Burger King's core young male market in North America. In 2010, the business was acquired by investment fund 3G Capital, which vowed to ramp up the chain's previously uneven international presence. The group floated part of its equity again in 2012, and two years later agreed to acquire Canadian rival Tim Hortons for around $11bn. The enlarged group adopted the new corporate name of Restaurant Brands International. It plans to add a third string to its bow in 2017 with the purchase of US chain Popeye's.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 23rd Feb 2017: So where next for 3G to go shopping, with what is reported to be a $15bn war chest of deployable capital? The main problem with their cost-cutting strategy - already implemented with ruthless efficiency at each of its acquisitions - is that it boosts profitability but diminishes organic growth by removing the infrastructure for experimentation. Once those cost savings have been made, the only way for a 3G company to grow is by gobbling up new businesses. Only days after a botched attempt to acquire Unilever via The Kraft Heinz Company, 3G's Restaurant Brands International launched an acquisition of its own. New Orleans-based fried chicken chain Popeyes has agreed to join its collection for an offer price of $1.8bn. Founded in 1972, Popeyes has more than 2,500 restaurants in the US and other markets.

Adbrands Weekly Update 23rd Jun 2016: Cannes Lions Grand Prix Print & Publishing and Media: "McWhopper". The "McWhopper" campaign - in which Burger King proposed a joint burger with McD's to honour Peace Day last September - had been widely predicted to collect a cupboard-full of awards at Cannes. By the end of Wednesday it had collected two Grand Prix, for Print & Publishing and Media, as well as some metal awards. Perhaps not as well known as the campaign itself was the fact that it originated not in the US but in the New Zealand office of BK's local agency Y&R. They should probably be making room in the board room for more trophies this weekend, and also preparing for some sort of homecoming victory tour for what is already New Zealand's best-ever Cannes performance.

Adbrands Weekly Update 18th Feb 2016: Burger King threw down a new challenge to traditional rival McDonald's with the introduction in selected US outlets of flame-grilled hot dogs. "This is probably the most obvious product launch ever," said US president Alex Macedo. "I don't know why we didn't do it before. I think the difficulty is in trying to keep it simple and aligned with the essence of the brand." He said it's the most significant change to the fast feeder's menu since it began offering chicken in 1979. The news followed a strong set of results for the newly formed Restaurant Brands International, which owns BK and Canadian chain Tim Hortons. Both chains delivered comparable sales growth of over 5%. BK's systemwide sales topped $17.3bn, while Tim Hortons were just under $3.5bn US. However RBI's total revenues were dented by currencies, falling 3.5% proforma to $4.05bn. The prior year's $400m net loss turned into a $104m profit.

Adbrands Weekly Update 30th Sept 2015: Burger King aims to put pressure on McDonald's in France, currently one of its weakest territories, by acquiring the Golden Arches' biggest local competitor, Quick. Burger King quit France in the mid-1990s as a result of poor performance, but re-established a presence there two years ago in a partnership controlled by local foodservice operator Groupe Bertrand. However, Burger King France still has fewer than 50 outlets, compared to Quick's 495 and almost 1,300 for "McDo". Under the current plan, Bertrand will acquire Quick Group from its investment fund owners. All French outlets will rebrand as Burger King, though the 55 or so restaurants in Belgium and Luxemburg will retain the Quick name.

Adbrands Weekly Update 3rd Sept 2015: Family diner Denny's called Burger King's bluff after the latter's offer to McDonald's to team up for a hybrid "Peace Day" burger was declined. Denny's took to social media to volunteer itself as a willing partner. Nervous - just like McDonald's was - of handing a clear advantage to a smaller rival, and keen to regain the PR upper hand, Burger King mulled over the offer for a few days before opening up the partnership not just to Denny's but also a group of other lesser-known brands as well: Wayback Burgers, Krystal and Giraffas. Notably absent from BK's invitation were more muscular competitors like Wendy's, Sonic, Jack In The Box and Carl's Jr/Hardee's.


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Background

Free for all users | see full profile for current activities: In the early 1950s "Insta Burger King" was one of numerous clones of the original McDonalds' hamburger restaurant in San Bernadino, California. The first Insta Burger King restaurant was founded in 1953 in Jacksonville, Florida by partners Keith Cramer and Matthew Burns, who developed a custom-built "Insta Burger" broiler to cook their burgers. A year later, James McLamore and David Edgerton acquired South Florida rights to the concept, and opened their first restaurant in Miami. Like McDonalds, they aimed to supply reasonably priced quality food, served quickly, but they quickly added a further benefit for customers by enclosing what was originally outdoor patio seating to create an internal dining room, a first for the fast-food industry. (McDonalds was at the time exclusively a drive-in service). However, after repeated faults with the Insta Burger broiler, McLamore and Edgerton designed their own more efficient version. They dropped the "Insta" tag to become Burger King and in 1957, a year before the Big Mac was invented by McDonalds, introduced their signature meal, the Whopper sandwich. Supported by local television advertising, the Whopper proved a huge success and the business was approached by several prospective franchisees. By 1961 there were 45 Burger King restaurants throughout Florida and the Southeast. That year, McLamore and Edgerton bought out Cramer and Burns and became exclusive agents for the Burger King franchise, just as Ray Kroc had done with McDonalds. 

But as the chain continued to expand, it gradually slipped further into the shadow of McDonalds. Kroc paid close attention to detail with each of his McDonalds franchisees, but McLamore and Edgerton were less painstaking, and this led to inconsistencies in both quality and menu choice from one branch to another. By 1967, the chain had 274 restaurants across the US, but its reputation was patchy, with some outlets considerably better than others. By contrast McDonalds was now a public company, with every outlet identical in menu and quality, and was taking its first steps into the international market. McLamore and Edgerton realised they didn't have the experience or funds to go it alone. In 1967 they sold out to food group Pillsbury for $18m, a handsome sum at the time.

A year later, BBDO was appointed to launch Burger King's first national ad campaign, promising "The Bigger The Burger The Better The Burger". The company continued to expand, but at a noticeably slower rate than McDonalds, as Pillsbury struggled to bring its various Burger King franchisees in line. In 1975 Burger King opened its first truly international outlet, in Madrid, Spain, and further countries followed. That year the company also established its hamburger USP for the first time, offering customers the opportunity to "Have It Your Way", rather than accept the standard menu offered by McDonalds. ("Hold the pickles, hold the lettuce / Special orders won't upset us / All we ask is that you let us... / Serve it your way!" went BBDO's jingle). Also in 1975, founder James McLamore retired as chairman, although he continued to tour outlets as chairman emeritus until his death in 1996.

By the end of 1986, a year in which the company opened a record 546 new restaurants worldwide, Burger King operated 4,743 restaurants, including 402 in 25 countries around the globe. In 1988, Pillsbury was the target of a hostile takeover by British food and restaurant group Grand Metropolitan. The following year Grand Met also acquired the UK's languishing chain of Wimpy Restaurants, which until the arrival of McDonalds in 1974 had been the closest thing in the UK to American-style hamburger joints (and that wasn't very close at all really!). Almost 100 Wimpy outlets were rebranded as Burger King the same year, making the UK at a single stroke the brand's biggest non-US outpost. International expansion was stepped up dramatically at the end of the decade, and in 1992 the group agreed an unprecedented (at the time) five-year promotional partnership with the newly rejuvenated Walt Disney Company, which had just scored its first animated hit in years with The Little Mermaid. In fact the 1990s were to prove perhaps the most successful period in the company's history, as the Burger King brand swept around the globe. By 1997 the system had expanded to almost 9,500 restaurants. However the company was unable to resolve management problems as a string of CEOs came and went, and this led to continuing problems of consistency, as well as slowly worsening relations with the chain's franchisees. 

From 1997, the momentum began to fail. That year, the promotional deal with Disney came up for renewal and Burger King was outbid by McDonalds. The same year Grand Met agreed to merge with rival drinks giant Guinness to form Diageo. The deal gave a new direction to the merged company, with drinks as the main priority. Pillsbury's food products came second in the new hierarchy with Burger King's restaurants taking lowly third place. It was to become increasingly apparent that BK no longer made a comfortable fit within the enlarged portfolio. The year was marked by a massive $70m marketing campaign to launch Burger King's hotter, crispier, and tastier French fries, but from that point onwards investment began to dwindle. Between 1996 and 2001 customer visits to US Burger King outlets dropped by more than 20%, and more than 10 franchisees filed for bankruptcy protection. Several also went public about their dissatisfaction with Diageo's lack of understanding, underinvestment, and inadequate marketing. Meanwhile a legal row between Burger King management and African-American franchisee Urban City Foods led to calls from radical black community leaders in New York to boycott the "racist" chain's outlets.

Despite strong growth in the fast-food market as a whole, BK's overall market share declined steadily between 1998 and 2004. According to consulting firm Technomic, Burger King's share of the burger sector peaked in 1998 at 20.4%, but fell steadily over the next six years, slipping to 14.2% by 2004, level pegging with Wendy’s which had steadily increased its penetration over the same period. 

Finally in 2000 Diageo confirmed plans to spin out Burger King, announcing it would float a small stake in 2001 with the intention of selling the remainder in 2003. But that plan was abandoned after the chain suffered a further dip in sales. Instead the group recruited new chairman John Dasburg to lead a buyout. After soliciting bids for the business, a consortium headed by investment group Texas Pacific and Bain Capital (which also owns Domino's Pizza) won the prize in July 2002 with an offer of $2.26bn. However, following a further downturn in business over the next few months, the consortium asked to renegotiate the deal. These negotiations were further hampered by the declaration of Chapter 11 by one of BK's main franchise operators, AmeriKing. The deal was finally completed in December 2002 for a reduced price of $1.5bn.

Brad Blum, CEO of Burger King at the time of its buyout, set out to change impressions of that job as the hottest seat in town - in its 50-year history, Burger King had already notched up 19 different CEOs, including 8 in just the previous 15 years. But history has a habit of repeating itself, and Blum made way for a 20th incumbent, Greg Brenneman, when he resigned in July 2004, blaming "strategic differences" with the board. The company's president, Robert Nilsen, had already resigned abruptly a few months earlier after just over a year in the job. Brenneman too stepped down less than two years later in April 2006. See full profile for current activities


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