Burger King was an early trailblazer in the fast-food delivery movement. But its initial foray turned out to be a premature one. The chain tested BK Delivers in late 2011. It grew into large cities, including San Francisco, Washington, D.C., Los Angeles, Chicago, Oakland and San Jose, California, Miami, Brooklyn, New York, Las Vegas, and Houston. Guests could order from menus online or call a toll-free number. Burger King also unrolled proprietary thermal packaging technology to ensure food arrived hot and to separate cold from warm items.
Yet, in this case, Burger King appeared too far ahead of the curve. The technology (think mobile apps and third-party vendors) simply couldn’t support the service, and customers weren’t clamoring for it the way they are today. Back in December, Restaurant Brands International chief executive officer Daniel Schwartz said the company was “working on it." The burger chain had some ground to make up compared to competitors. Then in January, RBI appointed chief financial officer Josh Kobza to chief technology and development officer—a role that reflected Burger King’s renewed commitment to technology.
During Tuesday’s earnings call, Schwartz provided an update: In this past quarter, Burger King began testing delivery in the U.S. across “several hundred restaurants and numerous markets.”
“We’re encouraged by the results so far," he said. "Though it is still early, delivery has been successful for us in many of our international markets, including places like China and Spain, and we intend to further expand our test in the U.S. over the coming months.”
Additionally, RBI started testing delivery at Popeyes in the U.S. in “several hundred restaurants in various markets across the country,” as well.
“Our results thus far have shown that consumers have particularly enjoyed using the delivery channel to purchase Popeyes products for the dinner and for the late-night day parts, which are day parts that typically involve larger check sizes. As with BK it is still early, but the results have been encouraging so far and we intend to meaningfully broaden our test in the coming months,” he said.
There is much whitespace for both brands to fill. McDonald’s offers the service via UberEats to thousands of U.S. restaurants (8,000 globally). Wendy’s recently said it’s partnering with DoorDash to go national. YUM! Brands took a $200 million stake in GrubHub with the intention of rapidly expanding KFC and Taco Bell’s ability to offer online ordering, CEO Greg Creed said in early February. And this was with nearly half of YUM!’s 45,000 restaurants already offering pickup and delivery via online ordering.
Burger King has 16,859 total restaurants. Popeyes has 2,926. At the end of 2016, there were more than 7,100 Burger Kings in the U.S.
Schwartz said he doesn’t expect Burger King’s technology push to require a meaningful amount of capital.
“We see opportunities to better leverage technology like we’re already doing around the world so in places like China and Spain, where delivery is a really big portion of our business,” he said. “We talk about testing delivery across the Burger King system in the U.S. which we’re already doing, we’re testing delivery in the Popeyes system, and we’re looking at a whole different variety of things, and we are already investing in the most important element, which is having the best people working on the project internally.”
Schwartz said Burger King and Popeyes are still in the monitoring phase. While the results have been good, the company wants to adjust accordingly before it unveils definitive plans around how it will reprioritize marketing.
“This is just one good example of us being able to kind of quickly move fast to use technology to enhance our guest experience and really just to provide more channels for the guest to access the brands,” he said.
The notion that Burger King is knocking on the door of this business is appealing for investors. The chain posted same-store sales growth of 3.8 percent in the first quarter, including 4.2 percent in the U.S. Popeyes’ comps lifted 3.2 percent.
RBI’s revenues totaled $1.1 billion in the quarter, up 7 percent. Net income came in at $151 million, or 60 cents per share, from $50.2 million (21 cents).