Burger King's Multi-Year Turnaround is Underway

In early August, Restaurant Brands International CEO Jose Cil made it clear he wasn’t satisfied with Burger King’s recent performance.

A few weeks later, Tom Curtis, the burger chain’s COO, was promoted to president of U.S. and Canada and charged with leading a turnaround for one of the country’s most recognizable fast-food brands.

In the past six months, Curtis—who spent two decades as a franchisee for Domino’s—has traveled throughout the U.S. meeting with franchisees and cementing a multi-year plan to “reclaim the flame” at Burger King.

“I think that where we have the most opportunity is really redefining or defining who we are—having a relevant and distinct voice,” Curtis said during RBI’s Q4 and full-year earnings call. “… We're excited to work on that brand positioning and defining our brand essence going forward. I think we'll be focusing on our core, on the Whopper, flame grilling, ‘Having it Your Way.’ Those are really the things that made us great and the things that will make us great going forward.”

There’s plenty of room for improvement, given recent results. Domestic same-store sales increased 1.8 percent in Q4 year-over-year, but declined 1.1 percent on a two-year basis. For the full year, comps grew 4.7 percent, but dropped 0.9 percent on a two-year stack.

The chain came out of 2020 with strong franchisee profitability, but saw decreases in 2021 due to rising costs. There were positive signs late in the year, with Q4 profitability basically flat in comparison to Q3, both nominally and as a percentage of sales.

The first tenet of Burger King’s multi-year strategy is improved operations, which Curtis believes is a crucial unlock for driving comparable sales.

The industry veteran sees ample opportunity when comparing top- and lower-tier operators across multiple metrics, such as hours of operation, staffing, speed of service, and average complaint ratios. In terms of 2021 comp sales, the top quartile outperformed the bottom quartile by more than 400 basis points.

To close this gap, Burger King rolled out its first wave of menu simplification in Q4. This initial stage, occurring at the end of December, had no material impact on same-store sales. The chain is also streamlining product builds across the menu and simplifying menuboards to make production and ordering easier for employees and customers.

“These measures and the renewed focus on operations are welcomed by franchisees and starting to drive progress in several key operational metrics, including order accuracy and overall satisfaction,” Curtis said.

Additionally, the Burger King president visualizes room for more digital innovation, such as fewer clicks to complete an order and implementation of a consistent pickup experience.

This effort involves the continued rollout of outdoor digital menu boards at the drive-thru, a channel that mixes more than 70 percent. The brand is on pace to equip 100 percent of U.S. and Canada restaurants with these digital menuboards by mid-2022. As Burger King expands its Royal Perks rewards program—launched in 2021—the plan is to integrate loyalty into the digital drive-thru experience.

As for the menu, Curtis said Burger King is leaning into its “iconic brand equity and assets,” like the Whopper. This means new extensions and innovations around the burger, some of which have already proven successful in international markets.

“The Whopper is a multi-billion-dollar brand, and we need to treat it as such,” Curtis said. “… While we always strive to provide excellent value for money on a full-menu basis, going forward, we will be purposeful and targeted when we choose to promote this iconic asset.”

Burger King

To support franchisees, Burger King increased its U.S. and Canada corporate field and training positions by more than 50 percent since the start of 2021.

With chicken, Burger King will optimize its platform to “ensure unique offerings that we can execute on consistently.” Curtis said this includes thoughtful menu architecture that features the premium chicken sandwich and extensions, celebrates the original chicken sandwich, and offers a “fun, new approach” to chicken fries.

The executive also noted the importance of creating “a powerful ‘Have it Your Way’ value menu and addressing its rightful place in our overall menu architecture.”

For branding and advertising, the fast-food giant is working on positioning and how to build relevancy with all audiences. To this end, Burger King put its creative and media accounts into review. Curtis said branding is also reflected in physical infrastructure; 30 percent of the system has the latest “BK of Tomorrow” image and technology elements. The restaurant company is averaging about 500 remodels per year.

To support franchisees, Burger King increased its U.S. and Canada corporate field and training positions by more than 50 percent since the start of 2021. Also, the chain is developing its employee value proposition and will start providing franchisees with market insights on competitive wages and benefits to help attract and retain workers.

In addition, Burger King will pilot new training methods, like “in the moment” QR codes that help employees complete everyday tasks more efficiently. To alleviate profitability struggles, the brand lifted price caps on some items and removed the Whopper from its core discounts. In the future, the chain will continue to look for opportunity with incremental discounting. Top operators are sharing best practices for profitability, as well.

To carry out these initiatives, Burger King built new teams to better leverage guest insights and operational, performance, and digital analytics.

“We are implementing better testing protocols to ensure our advertising and our initiatives are well-chosen and more impactful,” Curtis said. “And given the increased rigor of our new processes, it’s fair to expect more of an impact from our initiatives in the back half of 2022.”

Burger King’s international business, which comprised nearly 60 percent of the company’s global systemwide sales in Q4, is faring much better. Same-store sales outside the U.S. lifted 19.4 percent in the fourth quarter, or a 7.5 percent increase across two years. In 2021 overall, comps rose 13.6 percent, or a 3.5 percent lift on a two-year stack.

The performance was driven by Spain and Brazil returning to pre-pandemic levels, Canada up in the high-single digits versus 2019, and Australia, South Korea, and the U.K. generating double-digit growth.

Burger King finished 2021 with 19,247 stores worldwide—net growth of 622 restaurants. That includes 7,105 in the U.S. (net increase of 24) and 12,142 internationally (net increase of 598). Global systemwide sales increased to $23.45 billion, up from $20 million in 2020.