Restaurant Brands International executive chairman Patrick Doyle is fully aware of McDonald's giant presence in the burger space.
He acknowledges the chain's success with reimaging restaurants. In fact, Doyle said the units "look terrific." He's cognizant of triumphs with MyMcDonald's Rewards—the brand's first loyalty program—which is now up to 50 million active members. He knows the company excels at speed of service.
However, Burger King has one thing McDonald's doesn't: "They do not sell the Whopper. That's the point of leverage," Doyle said Wednesday during a conversation with investors.
"There are a lot of things that have been going nicely at McDonald's, and they are a tough competitor—who does not have the Whopper. And that is ultimately how we compete effectively with them," the chairman said. "We've got great food. We need to do all the rest of those things as well as they do and then I like our odds. ... What we've got to do is, over time—and it's gonna take a little bit of time—we've got to get rid of our competitive disadvantages."
Doyle suggested the Whopper may be a bigger brand than Burger King itself. To its credit, the company had this realization before Doyle joined last fall, along with his $30 million investment. In February, Tom Curtis, president of Burger King U.S. and Canada, referred to the Whopper as a "multi-billion-dollar brand" and said the chain should "treat it as such." That means cutting discounting around this hero item and being more targeted in how it's promoted.
That discussion leads directly to Burger King's $400 million "Reclaim the Flame" turnaround plan, which includes $150 million for advertising and digital investments. The fast-food brand has already used a portion of these funds to place the Whopper in the spotlight. Burger King switched its tagline from "Have it Your Way" to "You Rule," and accompanied the evolution with commercials featuring a hip-hop twist to the "Have it Your Way" jingle from the 1970s.
Doyle recalled an old joke in the advertising industry that said, "careful, your strategy is showing." That's what Burger King is doing essentially. The song—which has gone viral for getting stuck in people's heads—starts by saying "Whopper" four times.
"If you look at advertising, the 'You Rule' advertising with Whopper front and center, our strategy is showing," Doyle explained. "You build from there. You build with the strength of this product, with the strength of the brands."
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The commercials played a role in Burger King's U.S. same-store sales rising 5 percent in Q4, on top of 1.8 percent growth in 2021. It's also a sequential improvement from Q3 when comps lifted 4 percent. Additionally, guest satisfaction increased more than 40 percent, marking the sixth consecutive quarter of growth, and franchisee profitability—although down from 2019—was up 40 percent in the fourth quarter year-over-year.
"The Whopper is the best burger in the business," Doyle said. "It's fabulous food when it is executed well. I am convinced, you get people to try it, you give them decent service and good value, and you're going to get them coming back."
It's progress, Doyle said, but 2022 as a whole was not where Burger King needed to be. To illustrate that point, and keeping with the comparison, McDonald's U.S. comps grew 19.7 percent in 2022 on a two-year basis while Burger King's same-store sales lifted 6.9 percent over two years.
Incoming CEO Josh Kobza said Burger King and McDonald's are "neck and neck" in a lot of international markets. In terms of comps, Burger King's international business saw sales rise 30.4 percent in Q4 on a two-year stack. At McDonald's, International Operated Markets (i.e. U.K., France, and Germany) rose 29.4 percent on a two-year basis, and International Developmental Licensed Markets (i.e. Japan, Brazil, and China) increased 30.7 percent over two years.
Doyle said Burger King's international cash-on-cash returns are "definitely better" than the U.S. on average.
"I've seen it," Doyle said. "The return on investment is good. Everybody has gone through a little bit of shock with the pandemic and inflation and all those things. So short term it may not be as magical as it was three years ago. But overall, the returns are very good."
On U.S. soil, Doyle feels "very good" about the Reclaim the Flame program, and what it will do for franchisees long term. Of that $400 million, $250 million is going toward technology, kitchen equipment, building enhancements, and remodels/relocations. That's split between two major programs—a $50 million Royal Reset Refresh for the equipment portion and a $200 Royal Reset Remodel for redesigning restaurants. The refresh has already begun, with new POS terminals, kitchen display screens, and indoor digital menu boards being deployed starting this month. Franchisees are buying into the remodels as well, with 25 percent opting for complete scrap and rebuilds.
Investments like the Whopper advertisement reel customers into stores, but Burger King also wants to ensure these guests return, Kobza said. That's why the huge push for operational improvements is key, he added. The chain even accelerated its timeline for the $50 million Royal Reset Refresh and will spend most of it in 2023.
Additionally, Burger King started the year with Royal Roundtables, which involved talking to 8,000-plus general managers located in more than 40 cities. At these tour stops, the company explained the game plan and what needs to happen.
"Every single restaurant had their own individual plan of what they're going to do to make sure they’re ready," Kobza said. "So I would say we've really rallied our operations team, franchisees, and general managers to make sure they were cleaning up the restaurants, refreshing all of their training, making sure that they're ready to receive more guests."
Doyle's promise to franchisees is that Burger King will help operators who are running units well and also those that aren't where they need to be but are trying.
In his experience, if a franchisee is overseeing a failing location, it's typically because they've taken a step back. It's rare because they can't do it.
"There's a reason why they're there," Doyle said. "They've had success in the past, either with this brand or different brands. I know they can do it. It’s setting them up to be able to do that. " ... If you've disengaged, if you're not trying as hard as you did, if you maybe don't believe in the future of the brand as much, then probably the best price you can get on your business is today because it's probably not going to improve."