Burger King’s $400 million “Reclaim the Flame” strategy is seeing early wins, but positive traffic isn’t one of them—at least not yet.
Restaurant Brands International CEO Josh Kobza called it “slightly negative,” although the metric improved sequentially. The executive said he was confident that further improving operations would support growth in traffic, which he said was “one of the most significant near-term opportunities we see for the brand.”
“I think our goal for sure in the next couple of quarters is to turn that to flat and then positive over time,” Kobza said during RBI’s Q2 earnings call.
Here’s where the burger giant’s $400 million comeback plan—scheduled to be spent in 2023 and 2024—currently stands: During the second quarter, it used roughly $12 million of the $150 million earmarked for advertising and digital investments. The financial period featured a “Ways to Whooper” marketing campaign that reminded guests there are more than 220,000 ways to build the burger. That was paired with the Whopper Jr. Duo—the chain’s core discount initiative—and the Spider-Verse Whopper that targeted younger customers. These two promotions fueled higher average tickets and attracted youthful guests without impacting sales of the regular Whopper.
The marketing efforts fueled an 8.3 percent bump in U.S. same-store sales after seeing 8.7 percent growth in the first quarter.
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RBI chairman Patrick Doyle said Burger King is choosing to ramp up the advertising business over time and “lessen kind of the stunts.” The focus is on core equities, like the Whopper, and building that progressively over the next two years.
“We’re focused a lot on the quality of the advertisements, how they resonate with guests,” Doyle says. “And I think the good news is you’re seeing it work in the results. The same-store sales have moved in the right direction. … We’ve got a lot of the firepower left. We’ve got a year and a half or so left in that initial two-year period and we still have a lot of the dollars left to spend. We’re not in a place to give exact cadence on how we’ll spend that over the next couple of years, but it will be somewhat evenly.”
Additionally, Burger King deployed $9 million of the $50 million meant for restaurant refreshes, including better equipment like toasters and broilers. Most of these resources will roll out in the latter half of 2023. As part of this deal, participating franchisees are matching Burger King’s spend dollar-for-dollar. The third component, $200 million toward remodels—is also underway. More than 75 percent of U.S. restaurants have committed to full remodels or scrapes and rebuilds.
Kobza said revitalized locations will become “an increasingly important part” of building traffic later in 2023 and into 2024.
Overall, the brand spent $12 million in the quarter against the “Fuel the Flame” investment, including $10 million toward advertising, and $11 million for its “Royal Reset.” As of June 30, RBI had funded a total of $32 million for Fuel the Flame and $35 million on Royal Reset.
“In the longer term, I think our point of view is we need pretty much every Burger King all across the country to be modern, convenient, and competitive with all of the other concepts out there that have new and modern buildings,” Kobza said.
And if Burger King is to achieve this dream, investments must go further than just 2024, the CEO added. Doyle agreed, saying there’s more the chain will consider doing, like focusing on digital-centric remodels. There are a couple of ways that could happen: One recent focus has been on self-service kiosks. Burger King conducted a “pretty big test” in company-owned restaurants and it saw “much better” customer feedback than it did several years ago. Testing will expand over the remainder of 2023.
“Early on in the process of doing these re-images, we’re seeing very promising results,” Doyle said. “From doing those re-images, lifts that we’re getting in sales, it’s generating a good return for us and the franchisees, but it’s early. And so what we’ve got to see is more results and a good return for the franchisees and for us. And we become convinced that it’s definitely generating what we both need to see. Then we’re certainly going to consider more.”
Alongside these financial investments are Gold Standard Service Trainings, which have fueled positive results, like improved Whopper product satisfaction scores and speed of service. These components have been getting better for a number of quarters in a row, Kobza said.
“I think we’re going to layer on top of that some of the capital that’s going to go into the business,” the CEO said. “I don’t think you’ve really seen that yet, but you will over the next four to six quarters. You’ll start seeing the new technology in the restaurants, you’ll start seeing upgrades to the equipment in the back of house, and you’re going to start seeing more high-quality remodels. And I think all those things give us confidence in the direction of the business.”
Burger King ended Q2 with 6,964 restaurants, a 2.2 percent decline year-over-year as the chain continues to weed out weaker locations.
Meanwhile, international comps rose 11.6 percent thanks to positive traffic and higher average check. Australia joined France, Germany, and Spain as the fourth international market to surpass the $1 billion systemwide sales mark on a trailing 12-month basis.
The chain had 11,947 international locations by the end of Q2—net restaurant growth of 5.3 percent.
“If you go to some of our restaurants, whether it’s in Asia or Europe, increasingly in Latin America, they are much more digital, especially the in-restaurant transactions, which are almost entirely run through kiosks,” Kobza said. “So some of those learnings are absolutely impacting how we think about where the BK U.S. business can go, and really the opportunity for that business to move the brand perception and quality of operations.”
Elsewhere in the RBI portfolio, Popeyes U.S. saw same-store sales grow 4.2 percent. The chain is in the early stages of its “Easy to Love” profitability growth plan, which involves core menu extensions, operational improvements, and the development of easy-to-run kitchens. Top-line momentum was driven by the Blackened Chicken Sandwich, Ghost Pepper Wings, innovation across the beverage and dessert categories, and 22 percent growth in digital sales. The chain had 4,178 stores globally at the end of Q2—2,947 in the U.S. and 1,231 internationally.
Tim Hortons Canada experienced a 12.5 percent rise in comps, fueled by cold beverages and afternoon meals, improved speed of service, and a record year for Smile Cookie campaign. Digital mixed 33 percent. The coffee chain had 5,620 units worldwide, with 3,882 in Canada and 1,738 internationally.
Firehouse Subs’ U.S. same-store sales rose 2.6 percent in Q1. However, there was a 1 percent negative impact due to a major outage from its primary third-party tech provider, NCR. Because of this headwind, several sales channels were down in April and May. The fast casual had 1,174 U.S. and 73 international stores.
