Burger King’s ongoing comeback hit a snag this summer.
While the chain’s leaders remain optimistic, U.S. comps slid 0.4 percent and Q3 net restaurant count slid 1.6 percent, resulting in a 1.5 percent drop in systemwide sales. The softer-than-expected performance was impacted by a tough consumer environment over the summer. Kobza admitted Burger King’s Fiery platform was unsuccessful in competing with value messaging in the market and didn’t make as big of an impact as its Royal Crispy Chicken Wraps in Q3 2023.
The chain’s gap versus the industry took a step back in August after several quarters of outperforming peers. However, as Burger King moved into October, sales shifted thanks to the Addams Family Meal, including the purple Wednesday Whopper. This helped the brand return to comp outperformance relative to the QSR burger industry.
“I think when we get the marketing right, when we really focus on the Whopper, we tend to do really well,” CEO Josh Kobza said during RBI International’s Q3 earnings call. “And I think that helped us take some share here in the near term. But I also do see some positive signs on the overall consumer. I think if you look at a few of the things that help our guests out, things like inflation have been persistently trending down. Gas prices have come down a little bit recently, and interest rates have started to come down. And I think you can start to see that reflected a little bit in things like some of the consumer sentiment indices.”
Kobza emphasized that value is still playing a major role in driving traffic. He believes Burger King is strongest when it can combine an offer like the $5 Your Way Meal with relevant innovation and a big focus on the Whopper. In November, Burger King will begin offering three finalists of the Million Dollar Whopper competition—the Fried Pickle Ranch Whopper, the Maple Bourbon BBQ Whopper, and the Mexican Street Corn Whopper.
“I think that shapes a bit of our thinking as we look into Q4 and really into next year,” the CEO said. “We do need to have good value offerings. We think we have something right now that works really well for the business. We may tweak it slightly into 2025, but I think we’re pretty happy with it overall. But as much as that, we want to make sure that we have relevant innovation and big Whopper focus, really elevating our flagship Whopper. When we have both of those things I think is when we perform our best and you’ll see us try to balance those as we get into next year.”
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Burger King is roughly two years into its $400 million Reclaim the Flame turnaround plan. As of now, the brand plans to accelerate its pace of remodels and reach 85 percent to 90 percent modern image by the end of 2028. The chain projected that remodels would see a low-teen uplift in sales, and the figures have been “a little bit better,” according to Kobza. Some feature aspects of Burger King’s Sizzle prototype, which comes with modern aesthetic features and a digital-forward layout. “
“Pretty happy with what we’re seeing there so far,” Kobza said. “And I would tell you, even some of the recent ones we’ve seen, some of the new Sizzle restaurants are really amazing. I’d really encourage everybody to check them out. They’re beautiful, but also some of the sales results we’re seeing on those have been really fantastic. We’ve done a bunch here in Miami with our company restaurants with some tremendous results so far. So I am very excited to see more and more Sizzles out there in the market as we get through the end of this year and especially into next year. I think it’s a really transformative image that really elevates the brand and the market.”
About $120 million of the Reclaim the Flame strategy is earmarked toward advertising. This boost has helped the chain increase its share of voice, regain market share, and drive a positive trailing 12-month same-store traffic gap versus the industry “for the first time in a very long time,” Kobza said. Dollars have also been used to enhance the digital business. These channels mix nearly 20 percent, up from about 10 percent in Q3 2022.
Burger King wants its improved U.S. business to be shared by a much larger franchisee base.
In January, the fast-food giant announced the $1 billion purchase of Carrols Restaurant Group—its largest operator—with plans to re-franchise the 1,000-plus units to hundreds of franchisees. This move is to ensure operators in the system control a smaller, more focused footprint. The chain currently has 300 franchisees, but that is expected to move to roughly 400–500 in the next few years.
Burger King has completed some re-franchising deals already, and the expectation is that many more will involve new operators. Some field team members running company-operated restaurants are interested in becoming franchisees, and the chain is in talks with them to take over portfolios of two to 10 restaurants, Kobza said. The chain is also discussing franchising opportunities with former Carrols employees. These incoming operators could be a general manager, district manager, director of operations, or another position.
“I think the idea here is that there’s something very powerful if we can get closer ownership of those restaurants, whether that’s how you compensate the general managers or having smaller franchisees who have ownership of the business or in the restaurants in the communities every day,” Kobza said. “I think there will be a lot of different versions of the exact form of that. So there may be smaller and larger versions of how we accomplish that, but it’s very much front of mind to us that having more local ownership in the business at the restaurant level is really the key to outsized performance and taking market share. And I think that you’ll see that be a big piece of what we do over the next few years at Burger King in the U.S.”
RBI chairman Patrick Doyle said having local owner-operators in restaurants is a “powerful thing.” He noted if Burger King keeps making progress on franchisee profitability and boosting returns from building or buying restaurants, then access to capital “becomes easy.” In 2022, Burger King’s goal was to reach $175,000 in four-wall EBITDA by the end of 2024. The brand surpassed $205,000 in 2023 and expects the figure to be “flattish to slightly up” this year. Doyle considered this a “pretty great result considering the labor, commodity, and top-line sales pressures facing the industry this year.” The objective is to eclipse $230,000 by the end of 2026, with a longer-term commitment to get to $300,000.
Burger King finished Q3 with 6,752 stores in the U.S. and 12,390 internationally.
