If you’re losing, it’s simple to figure out what you need to do next, RBI chairman Patrick Doyle said.
That’s the situation Burger King found itself in heading into COVID and during the post-pandemic recovery. But a plan was underway before Doyle arrived in the fall of 2022. In September of that year, Burger King officially announced its $400 million Reclaim the Flame turnaround strategy involving remodels, equipment upgrades, digital enhancements, and an improved approach to advertising and marketing.
“[Burger King’s] obviously been the fixer-upper,” Doyle said at the dbAccess Global Consumer Conference. “That’s the one where the team had already started on it and frankly, the fact that they clearly recognized that the brand needed serious work—they had already announced Reclaim the Flame as I was looking at [RBI]. And my view was, yeah, you’re right. This is what needs to be done. There are no great performing restaurant stocks that are not part of an amazingly well-run restaurant brand, and Burger King was not where it needed to be. The assets were getting old, and we had franchisees that were not making enough money, some of whom were not in their operations the way they needed to.”
Nearly three years later, Burger King has outperformed the QSR burger category in five of the past six quarters.
Leading up to this point, Burger King spent $1 billion to purchase Carrols Restaurants Group—its largest franchisee—so that it could speed up Carrols’ remodeling process. The chain said it would spend $500 million in capital to redesign about 600 of these units that weren’t considered modern image and use the next several years to put them in the hands of capable franchisees. Burger King also tacked on an additional $300 million co-investment in remodels.
If you add in the original $400 million investment, that’s more than $2 billion worth of money being thrown into making Burger King better.
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The brand expects to finish 400 remodels in 2025, many of which will be in the new Sizzle image, which comes with an average sales lift in the mid-teens. This puts Burger King on track to be 85 percent modern image by the end of 2028. In addition to nicer-looking restaurants, the menu strategy appears to be working. The chain’s barbell approach—balancing $5 Duos and $7 Trios with the premium Steakhouse Bacon Whopper—has appealed to guests. Burger King is also going after families once again with a limited-time menu based on the upcoming film, “How to Train Your Dragon.” It’s a similar approach it took with the Addams Family menu in the fall.
To boost marketing even further, the burger giant brought on former Applebee’s CMO Joel Yashinsky.
“Burger King was losing three, four, five years ago,” Doyle said. “What needed to be done is we needed better-run restaurants and we needed better-looking restaurants. We’ve got the best food. That’s ultimately how we win, but growth for us is coming from running the restaurants better and the effect of the asset base—the restaurants looking better and better for our guests, and that’s what’s really driving it. There are things that are happening in digital and AI that I’m excited about. We’ve got a new CMO in now who we’re very excited about and so the marketing ought to kick in, and there are good things happening on that. But getting the fundamentals right is driving the relative outperformance right now and should drive relative outperformance for a number of years if we continue to improve it.”
One of Doyle’s biggest stamps on RBI is bringing more transparency around franchisee profitability—where the brands are currently at and where the company wants them to be in the future. Burger King’s goal is to reach $300,000 in average profitability per unit, but Doyle admitted the chain “still has a few years to go, I think, before it’s going to get there.” In 2024, Burger King’s average profitability per restaurant in the U.S. was $205,000, which was essentially flat compared to 2023.
Still, it’s a jump from where the chain used to be; Doyle said the brand bottomed at $130,000 in average profitability.
“That doesn’t work,” Doyle said. “That’s just not a sustainable model, and those franchisees with those economics weren’t going to be able to remodel those restaurants. So at the end of the day, we had to step up to improve the returns for them as they did it. We needed to have the franchisees know we were side by side with them to get this turned around. The system had shrunk a bit, so our advertising spend was down, so we went in and said, look, we’ll go first … We’ll commit some advertising dollars, we’ll subsidize the remodels of the restaurants. And I’d repeat, all of that was in place before I got here and it was part of what got me excited. I looked at it and said, yeah that’s the right thing to do.”
The chain has some catching up to do relative to its sister concepts. Burger King and Popeyes’ goal is to reach a six-year payback, while Tim Hortons is a three-year payback and Firehouse Subs is about a four-year payback.
Part of Burger King’s push for better profitability is inserting more qualified operators. In the future, the chain will lean toward dividing up stores among several smaller franchisees as opposed to putting them in the hands of fewer larger restaurateurs. That’s not to say Burger King would immediately turn down a large franchisee—at the end of the day, it just wants well-run locations.
Doyle believes there’s a franchisee pipeline to pull from, whether that’s an existing operator or someone from within Carrols, possibly a regional director or district manager who is ready for ownership.
“We’ve been working through that, looking through all of the franchisees, grading them on performance, A B, C, D, and F and making sure that they’re engaged, that they’re operating in the right way, that they’re committed to getting the remodels done,” Doyle said. “If they’re not, we have a tough talk with them and say, look, we’re going to give you a chance to improve your performance. If it’s not improving, then we have to have a different conversation.”
The response from franchisees, particularly those that have been performing well, has been positive, according to Doyle. Some are more vocal than others, but the main response is the same—keep doing it.
“I’m running my restaurants, right? The restaurant down the road is not being properly run. It damages my brand and my business, and thank you for finally dealing with that one way or the other, either by working with them to improve or by finding a new owner for that restaurant,” Doyle says. “And so the franchisee sentiment is really, really positive and aligned at this point.”
