The quick-service environment has changed quite a bit since RBI chairman Patrick Doyle set new standards for franchisee profitability last year. The space has been filled with discounts and competitive offers as operators look to attract low-income consumers.

Will this change how Doyle and the RBI leadership team think about the trajectory of franchise cash flow targets?

“No,” Doyle quickly replied during the company’s Q2 earnings call.

Elaborating further, the chairman said RBI is “feeling good about it” and that franchisee profitability is “absolutely top of mind.”

“We want to continue making improvements there, but nope, doesn’t change a thing,” Doyle added.

At Burger King, average profitability per restaurant increased nearly 50 percent in 2023, moving from $140,000 to more than $205,000. CEO Josh Kobza said Thursday that U.S. franchise profitability has been stable to improving, but wouldn’t provide much detail beyond that.

Doyle said in February 2023 that when restaurant-level profitability is strong and growing, franchisees have more money to invest in restaurants, digital menu boards, kitchen equipment, and new locations. Maintaining that position, he told investors during the Q2 call that consistently acting in franchisees’ best interest has enabled the company to adapt swiftly to changing conditions.

“Our alignment with our franchisees is becoming a real strength of our businesses,” Doyle said. “We debate things thoroughly which is how you get to the best answer. But the trust we’re building with our franchisees allows us to move quickly together when needed and that creates competitive advantage. … But clearly, we have opportunities to position ourselves to perform even better in all environments and take share no matter the category conditions. We need to continue to provide guests the best quality food and beverages in each of our categories and to innovate to meet our guest needs. We need to continue to improve operations across the board.”

Burger King U.S.’s comps were basically flat in the second quarter and system sales decreased 0.8 percent. Traffic and sales were softer than what Burger King wanted, but the business is still outperforming QSR sales and traffic, Kobza noted. In terms of costs, the chain didn’t see much impact from commodity inflation, however in the second half of 2024, the company expects to see some beef inflation, which should lead to low-single-digit commodity inflation. The labor side will likely see low-single-digit inflation as well.

Kobza said Burger King bested the industry due to the chain’s commitment to everyday value. The fast-food giant spent the quarter balancing low-priced options, like its $5 Your Way Meal, $5 Junior Whopper Duos, and $2.99 Royal Crispy Wraps, and premium menu innovation, such as the Whopper Melt and the new Fiery platform.

The $5 Your Way Meal—which provides a reasonable gross profit margin for operators—has performed so well that franchisees agreed to extend the offer into October. It over-indexes with lower and middle-income consumers and women and has an average check over $10, meaning customers who buy the meal are adding other items to their order.

Burger King released its national value offer not too long before McDonald’s rolled out its $5 Meal Deal. The latter is also being extended beyond its original timeline as pressures rise. Many other quick-service concepts have unveiled their own versions of value in the past few weeks. Doyle noted that increased advertising around $5 meal deals by competitors is beneficial. This trend, he believes, helps consumers recognize the overall value in the burger category, which is advantageous for the industry as a whole.

“We need to not only be focused ourselves on seeing if we can take share, but we also need the category to be healthy,” the chairman said. “And the fact that there’s a lot of messaging out there right now, around that $5 price point, I think is overall a positive for the category. So we feel pretty good about where we are, but we’re taking actions on the business as if this is going to continue for at least another quarter or two through the end of the year.”

Kobza also emphasized that value extends beyond price points; improvements in operations, digital, and reimaging are also crucial in attracting new and existing customers. To that end, Burger King is projected to complete nearly 400 remodels in 2024 and bring the system to 85 to 90 percent modern image by 2028. Approximately 150 remodels have been open for at least six months, and they’re seeing sales lifts in the mid-teens. Several of these stores showcase the modernized Sizzle imagery that Burger King introduced in 2023.

“It may take time to see the full impact of our Burger King investments flow through,” Kobza said. “I’m confident in the brand’s path forward, especially given the focus of our multiyear plan and the strong alignment our team has built with our franchisees. I think we’ll find that the shorter-term pressures being felt by the QSR industry are masking some pretty incredible changes at Burger King that will deliver long-term rewards.”

Burger King finished Q2 with 6,764 restaurants nationwide, down from 6,900 in the year-ago period. It also had 12,313 international stores, up from 11,677 a year ago.