7/3/2012 6:02 PM ET|
Why Burger King is no Big Mac
Burger King admits in filings that its debt "may have an adverse effect" on its business. But it also says it has an advantage in that almost all of its stores are run by franchisees, who fund growth by paying for new stores and store upgrades.
This would make more sense if Burger King didn't have such a spotty record in getting along with its franchisees. "Burger King has had problems with franchisees over the years," says Hottovy. "There have been cases where they have not been on board with new products."
Burger King admits as much in filings. "Our franchisees are independent operators and we have limited influence over their restaurant operations," says the company.
In contrast, a strength of McDonald's is its generally good relations with franchisees, says Hottovy.
A good relationship with franchisees is crucial in a competitive playing field, where Burger King faces tough players on all fronts.
In one corner, there are the relative upstarts -- smaller chains like Five Guys, In-N-Out Burger and Smashburger, that are becoming quite popular.
And then there are the big, traditional players like McDonald's and Burger King. McDonald's has a huge advantage in its sheer size. McDonald's now has more than 33,500 restaurants in 119 countries worldwide, compared with just over 12,500 for Burger King, in 82 countries. This gives the Golden Arches bargaining leverage with suppliers to help ensure low prices and consistent quality.
Like many U.S. companies in relatively mature industries, Burger King is looking to expand in high-growth emerging markets such as Brazil, China, Russia and Turkey, as a path forward. Indeed in June alone, Burger King inked deals for a joint venture in Russia, China and Turkey. But there, too, Burger King faces McDonald's.
And back in the U.S. market, things definitely won't be easy for Burger King. "On the one end, there are a bunch of new guys growing fast and taking market share at a rapid clip. On other end you have the very dominant McDonald's," says Hottovy. "Burger King faces an uphill battle. I don't really look at them as a huge threat at this point."
In short, Burger King is going to need more than a bacon sundae to get out of this jam.
At the time of publication, Michael Brush did not or control shares of any stock or fund mentioned in this column.
Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.
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Soembody needs to tell Burger King Worldwide about demographics ... The corporate executives need to do two things:
1) Clean the damned stores
2) Try to market the product to a more upscale clientele.
I know this is not gourmet food but I gotta tell you ... if you do a survey, the cleaner stores are probably the most profitable and productive stores. And can somebody tell me ... why I am telling BKW this and doing their job? Maybe BKW needs to start reducing the fat in the CORPORATE OFFICE.
Every Burger King I ever been in ... All to a Store ... WERE FILTHY ... the last one I went into, it was a Saturday around noon this time of year ... I was returning from my annual physical where I received news my blood cholesterol levels were all looking great ... so I figured what the hell. This store looked cleaner than any in my prior experience. Anyway, I ordered a BIG WHOPPER with cheese, the usual large COKE and FRIES. I sat down to eat my BURGER ... after a few bites I thought ... WOW this must be the best BURGER KING WHOPPER I ever had in my life ... I was about half way through the burger when I felt something on my tongue ... turned out to be a 12" red hair from one of the cooks. I took my tray with the burger to the manager. He apologized and offered to replace the burger ... NO THANKs ... NEVER HAVE RETURNED and NEVER WILL. Burger King Fries still suck ... but the COKE is generally acceptable.
There is no right or wrong here: to each his/her own, but I still prefer the flavor of the Burger King flame broiled burgers to the fried burgers at Mickey D's. I also like that Burger King has onion rings, and dip sauces. Last time I asked for a packet of mayo at McD's, they charged me an extra 30c. Also feel that the lettuce at Burger King is fresh, where it seems like the lettuce at McD's seems to be the prepackaged stuff, which I am not fond of.
That being said, I DO love the 'secret sauce' on the Big Mac. ("Burgerville" sauce is better, but More's the Pity for the rest of the country, it's only available in the Pacific NorthWest.)
I think we all understand that 'fast food' is high is fat, salt, and sugars, and not the best choice for every day eating.
But once in a while....that Whopper Jr w/ Cheeze is pretty danged yummy!!
Burger King had cini mini's and Big Kid Meals before Mc Donalds had mighty Kid meals and cinnamon melts. All fast food steal ideas from each other it's just the way it is.
McDonald's is the winner every time because they're a PR powerhouse, NOT because their food is generally better. (Give me a Whopper any day over a mushy, bready Big Mac.) The only thing worth eating on a McDonald's menu are the fries--easily the best of the bunch. Other than that, everything else at McDonald's just tastes like salt, salt, salt.
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