Topline performance was fueled by the Whopper, value initiatives like the $5 Your Way Meal, more than 30 percent growth in digital sales, and strategic pricing. same-store sales increased 8.7 percent in the first quarter, lapping a 0.5 percent drop in 2022. The chain lost a net of 124 domestic stores year-over-year, while adding a net of 589 locations outside the country.īurger King U.S. The brand ended Q1 with 18,911 stores systemwide, including 6,964 in the U.S. We are focused on doing everything right around the BK business and that includes getting the restaurants into the right hands.' 'And if we've got to step in and use our balance sheet or run a few restaurants for a while to make sure that they are ultimately winding up in the right hands, we're willing to do that, but there are no shortcuts to us on how you're running the business. 'We want our restaurants run by people who are going to run them incredibly well,' Doyle said. In fact, the company acquired 17 shops from TOMS King. The CEO said Burger King is willing to step in and purchase underperforming restaurants until a better operator is found. 'Most of our franchisees are embracing these points and are working closely with us to drive execution in their restaurants.' 'The Burger King team is having direct conversations with our franchisees about the transformative business results that are possible through strong operations and delivering a great guest and team member experience,' Kobza said. Kobza said most franchisees fall into these upper categories, and the ideal scenario would be to reach 'nearly all.' Burger King has seen 'healthy growth' in its 'A' and 'B' operator levels since the rollout of a franchise success system and targeted training sessions. There's also an emphasis on keeping portfolios to fewer than 50 units, geographically contiguous restaurants, and local ownership. To encourage more franchisees to reach this level, the chain is now only letting 'A' and 'B' operators build new restaurants or acquire existing ones. Patrick Doyle Brings His Turnaround Magic to Burger Kingīurger King's $400 Million Comeback Takes Shape How Burger King's New Jingle Captured America's Attention

Additionally, Kobza noted that typically, taking 1 percent price equals a 0.4 percent dip in traffic, but 'A' and 'B' franchisees see significantly higher flow-through rates because guests are willing to pay for better experiences. This trend continued into the first quarter. Average four-wall EBITDA of 'A' Burger King operators was over 65 percent higher than the system average last year. The ultimate goal is to fill the system with higher-performing restaurateurs who take an owner-and-operator mentality, set culture, visit restaurants regularly, get to know employees and customers, and are hands-on, whether it's one or 100 stores. In addition, EYM King of Michigan filed a WARN notice stating it was closing 26 restaurants across the state after allegedly not paying royalties, advertising, and other fees. Both companies attributed their downfall to decreased traffic and revenue without proportionate drops in liabilities. This year alone, two major franchisees- Meridian Restaurants Unlimited and TOMS King -declared bankruptcy. RBI believes the impact on systemwide sales will be lower than the reduction in restaurant count. Most of these closed units will be low volume, with some sales recapture. CEO Josh Kobza cautioned 'a fair degree of uncertainty' around the exact number, and that it will depend on the brand's pace of recovery. restaurants per year, but in 2023, that's expected to be in the 300-400 range. The chain historically shutters around 200 U.S. We're working to find partners who are all in.'īurger King is currently weeding out these less-than-stellar operators. But we're talking about a small number here in these instances. There simply is no room for franchisees who are not willing or able to work hard to operate restaurants that are better than the system average over the long term. 'We'll work with them to leave the system and move on to do something else. 'There will always be a minority who aren't dedicated enthusiastic operators, and that's OK,' Doyle said during RBI's Q1 earnings call. But that also implies there's a segment-however small-that's not exactly hearing the message. The executive said the 'vast majority' are enthusiastic franchisees dedicated to long-term success. The company sells a business model and works to increase the average profitability while the franchisees aim to be better than average.ĭoyle said the core to making it all harmonious is ensuring RBI has operators who believe in the vision. There are several components to a franchisor-franchisee relationship, but RBI chairman Patrick Doyle described it in the simplest of terms-operators are the customer.

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