Burger King, often abbreviated as BK, is a global chain of hamburger fast food restaurants headquartered in unincorporated Miami-Dade County, Florida, United States. The company began in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain. After Insta-Burger King ran into financial difficulties in 1955, its two Miami-based franchisees, David Edgerton and James McLamore, purchased the company and renamed it Burger King. Over the next half century the company would change hands four times, with its third set of owners, a partnership of TPG Capital, Bain Capital, and Goldman Sachs Capital Partners, taking it public in 2002. In late 2010 3G Capital of Brazil acquired a majority stake in BK in a deal valued at $3.26 billion (USD).
At the end of fiscal year 2010, Burger King reported it had more than 12,200 outlets in 73 countries; of these, 66 percent are in the United States and 90 percent are privately owned and operated. BK has historically used several variations of franchising to expand its operations. The manner in which the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licenses on the company's behalf. Burger King's relationship with its franchises has not always been harmonious. Occasional spats between the two have caused numerous issues, and in several instances the company's and its licensees' relations have degenerated into precedent-setting court cases.
The Burger King menu has evolved from a basic offering of burgers, french fries, sodas and milkshakes in 1954, to a larger, more diverse set of product offerings. In 1957, the Whopper was the first major addition to the menu; it has since become Burger King's signature product. Conversely, BK has introduced many products which failed to catch hold in the marketplace. Some of these failures in the US have seen success in foreign markets, where BK has also tailored its menu for regional tastes. After the purchase of the company in 2002, Burger King began to aggressively target the 18–34 male demographic with larger products that often carried correspondingly large amounts of unhealthy fats and trans-fats. This tactic would eventually come to hurt the company's financial underpinnings and cast a negative pall on its earnings.
The 1970s were the "Golden Age" of Burger King advertising, but beginning in the early 1980s, the company's advertising began to lose focus; a series of less successful ad campaigns created by a procession of advertising agencies continued for the next two decades. In 2003, Burger King hired the Miami-based advertising agency of Crispin Porter + Bogusky (CP+B). CP+B completely reorganized Burger King's advertising with a series of new campaigns centered on a redesigned Burger King character accompanied with a new online presence. While highly successful, some of CP+B commercials have been derided for perceived sexism or cultural insensitivity.
Burger King's private equity investors took the company public just four years ago at an initial share price of $17.
At the market close on Tuesday, shares in Burger King were down more than 31 percent since the end of 2008. McDonald's shares were up nearly 18 percent.
Burger King's stock jumped 25 percent to close at $23.59, on Thursday, adding to Wednesday's 15 percent gain. Shares in bigger rival McDonald's rose 0.6 percent and Wendy's/Arby's Group Inc added 6.8 percent.
CATCHING UP TO MCDONALD'S
3G, a little-known investment firm, was last in the spotlight in 2008, when it waged a proxy battle alongside The Children's Investment Fund against U.S. railroad CSX Corp. That led to Behring joining the railroad's board.
3G's backers include Brazil's Jorge Paulo Lemann, who sits on the board at Anheuser-Busch InBev NV. Forbes magazine estimates his fortune at $11 billion.
"This looks to be something of a new line of business for 3G, which has historically held a concentrated portfolio of high-quality publicly traded businesses, rather than buying companies outright," Bernstein analyst Sara Senatore said.
The deal is the biggest in a string of recent restaurant buyouts. This summer, Carl's Jr parent CKE Restaurants and Brinker International Inc's On the Border Mexican Grill & Cantina were sold to private equity shops.
Wendy's/Arbys in June said an unnamed party had expressed interest in a potential deal involving the fast-food company, while California Pizza Kitchen Inc and Benihana Inc are looking for buyers.
Burger King, which has been hurt by high unemployment rates among its core audience of young men, expects weak demand during its new fiscal year due to the U.S. economy's slow pace of recovery and government austerity programs in Europe.
Analysts said going private would free Burger King to make major changes without the distraction of pleasing Wall Street.
In particular, West said Burger King needs to remodel its restaurants, which he said are older and less appealing than those operating under McDonald's Golden Arches.
Burger King, known as the "Home of the Whopper," also needs to upgrade its technology to allow it to track sales trends in real time, analysts said.
McDonald's has muscled a bigger share of the market by expanding its menu with salads and apple dippers -- which appeal to moms and kids -- and high-profit beverages like lattes, fruit smoothies and frappes.
Telsey's Forte would like to see Burger King's new owners stick with the company's "barbell" strategy of selling low-priced and high-priced food.
Value-priced menu items, like its previously offered $1 double cheeseburgers, boosted sales but squeezed franchisees.
On the flip side, it has introduced a new broiler system that allows the chain to quickly prepare larger, "premium" Steakhouse XT burgers that sell for around $4 and bone-in ribs, which quickly sold out despite their price of about $7 for an eight-piece order. Such items appeal to its young, hungry male clientele, but sales could be constrained by the weak economy.
Burger King is rolling out an expanded breakfast menu this autumn and Chidsey said 3G has strong connections internationally, where the chain has opportunities to expand.
Lazard Ltd, JPMorgan Securities LLC and Barclays Capital acted as advisers to 3G Capital. Morgan Stanley and Goldman, Sachs & Co advised Burger King.
Burger King's success however, proved to be short-lived. In 1999, the company was forced to recall a promotional toy, the Pokemon ball, after it was discovered to be potentially dangerous for children. A class-action suit followed, claiming the company acted in a negligent fashion when it distributed the toy in its kids' meals. The firm's relationship with its franchisees was also deteriorating, marked by a highly publicized lawsuit with franchisee La Van Hawkins. The Detroit-based entrepreneur claimed Burger King failed to help him develop and purchase restaurants as promised. The firm counter-sued claiming that Hawkins owed the company $16 million. Civil rights activist Al Sharpton threatened to boycott Burger King as a result. To top it off, sales were falling, and the company experienced yet another change in management. Malamatinas left the firm in 2000, and Colin Storm was named interim CEO.
By this time, Burger King's parent company had announced plans to exit the fast food industry. Many franchisees were experiencing financial difficulties--including bankruptcy--and had long since complained that Diageo had neglected Burger King in favor of its premium liquor business. These franchisees adopted an internal program entitled "Project Champion" aimed at forcing a sale of Burger King. They approached J.P. Morgan Chase & Co. to orchestrate the deal, and, eventually, Diageo agreed to sell Burger King. Texas Pacific Group along with Bain Capital and Goldman Sachs Capital Partners purchased the fast food chain for $1.5 billion in late 2002.
According to a 2003 Feedstuffs article, Burger King's franchisee association claimed that the new ownership marked "the first day of a new era" for Burger King. CEO John Dasburg--elected in 2001--also felt the acquisition had significant benefits. In the aforementioned article Dasburg remarked that it would "better position Burger King as a healthy, independent company for the first time in more than 30 years."
While company management appeared optimistic about its future, Burger King remained embroiled in intense competition. The firm continued to launch new advertising campaigns and in 2002 introduced the BK Veggie, the first fast food veggie burger to be offered in the United States. Also in 2002, Burger King revamped the BK Broiler, making a new product they called the Chicken Whopper. The firm also moved into its new world headquarters in Miami, dedicating the building to founders Edgerton and McLamore. Management focused on capturing a larger portion of the fast food market. However, only time would tell if Burger King's new independence would help realize its goals.
Principal Competitors: McDonalds Corporation; Wendy's International Inc.; Yum! Brands Inc.
Statistics:
Private Company
Incorporated:1954
Employees:340,000
Sales:$1.7 billion (2002)
NAIC:722211 Limited Service Restaurants
Key Dates:
1954: James McLamore and David Edgerton establish Burger King Corporation.
1957: The Whopper is launched.
1959: The company begins to expand through franchising.
1967: Burger King is sold to Pillsbury.
1977: Donald Smith is hired to restructure the firm's franchise system.
1982: Burger King claims its grilled burgers are better than competitors McDonald's and Wendy's fried burgers.
1989: Grand Metropolitan plc acquires Pillsbury.
1997: The firm launches a $70 million french fry advertising campaign; Grand Metropolitan merges with Guinness to form Diageo plc.
2002: A group of investors led by Texas Pacific Group acquire Burger King.
Address:
5505 Blue Lagoon Drive
Miami, Florida 33126
U.S.A.
At the end of fiscal year 2010, Burger King reported it had more than 12,200 outlets in 73 countries; of these, 66 percent are in the United States and 90 percent are privately owned and operated. BK has historically used several variations of franchising to expand its operations. The manner in which the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licenses on the company's behalf. Burger King's relationship with its franchises has not always been harmonious. Occasional spats between the two have caused numerous issues, and in several instances the company's and its licensees' relations have degenerated into precedent-setting court cases.
The Burger King menu has evolved from a basic offering of burgers, french fries, sodas and milkshakes in 1954, to a larger, more diverse set of product offerings. In 1957, the Whopper was the first major addition to the menu; it has since become Burger King's signature product. Conversely, BK has introduced many products which failed to catch hold in the marketplace. Some of these failures in the US have seen success in foreign markets, where BK has also tailored its menu for regional tastes. After the purchase of the company in 2002, Burger King began to aggressively target the 18–34 male demographic with larger products that often carried correspondingly large amounts of unhealthy fats and trans-fats. This tactic would eventually come to hurt the company's financial underpinnings and cast a negative pall on its earnings.
The 1970s were the "Golden Age" of Burger King advertising, but beginning in the early 1980s, the company's advertising began to lose focus; a series of less successful ad campaigns created by a procession of advertising agencies continued for the next two decades. In 2003, Burger King hired the Miami-based advertising agency of Crispin Porter + Bogusky (CP+B). CP+B completely reorganized Burger King's advertising with a series of new campaigns centered on a redesigned Burger King character accompanied with a new online presence. While highly successful, some of CP+B commercials have been derided for perceived sexism or cultural insensitivity.
Burger King's private equity investors took the company public just four years ago at an initial share price of $17.
At the market close on Tuesday, shares in Burger King were down more than 31 percent since the end of 2008. McDonald's shares were up nearly 18 percent.
Burger King's stock jumped 25 percent to close at $23.59, on Thursday, adding to Wednesday's 15 percent gain. Shares in bigger rival McDonald's rose 0.6 percent and Wendy's/Arby's Group Inc added 6.8 percent.
CATCHING UP TO MCDONALD'S
3G, a little-known investment firm, was last in the spotlight in 2008, when it waged a proxy battle alongside The Children's Investment Fund against U.S. railroad CSX Corp. That led to Behring joining the railroad's board.
3G's backers include Brazil's Jorge Paulo Lemann, who sits on the board at Anheuser-Busch InBev NV. Forbes magazine estimates his fortune at $11 billion.
"This looks to be something of a new line of business for 3G, which has historically held a concentrated portfolio of high-quality publicly traded businesses, rather than buying companies outright," Bernstein analyst Sara Senatore said.
The deal is the biggest in a string of recent restaurant buyouts. This summer, Carl's Jr parent CKE Restaurants and Brinker International Inc's On the Border Mexican Grill & Cantina were sold to private equity shops.
Wendy's/Arbys in June said an unnamed party had expressed interest in a potential deal involving the fast-food company, while California Pizza Kitchen Inc and Benihana Inc are looking for buyers.
Burger King, which has been hurt by high unemployment rates among its core audience of young men, expects weak demand during its new fiscal year due to the U.S. economy's slow pace of recovery and government austerity programs in Europe.
Analysts said going private would free Burger King to make major changes without the distraction of pleasing Wall Street.
In particular, West said Burger King needs to remodel its restaurants, which he said are older and less appealing than those operating under McDonald's Golden Arches.
Burger King, known as the "Home of the Whopper," also needs to upgrade its technology to allow it to track sales trends in real time, analysts said.
McDonald's has muscled a bigger share of the market by expanding its menu with salads and apple dippers -- which appeal to moms and kids -- and high-profit beverages like lattes, fruit smoothies and frappes.
Telsey's Forte would like to see Burger King's new owners stick with the company's "barbell" strategy of selling low-priced and high-priced food.
Value-priced menu items, like its previously offered $1 double cheeseburgers, boosted sales but squeezed franchisees.
On the flip side, it has introduced a new broiler system that allows the chain to quickly prepare larger, "premium" Steakhouse XT burgers that sell for around $4 and bone-in ribs, which quickly sold out despite their price of about $7 for an eight-piece order. Such items appeal to its young, hungry male clientele, but sales could be constrained by the weak economy.
Burger King is rolling out an expanded breakfast menu this autumn and Chidsey said 3G has strong connections internationally, where the chain has opportunities to expand.
Lazard Ltd, JPMorgan Securities LLC and Barclays Capital acted as advisers to 3G Capital. Morgan Stanley and Goldman, Sachs & Co advised Burger King.
Burger King's success however, proved to be short-lived. In 1999, the company was forced to recall a promotional toy, the Pokemon ball, after it was discovered to be potentially dangerous for children. A class-action suit followed, claiming the company acted in a negligent fashion when it distributed the toy in its kids' meals. The firm's relationship with its franchisees was also deteriorating, marked by a highly publicized lawsuit with franchisee La Van Hawkins. The Detroit-based entrepreneur claimed Burger King failed to help him develop and purchase restaurants as promised. The firm counter-sued claiming that Hawkins owed the company $16 million. Civil rights activist Al Sharpton threatened to boycott Burger King as a result. To top it off, sales were falling, and the company experienced yet another change in management. Malamatinas left the firm in 2000, and Colin Storm was named interim CEO.
By this time, Burger King's parent company had announced plans to exit the fast food industry. Many franchisees were experiencing financial difficulties--including bankruptcy--and had long since complained that Diageo had neglected Burger King in favor of its premium liquor business. These franchisees adopted an internal program entitled "Project Champion" aimed at forcing a sale of Burger King. They approached J.P. Morgan Chase & Co. to orchestrate the deal, and, eventually, Diageo agreed to sell Burger King. Texas Pacific Group along with Bain Capital and Goldman Sachs Capital Partners purchased the fast food chain for $1.5 billion in late 2002.
According to a 2003 Feedstuffs article, Burger King's franchisee association claimed that the new ownership marked "the first day of a new era" for Burger King. CEO John Dasburg--elected in 2001--also felt the acquisition had significant benefits. In the aforementioned article Dasburg remarked that it would "better position Burger King as a healthy, independent company for the first time in more than 30 years."
While company management appeared optimistic about its future, Burger King remained embroiled in intense competition. The firm continued to launch new advertising campaigns and in 2002 introduced the BK Veggie, the first fast food veggie burger to be offered in the United States. Also in 2002, Burger King revamped the BK Broiler, making a new product they called the Chicken Whopper. The firm also moved into its new world headquarters in Miami, dedicating the building to founders Edgerton and McLamore. Management focused on capturing a larger portion of the fast food market. However, only time would tell if Burger King's new independence would help realize its goals.
Principal Competitors: McDonalds Corporation; Wendy's International Inc.; Yum! Brands Inc.
Statistics:
Private Company
Incorporated:1954
Employees:340,000
Sales:$1.7 billion (2002)
NAIC:722211 Limited Service Restaurants
Key Dates:
1954: James McLamore and David Edgerton establish Burger King Corporation.
1957: The Whopper is launched.
1959: The company begins to expand through franchising.
1967: Burger King is sold to Pillsbury.
1977: Donald Smith is hired to restructure the firm's franchise system.
1982: Burger King claims its grilled burgers are better than competitors McDonald's and Wendy's fried burgers.
1989: Grand Metropolitan plc acquires Pillsbury.
1997: The firm launches a $70 million french fry advertising campaign; Grand Metropolitan merges with Guinness to form Diageo plc.
2002: A group of investors led by Texas Pacific Group acquire Burger King.
Address:
5505 Blue Lagoon Drive
Miami, Florida 33126
U.S.A.