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Burger King

 
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Burger King Corporation

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Type: Private Company
Address: 5505 Blue Lagoon Drive, Miami, Florida 33126, U.S.A.
Telephone: (305) 378-3000
Fax: (305) 378-7262
Web: http://www.burgerking.com
Employees:340,000
Sales:$1.7 billion (2002)
Incorporated:1954
NAIC:722211 Limited Service Restaurants

Burger King Corporation is the second largest fast-food chain in the United States, trailing only McDonald's. The company franchises more than 10,400 restaurants and owns about 1,000 for a chainwide total exceeding 11,455, with locations in all 50 states and 56 countries. The company serves 15.7 million customers each day and over 2.4 billion Burger King hamburgers are sold each year across the globe. In the late 1990s and into the new millennium, Burger King was plagued by falling sales and deteriorating franchisee relationships. Burger King's parent, Diageo plc, sold the company to a group of investors led by Texas Pacific Group in late 2002.

Miami entrepreneurs James McLamore and David Edgerton founded Burger King Corporation in 1954. Five years later, they were ready to expand their five Florida Burger Kings into a nationwide chain. By the time they sold their company to Pillsbury in 1967, Burger King had become the third largest fast-food chain in the country and was on its way to second place, after industry leader McDonald's.

The story of Burger King's growth is the story of how franchising and advertising developed the fast-food industry. McLamore and Edgerton began in 1954 with a simple concept: to attract the burgeoning numbers of postwar baby boom families with reasonably-priced, broiled burgers served quickly. The idea was not unique: drive-ins offering cheap fast food were springing up all across America in the early 1950s. In fact, 1954 was the same year Ray Kroc made his deal with the McDonald brothers, whose original southern California drive-in started the McDonald's empire.

McLamore and Edgerton tried to give their Burger King restaurants a special edge. Burger King became the first chain to offer dining rooms (albeit uncomfortable plastic ones). In 1957 they expanded their menu with the Whopper, a burger with sauce, cheese, lettuce, pickles, and tomato, for big appetites. But prices were kept low: a hamburger cost 18 cents and the Whopper 37 cents. (McDonald's burgers at the same time, however, cost only 15 cents.) In 1958 they took advantage of an increasingly popular medium, television: the first Burger King television commercial appeared on Miami's VHF station that year.

By 1959 McLamore and Edgerton were ready to expand beyond Florida, and franchising seemed to be the best way to take their concept to a broader market. Franchising was booming in the late 1950s because it allowed companies to expand with minimal investment. Like many other franchisers, McLamore and Edgerton attracted their investors by selling exclusive rights to large territories throughout the country. The buyers of these territorial rights, many of them large businesses themselves, could do what they wanted to in their territory: buy land, build as many stores as they liked, sell part of the territory to other investors, or diversify. McLamore and Edgerton took their initial payments (which varied with the territory) and their cut (as little as 1 percent of sales) and left their franchisees pretty much on their own.

The system worked well, allowing Burger King to expand rapidly. By 1967, when the partners decided to sell the company they had founded, the chain included 274 stores and was worth $18 million to its buyer, prepared-foods giant Pillsbury.

The Burger King franchising system also worked well for the franchisees. Under the early Burger King system, some of the company's large investors expanded at a rate rivaling that of the parent company. Where this loosely knit franchising system failed, however, was in providing a consistent company image. Because McLamore and Edgerton didn't check on their franchises and used only a small field staff for franchise support, the chain was noted for inconsistency in both food and service from franchise to franchise, a major flaw in a chain that aimed to attract customers by assuring them of what to expect in every Burger King they visited.

It was up to the new owner, Pillsbury, to crack down on franchise owners. But some large franchisees thought they could run their Burger King outlets better than a packaged-goods company. Wealthy Louisianans Billy and Jimmy Trotter bought their first Burger King outlet in 1963. By 1969, they controlled almost two dozen Burger King restaurants and went public under the name Self Service Restaurants Inc. In 1970, when the franchisees in control of the lucrative Chicago market decided to sell out, Billy Trotter flew to Chicago in a snowstorm to buy the territory for $8 million. By the time Pillsbury executives got to town the next day, they found they had been bested by their own franchisee.

The Trotters didn't stop there. By 1971 they owned 351 stores with sales of $32 million. They bought out two steak house chains (taking the name of one of them, Chart House), established their own training and inspection programs, and decided on their own food suppliers. By 1972 they were ready to take over altogether; the Trotters made Pillsbury a $100 million offer for Burger King. When that initiative failed, they suggested that both Pillsbury and Chart House spin off their Burger King holdings into a separate company. When that also failed, they continued to acquire Burger King piecemeal, buying nine stores in Boston and 13 in Houston.

However, Pillsbury wasn't about to allow Chart House to gain other valuable territories. They sued the Boston franchisees who had sold to Chart House, citing Pillsbury's contractual right of first refusal to any sale. Eventually Chart House compromised, agreeing to give up its Boston holdings in exchange for the right to keep its Houston properties.

Pillsbury's suit was proof of a new management attitude that involved more central control over powerful franchisees. However, it wasn't until Pillsbury brought in a hard-hitting executive from McDonald's that Burger King began to exert real control over its franchisees. Donald Smith was third in line for the top spot at McDonald's when Pillsbury lured him away in 1977 with a promise of full autonomy in the top position at Burger King. Smith used it to "McDonaldize" the company, a process that was especially felt among the franchise holders.

While Burger King had grown by selling wide territorial rights, McDonald's had taken a different approach from the very beginning, leasing stores to franchisees and demanding a high degree of uniformity in return. When Smith came on board at Burger King in 1977, the company owned only 34 percent of the land and buildings in which its products were sold. Land ownership is advantageous because land is an appreciating asset and a source of tax deductions, but more importantly it gives the parent company a landlord's power over recalcitrant franchisees.

Smith began by introducing a more demanding franchise contract. Awarded only to individuals, not partnerships or companies, it stipulated that franchisees may not own other restaurants and must live within an hour's drive of their franchise, effectively stopping franchisees from getting too big. He also created ten regional offices to manage franchises.

Smith's new franchise regulations were soon put to the test. Barry W. Florescue, chairman of Horn & Hardart, the creator of New York City's famous Automat restaurants, had recognized that nostalgia alone couldn't keep the original fast-food outlets alive and had decided to turn them into Burger Kings. Smith limited Florescue to building four new stores a year in New York and insisted that he could not expand elsewhere. When Florescue bought eight units in California anyway, Smith sued successfully. Florescue then signed with Arby's, and Smith again effectively asserted Burger King's control in court, based on the franchise contract. His strong response to the upstart franchisee kept Horn & Hardart from becoming too strong a force within Burger King.

Increasing control over franchisees was not the only change Pillsbury instituted at Burger King during the 1970s. Like many other chains, Burger King began to expand abroad early in the decade. Fast food and franchising were unfamiliar outside the United States, making international expansion a challenge. Burger King's international operations never became as profitable as anticipated, but within a decade the company was represented in 30 foreign countries.

At home the company focused on attracting new customers. In 1974 management required franchisees to use the "hospitality system," or multiple lines, to speed up service. In 1975 Burger King reintroduced drive-through windows. While original stands had offered this convenience, it had gradually been eliminated as Burger King restaurants added dining rooms. Drive-throughs proved to be a profitable element, accounting for 60 percent of fast food sales throughout the industry by 1987.

Smith also revamped the corporate structure, replacing eight of ten managers with McDonald's people. To attack Burger King's inconsistency problem, Smith mandated a yearly two-day check of each franchise and frequent unscheduled visits. He also decided that the company should own its outlets whenever possible, and by 1979 had brought the company's share of outlet ownership from 34 percent to 42 percent.

Smith also turned his hand to the food served in his restaurants. He introduced the french fry technique that produced the more popular McDonald's-type fry. In 1978, primarily in response to the appeal that newcomer Wendy's had for adults, he introduced specialty sandwiches--fish, chicken, ham and cheese, and steak--to increase Burger King's dinner trade. Offering the broadest menu in fast food did the trick, boosting traffic 15 percent. A more radical expansion for the Burger King menu came next. After McDonald's proved that breakfast could be a profitable fast-food addition (offering a morning meal spread fixed costs over longer hours of operation) Smith began planning a breakfast menu in 1979. But Burger King had a problem with breakfast: its flame broilers could not be adapted as easily to breakfast entrees as McDonald's grills could. Smith urged development of entrees that could be prepared on existing equipment instead of requiring special grills. He began testing breakfast foods in 1978, but it wasn't until the Croissan'wich in 1983 and French Toast sticks in 1985 that Burger King had winning entries in the increasingly competitive breakfast market.

Smith left Burger King in June 1980 to try to introduce the same kind of fast-food management techniques at Pizza Hut. (Ironically, when he left Pizza Hut in 1983 he moved into the chief executive position at the franchisee that had given Burger King so much trouble, Chart House.) By following in Smith's general direction, Burger King reached its number-two position within two years of his departure, but frequent changes at the top for the next several years meant inconsistent management for the company. Louis P. Neeb succeeded Smith, to be followed less than two years later by Jerry Ruenheck. Ruenheck resigned to become a Burger King franchise owner in Florida less than two years after that, and his successor, Jay Darling, resigned a little over a year later to take on a Burger King franchise himself. Charles Olcott, a conservative former chief financial officer, took over in 1987.

Burger King did not stand still under its succession of heads, though. The company continued to expand abroad, opening a training center in London to serve its European franchisees and employees in 1985. Besides developing successful breakfast entries, Burger King added salad bars and a "light" menu to meet the demand for foods with a healthier, less fatty image. In 1985 the firm began a $100 million program to remodel most of its restaurants to include more natural materials, such as wood and plants, and less plastic. Burger King also completely computerized its cooking and cash register operations so even the least skilled teenager could do the job. Average sales per restaurant reached the $1 million mark in 1985.

Even some of Burger King's post-Smith successes caused problems, though. The company introduced another successful new entree, Chicken Tenders, in 1986, only to find it that it could not obtain enough chicken to meet demand. Burger King was forced to pull its $30 million introductory ad campaign.

Burger King was still bedeviled by the old complaint that its service and food were inconsistent. The company played out its identity crisis in public, changing ad styles with almost the same frequency that it changed managers. After Smith's departure in 1980, Burger King's old "Have it your way" campaign ("Hold the pickles, hold the lettuce. Special orders don't upset us.") was no longer appropriate. That ad campaign emphasized as a selling point what many saw as a drawback at Burger King: longer waiting times. However, under Smith's emphasis on speed and efficiency, special orders did upset store owners. So the company turned to the harder sell "Aren't you hungry for Burger King now?" campaign. The hard sell approach moved the chain into second place, and Burger King took an even more aggressive advertising line. In 1982 Burger King directly attacked its competitors, alleging that Burger King's grilled burgers were better than McDonald's and Wendy's fried burgers. Both competitors sued over the ads, and Wendy's challenged Burger King to a taste test (a challenge that was pointedly ignored). In return for dropping the suits, Burger King agreed to phase out the offending ads gradually, but Burger King came out the winner in its $25 million "Battle of the Burgers": the average volume of its 3,500 stores rose from $750,000 to $840,000 in 1982, sales were up 19 percent, and pretax profits rose 9 percent.

Burger King's subsequent ad campaigns were not as successful. In 1985 the company added just over half an ounce of meat to its Whopper, making the 4.2 ounce sandwich slightly larger than the quarter-pound burgers of its competitors. The meatier Whopper and the $30 million ad campaign using celebrities to promote it failed to bring in new business. All three of the major campaigns that followed ("Herb the Nerd," "This is a Burger King town," and "Fast food for fast times") were costly flops. "We do it like you'd do it" followed in 1988, with little more success.

In 1988, the company faced another kind of threat. Parent Pillsbury, the target of a hostile takeover attempt by the British company Grand Metropolitan plc, devised a counterplan that included spinning off the troubled Burger King chain to shareholders, but at the cost of new debt that would lower the price of both Pillsbury and the new Burger King shares. Such a plan would have made it highly unlikely that Burger King could ever have overcome its ongoing problems of quality and consistent marketing.

Pillsbury's plan didn't work, and Grand Met bought Pillsbury in January 1989 for $66 a share, or approximately $5.7 billion. Pillsbury became part of Grand Met's worldwide system of food and retailing businesses with well-known brand names. In Burger King, Grand Met got a company with some problems but whose 5,500 restaurants in all 50 states and 30 foreign countries gave it a strong presence.

Grand Met's first move was to place Barry Gibbons, a successful manager of pubs and restaurants in the United Kingdom, into the CEO slot. Soon thereafter, in September 1989, Grand Met acquired several restaurant properties from United Biscuits (Holdings) plc, including the Wimpey hamburger chain, which included 381 U.K. outlets and 148 in other countries. By the summer of 1990, 200 Wimpeys had been converted to Burger Kings, bolstering the company's foreign operations, a traditional area of weakness. Over the next several years, Burger King was much more aggressive with its international expansion, with restaurants opening for the first time in Hungary and Mexico (1991); Poland (1992); Saudi Arabia (1993); Israel, Oman, the Dominican Republic, El Salvador, Peru, and New Zealand (1994); and Paraguay (1995). By 1996, Burger King had outlets in 56 countries, a dramatic increase from the 30 of just seven years earlier.

While Gibbons was successful in accelerating the company's international growth, overall his tenure as CEO (which lasted until 1993) brought a mixture of successes and failures. In the new product area, the hamburger chain hit it big with the 1990 introduction of the BK Broiler, a broiled chicken sandwich aimed at fast-food eaters seeking a somewhat more healthful meal; soon after introduction, more than one million were being sold each day. Also successful were promotions aimed at children. In 1990 the Burger King Kids Club program was launched nationwide, and more than one million kids signed up in the first two months. The program continued to grow thereafter; by 1996 membership stood at five million and the number of Kids Club meals sold each month had increased from 6.1 million in 1990 to nearly 12 million.

Also hugely successful was the long-term deal with Disney for motion picture tie-ins signed in 1992. Through 1996 (when Disney broke with Burger King to sign a deal with arch-rival McDonald's), the partnership had involved such Disney smashes as Beauty and the Beast, The Lion King, and Toy Story. In 1996 Burger King signed a new Hollywood deal with DreamWorks SKG.

Gibbons also worked to improve Burger King's profitability, under a mandate from Grand Met. Soon after taking over as CEO, Gibbons cut more than 500 jobs, mainly field staff positions. He also began to divest company-owned stores in areas where the company did not have critical mass, particularly west of the Mississippi. Doing so helped increase profitability, although some observers charged that Gibbons was selling off valuable assets just to improve the company numbers. In any case, during Gibbons's last two years as CEO, profits were about $250 million each year, compared to at most $175 million a year under Pillsbury.

Where Gibbons certainly failed, however, was in addressing Burger King's longstanding problem with image. The advertising program was still in disarray as the firm hired in 1989, D'Arcy Masius Benton & Bowles, created still more short-lived campaigns: "Sometimes you've gotta break the rules" (1989-91), "Your way right away" (1991), and "BK Tee Vee" (1992-93). Neither franchisees nor customers were endeared to any of these. In the face of the improving profitability of the corporation, such marketing blunders led to abysmal chainwide sales increases, such as a 3.6 percent increase for fiscal years 1991 and 1992 combined.

In mid-1993, James Adamson succeeded Gibbons as CEO, a position for which he had been groomed since joining Burger King as COO in 1991. Adamson, who actively sought out the advice of company co-founder James W. McLamore, moved to build on Gibbons's successes as well as rectify the failures. Adamson's most important initiatives addressed key areas: quality, value, and image. He improved the quality of products, such as in 1994 when the size of the BK Broiler, the BK Big Fish, and the hamburger were increased by more than 50 percent. He belatedly added a "value menu" after most other fast feeders had already done so, as well as offering special promotions, such as the 99¢ Whopper. Related to both value and image was the long-awaited successful ad campaign, "Get your burger's worth," created by Ammirati Puris Lintas, and emphasizing a back-to-basics approach and good value. The focus on the basics also led to a simplification of what had become an unwieldy menu--40 items were eliminated. The new focus was on burgers--with an emphasis on flame broiling--fries, and drinks. By early 1995, Adamson's program was paying off as same-store sales increased 6.6 percent for the fiscal year ending March 31, 1995. Morale among the franchisees had improved dramatically as well.

Adamson resigned suddenly in early 1995 to head Flagstar Cos. of Spartanburg, South Carolina. In July, Robert C. Lowes, who had been chief officer for Grand Met Foods Europe, was named CEO. Later that same year he became chairman of Burger King and gained a position on the Grand Met executive committee, a move that signaled Grand Met's commitment to Burger King and the strength of the company's resurgence. Lowes soon set some lofty goals for Burger King, including $10 billion in systemwide sales by 1997 (from $8.4 billion in 1995) and 10,000 outlets by the year 2000 (there were 8,455 in mid-1996). Management changes continued however, and in 1997 Dennis Malamatinas, an executive from Grand Met's Asian beverage division, was named CEO. Later that year, Grand Met merged with Guinness, creating Diageo plc. The new company's main focus was on its beverage and spirits business, leaving many analysts speculating that Diageo would eventually sell or spin off Burger King.

Despite the changes in ownership and management, Burger King remained dedicated to beating out its main competition, McDonald's. It introduced the new Big King burger to compete with McDonald's Big Mac and also launched a $70 million french fry advertising campaign that included a free fryday give-away at its restaurants. By 1998 both domestic and international sales were increasing, along with market share.

Bolstered by its recent success, Burger King launched an aggressive restructuring campaign that included adopting a new logo; store remodeling with cobalt blue, red, and yellow décor; new packaging; drive-thru lane upgrades; and a new cooking system. The firm also began to turnaround its European operations, exiting the highly competitive French region and focusing on growth in the UK, Germany, and Spain. The company's Latin America, Mexico, and Caribbean operations also experienced modest growth.

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.

Further Reading

Alva, Marilyn, "Can They Save the King?," Restaurant Business, May 1, 1994, p. 104.

"Burger King Sale as Much Hot Temper as Cool Cash," Houston Chronicle, December 29, 2002, p. 1.

Collins, Glenn, "Grand Met Names a Chief for Burger King Subsidiary: Turnaround Is Seen at Fast Food Chain," New York Times, July 12, 1995, p. C2.

DeGeorge, Gail, "Turning Up the Gas at Burger King: It's Discounting Burgers and Dumping Yet Another Ad Campaign," Business Week, November 15, 1993, pp. 62-67.

Emerson, Robert L., Fast Food: The Endless Shakeout, New York: Lebhar-Friedman Books, 1979.

------, The New Economics of Fast Food, New York: Van Nostrand Reinhold, 1990.

Farrell, Greg, "Burger King: Whopper on the Rebound?," Brandweek, February 7, 1994, p. 22.

Gibson, Richard, "Burger King Overhaul Includes Refocus on Whopper," Wall Street Journal, December 15, 1993, p. B4.

Harrington, Jeff, "Burger King Executives Struggle to Turn Around Company," St. Petersburg Times, October 16, 2000.

Hays, Constance L., "Burger King Campaign Is Promoting New Fries," New York Times, December 11, 1997, p. D12.

Howard, Theresa, "BK Looks toward Recovery under New Chief Adamson," Nation's Restaurant News, August 2, 1993, p. 5.

Kramer, Louise, "Burger King Gets Back to Basics in Latest Ad Blitz," Nation's Restaurant News, April 29, 1996, p. 14.

Luxenberg, Stan, Roadside Empires: How the Chains Franchised America, New York: Viking, 1985.

Maremont, Mark, Pete Engardio, and Brian Bremner, "Trying to Get Burger King Out of the Flames: It's a Tall Order, Even for Grand Met Hotshot Gibbons," Business Week, January 30, 1989, p. 29.

Pollack, Judann, "Burger King Sizzles in Wake of Arch Deluxe," Advertising Age, June 17, 1996, p. 3.

Thomson, Richard, "GrandMet Fails to Stop Rumour Mill Biting Into Burger King," Times, November 10, 1995.

Smith, Rod, "Burger King's Sale Readies System for Growth," Feedstuffs, January 6, 2003, p. 7.

Walker, Elaine, "Burger King Takes Aim at First Place in Fast-Food Battle," Miami Herald, May 10, 1999.

— Ginger G. Rodriguez


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Burger King

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Home > Library > Miscellaneous > Wikipedia
"BK" redirects here. For other uses, see BK (disambiguation).
Burger King
Type Private
Industry Restaurants
Predecessor(s) Insta-Burger King
Founded Insta-Burger King: July 28, 1953 in Jacksonville, Florida
Current company: 1954 in Miami, Florida
Founder(s) Insta-Burger King: Kieth J. Kramer and Matthew Burns
Current company: David Edgerton and James McLamore
Headquarters 5505 Blue Lagoon Drive,
Miami-Dade Co, Florida, U.S.
Area served Global
Key people Alexandre Behring (Chairman)[1]
Bernard Hees (CEO)[1]
Ben K. Wells (CFO)[2]
Products Fast Food
(hamburgers • chicken • french fries • soft drinks • milkshakes • salads • desserts • breakfast)
Revenue decrease US$2.5 billion (FY 2010)[3]
Operating income decrease US$332.9 million (FY 2010)[3]
Net income decrease US$186.8 million (FY 2010)[3]
Total assets increase US$2.75 billion (FY 2010)[3]
Total equity increase US$1.13 billion (FY 2010)[3]
Employees 38,840 (2010)[3]
Parent 3G Capital
Website burgerking.com
This box:

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. New owner 3G Capital terminated the relationship with CB+B in 2011 and moved its advertising to McGarryBowen to begin a new campaign with expanded demographic targeting.

Contents

History

Main article: History of Burger King
A Burger King in Durham, North Carolina
A typical Burger King restaurant located in Durham, North Carolina

The predecessor to what is now the international fast food restaurant chain Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King. Inspired by the McDonald brothers' original store location in San Bernardino, California, the founders and owners, Keith J. Kramer and his wife's uncle Matthew Burns, began searching for a concept to open a new restaurant around. After purchasing the rights to two pieces of equipment called "Insta" machines, the two opened their first stores around a cooking device known as the Insta-Broiler. The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to carry the device.[4][5] After the original company began to falter in 1959, it was purchased by its Miami, Florida, franchisees James McLamore and David R. Edgerton. The two initiated a corporate restructuring of the chain; the first step was to rename the company Burger King. The duo ran the company as an independent entity for eight years, eventually expanding to over 250 locations in the United States, when they sold it to the Pillsbury Company in 1967.[4]:28

Pillsbury's management tried several times to reorganize or restructure the restaurant chain in the late 1970s and early 1980s. The most prominent change came in 1978 when Burger King hired McDonald's executive Donald N. Smith to help revamp the company. In a plan called Operation Phoenix,[5]:118 Smith initiated a restructuring of corporate business practices at all levels of the company. Changes to the company included updated franchise agreements,[6] a broadening of the menu,[5]:119[6]:66 and new store designs to standardize the look and feel of the company. Smith left the company for soft drinks producer PepsiCo in 1980,[7] and a resulting system-wide decline in sales began shortly after. Pillsbury executive vice president of restaurant operations Norman E. Brinker was tasked with turning the brand around and strengthening its position against its main rival, McDonald's. One of his initiatives was a new advertising campaign featuring a series of attack ads against its major competitors, the resulting advertising ushered a competitive period between the top burger chains known as the Burger Wars.[8] Brinker left the company in 1984 to take over Dallas-based gourmet burger chain Chili's.[9]

While the efforts of the two men were initially effective,[7] after their respective departures Pillsbury allowed many of their changes to be relaxed or discarded while scaling back on construction of new locations. These actions had the negative effect of stalling corporate growth and a return to declining sales. This decline eventually resulted in Burger King falling into a fiscal slump that damaged the financial performance of both Burger King and its parent;[10][11] this poor operating performance and ineffectual leadership continued to bog the company down for many years.[11][12] Even after Pillsbury was acquired in 1989 by the British entertainment conglomerate Grand Metropolitan, Burger King's financial performance lingered.[13][14]

Initially Grand Met attempted to bring the chain top profitability under newly minted CEO Barry Gibbons, the changes he initiated during his two-year tenure were hit or miss. Successful new product introductions and product tie-ins with the Walt Disney company were offset by continuing image problems and ineffectual advertising programs.[15] Additionally, Gibbons sold of several of the company's assets in attempt to profit from their sale and terminated many staff members.[16][17][18] After Gibbon's departure, a series of CEO each tried to repair the brand by changing the menu, bringing in new ad agencies and other changes.[19][20][21]

The parental disregard of the Burger King brand continued through Grand Metropolitan's merger with Guinness in 1997, when the two organizations formed the new holding company Diageo.[22] Eventually, the ongoing, systematic institutional neglect of the brand through the string of owners damaged the company to the point where major franchises were driven out of business and its total value was significantly decreased.[23] Diageo eventually decided to divest itself of the money-losing chain and put the company up for sale in 2000.[24][25]

1950–60s era Burger King logo

The twenty-first century saw the company return to independence when it was purchased from Diageo by a group of investment firms led by TPG Capital for $1.5 billion (USD) in 2002.[15][26] The new owners rapidly moved to revitalize and reorganize the company, culminating with the company being taken public in 2006 with a highly successful initial public offering.[27][28] The firms' strategy for turning the chain around included a new advertising agency and new ad campaigns,[29][30][31] a revamped menu strategy,[32] a series of programs designed to revamp individual stores,[33] and a new restaurant concept called the BK Whopper Bar.[34] These changes successfully reenergized the company, leading to a score of profitable quarters.[35] Yet, despite the successes of the new owners, the effects of the financial crisis of 2007–2010 weakened the company's financial outlooks while those of its immediate competitor McDonald's grew.[35][36] The falling value of Burger King eventually lead to TPG and its partners divesting their interest in the chain in a $3.26 billion (USD) sale to 3G Capital of Brazil.[37][38] Analysts from financial firms UBS and Stifel Nicolaus agreed that 3G would have to invest heavily in the company to help reverse its fortunes.[38][39] After the deal was completed, the company's stock was removed from the New York Stock Exchange, ending a four-year period as a public company.[40][41] The delisting of its stock was designed to help the company repair its fundamental business structures and continue working to close the gap with McDonald's without having to worry about pleasing shareholders.[39]


Structure and operations

Burger King's corporate headquarters
Company headquarters in unincorporated Miami-Dade County, Florida

Burger King Holdings is the parent company of Burger King, also known as Burger King Corporation and abbreviated BKC, and is a Delaware corporation formed on 23 July 2002, shortly before the acquisition of the company by the TPG lead group.[3]:4 A privately held company,[2] it derives its income from several sources, including property rental and sales through company owned restaurants;[3]:42 however a substantial portion of its revenue is dependent on franchise fees.[3]:23 During the transitional period after the acquisition of the company by 3G Capital, Burger King's board of directors was co-chaired by John W. Chidsey, formerly CEO and chairman of the company, and Alexandre Behring, managing partner of 3G Capital.[2] By April 2011 the new ownership completed the restructuring of Burger King's corporate management and Chidsey tendered his resignation, leaving Behring as current CEO and chair.[42]

The company operates approximately 40 subsidiaries globally that oversee franchise operations, acquisitions and financial obligations such as pensions.[3]:Exhibit 21.1 One example of a subsidiary is Burger King Brands, Inc. which is responsible for the management of Burger King's intellectual properties. A wholly owned subsidiary established in 1990,[43] Burger King Brands owns and manages all trademarks, copyrights and domain names used by the restaurants in the United States and Canada. It also responsible for providing marketing and related services to the parent company.[44]

The majority of Burger King restaurants, approximately 90%, are privately held franchises.[45] In North America Burger King Corporation is responsible for licensing operators and administering of stores. Internationally the company often pairs with other parties to operate locations or it will outright sell the operational and administrative rights to a franchisee which is given the designation of master franchise for the territory. The master franchise will then be expected to sub-license new stores, provide training support and insure operational standards are maintained. In exchange for the oversight responsibilities, the master franchise will receive administrative and advertising support from Burger King Corporation to ensure a common marketing scheme.[46][47] The 3G Capital ownership group announced in April 2011 that it would begin divesting itself of many corporate owned locations with the intent to increase the number of privately held restaurants to 95%.[45]

As the franchisor for the brand, Burger King Holdings has several obligations and responsibilities; the company designs and deploys corporate training systems while overseeing brand standards such as building design and appearance.[33][48][49] The company also develops new products and deploys them after presenting them to its franchises for approval per a 2010 agreement between itself and the franchise ownership groups.[45] Burger King has limited approval over franchise operations such as minimum hours of operation and promotional pricing.[50][51] Additionally Burger King designates approved vendors and distributors while ensuring safety standards at the productions facilities of its vendors.

Burger King is headquartered in a nine-story office tower by Miami International Airport in unincorporated Miami-Dade County, Florida.[52] Elaine Walker of the Miami Herald stated that the headquarters has a "Burger King" sign that drivers on Florida State Road 836 "can't miss." In addition the chain planned to build a neon sign on the roof to advertise the brand to passengers landing at the airport. On Monday 8 July 2002, 130 employees began working at the Burger King headquarters with the remainder moving in phases in August 2002. Prior to the moving to its current headquarters in 2002, Burger King had considered moving away from the Miami area; Miami-Dade County politicians and leaders lobbied against this, and Burger King stayed.[53]

The company's previous headquarters were in a southern Dade County campus described by Walker as "sprawling" and "virtually hidden away."[53] The former headquarters were located on Old Cutler Blvd in the Cutler census-designated place.[54][55] The former Burger King headquarters as of 2007 houses rental offices for several companies.[56]

Franchises

Main article: Burger King franchises
A Burger King in London, England
Burger King restaurant in Leicester Square, London, United Kingdom

When Burger King Corporation began franchising in 1959, it used a regional model where franchisees purchased the right to open stores within a geographic region.[6]:64[5]:117 These franchise agreements granted BKC very little oversight control of its franchisees and resulted in issues of product quality control, store image and design, and operational procedures.[6]:64[5]:118

During the 1970s, structural deficiencies in Burger King's franchise system became increasingly problematic for Pillsbury. A major example was the relationship between Burger King and Louisiana-based franchisee Chart House,[6]:64 Burger King's largest franchisee group at the time with over 350 locations in the United States. The company's owners, William and James Trotter, made several moves to take over or acquire Burger King during the 1970s, all of which were spurned by Pillsbury.[15] After the failed attempts to acquire the company, the relationship between Chart House and Burger King soured and eventually devolved into a lawsuit.[15] Chart House eventually spun off its Burger King operations in the early 1980s into a holding company called DiversiFoods, which in turn was acquired by Pillsbury in 1984 and absorbed into Burger King's operations.[57][58]

As part of the franchising reorganization segment of Operation Phoenix, Donald N. Smith initiated a restructuring of future franchising agreements in 1978. Under this new franchise agreement, new owners were disallowed from living more than one hour from their restaurants – restricting the to smaller individuals or ownership groups and preventing large, multi-state corporations from owning franchises. Franchisee were also now prohibited from operating other chains, preventing them from diverting funds away from their Burger King holdings. This new policy effectively limited the size of franchisees and prevented larger franchises from challenging Burger King Corporation as Chart House had.[6]:64 Smith also sought to have BKC be the primary owner of new locations and rent or lease the restaurants to its franchises. This policy would allow the company to take over the operations of failing stores or evict those owners who would not conform to the company guidelines and policies.[15] By 1988, parent company Pillsbury had relaxed many of Smith's changes, scaled back on the construction of new locations which resulted in stalled growth of the brand.[10] Neglect of Burger King by new owner Grand Met and its successor Diageo,[23] further hurt the standing of the brand, causing significant financial damage to BK franchises and straining relations between the parties.[59]

A Burger King in Oaxaca, Mexico
A Burger King franchise adapted to operate in the historic district of Oaxaca, Mexico

By 2001 and after nearly 18 years of stagnant growth, the state of its franchises was beginning to affect the value of the company. One of the franchises most heavily affected by the lack of growth was the nearly 400-store AmeriKing. By 2001, the franchise owner, which until this point had been struggling under a nearly $300 million (USD) debt load and been shedding stores across the US, was forced to enter Chapter 11 bankruptcy.[60] The failure of AmeriKing deeply affected the value of Burger King, and put negotiations between Diaego and the TPC Capital-lead group on hold. The developments eventually forced Diaego to lower the total selling price of the chain by almost $750 million dollars.[59] After the sale, newly appointed CEO Bradley (Brad) Blum initiated a program to help roughly 20 percent of its franchises, including its four largest, who were in financial distress, bankruptcy or had ceased operations altogether.[61] Partnering with California-based Trinity Capital, LLC, the company established the Franchisee Financial Restructuring Initiative, a program to address the financial issues facing BK's financially distressed franchisees. The initiative was designed to assist franchisees in restructuring their businesses to meet financial obligations, focus on restaurant operational excellence, reinvest in their operations, and return to profitability.[62]

Individual franchisees took advantage of the AmeriKing failure; one of BK's regional owners, Miami-based Al Cabrera, purchased 130 stores located primarily in the Chicago and the upper mid-west region, from the failed company for a price of $16 million, approximately 88 percent of their original value. The new company, which started out as Core Value Partners and eventually became Heartland Foods, also purchased 120 additional stores from distressed owners and revamped them. The resulting purchases made Cabrera the largest minority franchisee of Burger King, and Heartland one of the company's top franchises.[63] By 2006, the company was valued at over $150 million, and was sold to New York–based GSO Capital Partners.[64] Other purchasers included a three way group of NFL athletes Kevin Faulk, Marcus Allen and Michael Strahan who collectively purchased 17 stores in the cities of Norfolk and Richmond, Virginia;[65] and Cincinnati-based franchisee Dave Devoy, who purchased 32 AmeriKing stores. After investing in new decor, equipment and staff retraining, many of the formerly failing stores have shown growth approaching 20 percent.[23]

International operations

See also: List of countries with Burger King franchises and Hungry Jack's
A Burger King restaurant in Mexico City
Burger King located in Chalco, Mexico City

While BK began its foray into locations outside of the continental United States in 1963 with a store in San Juan, Puerto Rico,[66] it did not have an international presence until several years later. Shortly after the acquisition of the chain by Pillsbury, it opened its first Canadian restaurant in Windsor, Ontario in 1969.[67][6]:66 Other international locations followed soon after: Oceania in 1971 and Europe in 1975 with a restaurant in Madrid, Spain.[68][69] Beginning in 1982, BK and its franchisees began operating stores in several East Asian countries, including Japan, Taiwan, Singapore and South Korea.[15] Due to high competition, all of the Japanese locations were closed in 2001; however, BK reentered the Japanese market in June 2007.[70] BK's Central and South American operations began in Mexico in the late 1970s, and by the early 1980s in Caracas, Venezuela, Santiago, Chile and Buenos Aires, Argentina.[15] While Burger King lags behind McDonald's in international locations by over 12,000 stores, as of 2008 it had managed to become the largest chain in several countries including Mexico and Spain.[71] To assist in its international expansion, Burger King has established several subsidiaries to develop strategic partnerships and alliances to expand into new territories. In Europe, Burger King's subsidiary Burger King Europe GmbH is responsible for the licensing and development of BK franchises in that market, Africa and western Asia.[72] In eastern Asia, the BK AsiaPac, Pte. Ltd. business unit handles franchising for East Asia, the Asian subcontinent and all Oceanic territories except Australia.[46][73]

Australia is the only country in which Burger King does not operate under its own name. When the company set about establishing operations down under in 1971, it found that its business name was already trademarked by a takeaway food shop in Adelaide.[74] As a result, Burger King provided the Australian franchisee, Jack Cowin, with a list of possible alternative names derived from pre-existing trademarks already registered by Burger King and its then corporate parent Pillsbury, that could be used to name the Australian restaurants. Cowin selected the "Hungry Jack" brand name, one of Pillsbury's US pancake mixture products, and slightly changed the name to a possessive form by adding an apostrophe "s" forming the new name Hungry Jack's.[68][75] After the expiration of the trademark in the late 1990s, Burger King unsuccessfully tried to introduce the brand to the continent. After losing a lawsuit filed against it by Hungry Jack's ownership, the company ceded the territory to its franchisee.[68] Hungry Jack's is now the only Burger King brand in Australia; Cowin's company Hungry Jack's PTY is the master franchise and thus is now responsible for oversight of the operations that country with Burger King only providing administrative and advertising support to ensure a common marketing scheme for the company and its products.[47]

A Burger King in Beijing, China
Burger King in Beijing International Airport, Beijing, China

Over a 10-year period starting in 2008, Burger King predicted 80 percent of its market share would be driven by foreign expansion, particularly in the Asia-Pacific and Indian subcontinent regional markets.[76] While the TPG-lead group continued BK's international expansion by announcing plans to open new franchise locations in Eastern Europe, Africa and the Middle East, and Brazil, the company plan is focusing on the three largest markets – India, China and Japan.[77][78][79][80] The company plans to add over 250 stores in these Asian territories, as well as other places such as Macau, by the end of 2012.[81] Its expansion into the Indian market has the company at a competitive disadvantage with other fast food restaurants such as KFC because of the aversion of the country's large Hindu majority to beef. BK hopes to use their non-beef products, such as their TenderCrisp and TenderGrill chicken sandwiches, as well as other products to help them overcome this hurdle to expand in that country.[76] 3G has reported that it will continue with the plans to grow globally, even ramping up the planned expansion to help increase their return on investment.[14]:1 It is expected that 3G Brazilian-based management connections in the region may help Burger King expand in Brazil and Latin America, where it has been having problems finding acceptable franchisees.[14]:2[82]

At the end of its 2010 fiscal year, Burger King is the second largest chain of hamburger fast food restaurants in terms of global locations, behind industry bellwether McDonald's (32,400 locations); it is the fourth largest fast food restaurant chain overall after Yum! Brands (parent of KFC, Taco Bell and Pizza Hut totaling 37,000 locations),[83] McDonald's,[84] and Subway (32,000 locations).[85]

Controversies and legal cases

Main articles: Burger King legal issues and Burger King (Mattoon, Illinois)
The Hoot's family Burger King in Mattoon, Illinois, unrelated to Burger King Corporation
The Hoots' family Burger King restaurant in Mattoon, Illinois, one subject of major litigation by Burger King

Burger King has been involved in several legal disputes and cases, as both plaintiff and defendant, in the years since its founding in 1954. Disputes involving these many legal topics have affected almost every aspect of the company's operations. Depending on the ownership and executive staff at the time of these incidents, the company's responses to these challenges have ranged from a conciliatory dialog with its critics and litigants, to a more aggressive opposition with questionable tactics and negative consequences.[86][87][88][89] The company's response to these various issues has drawn praise[90][91] as well as accusations of political appeasement from different parties over the years.[92]

Controversies and disputes have arisen with groups such as People for the Ethical Treatment of Animals (PETA), governmental and social agencies, and unions and trade groups over various topics. These situations have touched on legal and moral concepts such as animal rights,[93] corporate responsibility,[94] ethics,[95] and social justice.[95] While the majority of the disputes did not result in lawsuits, in many of the cases the situations raised legal questions, dealt with legal compliance, or resulted in legal remedies such as changes in contractual procedure or binding agreements between parties. The resolutions to these legal matters have often altered the way the company interacts and negotiates contracts with its suppliers and franchisees, or how it does business with the public.[91][90][96][97]

Further controversies have occurred during the company's expansion in the Middle East. The opening of a Burger King location in Ma'aleh Adumim, an Israeli settlement in the Israeli-occupied Palestinian territories, lead to a breach of contract dispute between Burger King and it's Israeli franchise due to the hotly contested international dispute over the legality of Israeli settlements in the Palestinian territories in accordance to international law. The controversy eventually erupted into a geopolitical dispute involving Muslim and Jewish groups on multiple continents over the application of, and adherence to, international law.[98][99][100] The case eventually elicited reactions from the members of the 22-nation Arab League. The Islamic countries within the League made a joint threat to the company of legal sanctions including the revocation of Burger King's business licenses within the member states' territories.[101][99][100]

A related issue involving members of the Islamic faith over the interpretation of the Muslim version of canon law, Shariah, regarding the promotional artwork on a dessert package in the United Kingdom raised issues of cultural sensitivity,[102] and, with the former example, posed a larger question about the lengths that companies must go to insure the smooth operation of their businesses in the communities they serve.[103]

A trademark dispute involving the owners of the identically named Burger King in Mattoon, Illinois, led to a federal lawsuit. The case's outcome helped define the scope of the Lanham act and trademark law in the United States.[104] An existing trademark held by a shop of the same name in South Australia forced the company to change its name in Australia,[105] while another state trademark in Texas forced the company to abandon its signature product, the Whopper, in several counties around San Antonio.[106] Legal decisions from other suits have set contractual law precedents in regards to long-arm statutes, the limitations of franchise agreements, and ethical business practices.[107][108] Many of these decisions have helped define general business dealings that continue to shape the entire marketplace.[109][110][111]

Charitable contributions and services

Burger King has two of its own in-house national charitable organizations and programs. One is the Have It Your Way Foundation, a US-based non-profit (501(c)(3)) corporation with multiple focuses on hunger alleviation, disease prevention and community education through scholarship programs at colleges in the US. The other charitable organization is the McLamore Foundation, also a non-profit, 501(c)(3) corporation that provides scholarships to students in the US and its territories.[112][113]

In various regions across the United States, Burger King and its franchises have aligned themselves with several charitable organizations that support research and treatment of juvenile cancer. Each year, these coalitions hold a fund raising drive called "A Chance for Kids", in which Burger King restaurants sell lottery-style scratch cards for $1. Each card produces a winning prize that is usually a food or beverage product, but includes (rarer) items such as shopping sprees or trips. In the Northeast, BK has affiliated itself with the Major League Baseball team the Boston Red Sox and its charitable foundation, the Jimmy Fund. The group runs the contest in Boston. In the New York City area, it operates the contest in association with the Burger King Children's Charities of Metro New York and the New York Yankees. Funds raised in these areas go to support the Dana-Farber Cancer Institute, located in Boston.[114][115] In Nebraska, the company is affiliated with the Liz's Legacy Cancer Fund "BK Beat Cancer for Kids" program at the UNMC Eppley Cancer Center at the University of Nebraska Medical Center in Omaha.[116] In the Pittsburgh region, it funded the establishment of the Burger King Cancer Caring Center, a support organization for the families and friends of cancer patients.[117]

Products

Main article: Burger King products
A Whopper sandwich
The Whopper sandwich, Burger King's signature product.

When the predecessor of Burger King first opened in Jacksonville in 1953, its menu consisted predominantly of basic hamburgers, french fries, soft drinks, milkshakes and desserts. After being acquired by its Miami, Florida, franchisees and renamed to its current moniker in 1954, BK began expanding the breadth of its menu by adding the Whopper sandwich in 1957. This quarter-pound (4 oz (110 g)) hamburger was created by Burger King's new owners James McLamore and David Edgerton as a way to differentiate BK from other burger outlets at the time.[118] Since its inception, the Whopper has become synonymous with Burger King, and has become the focus of much of its advertising.[119] The company even named its new kiosk-style restaurants Whopper Bars.[120]

The menu component of Donald Smith's Operation Phoenix was initiated in 1978 and lead to the addition of the Burger King Specialty Sandwich line in 1979. The new product line significantly expanded the breadth of the BK menu with many non-hamburger sandwiches, including new chicken and fish offerings. The new Specialty Sandwich line was one of the first attempts to target a specific demographic, in this case adults 18–34, members of which would be willing to spend more on a higher quality product.[5]:119 One of Smith's other significant contributions to the menu was the addition of a breakfast product line, which until this time was not a market Burger King had entered.[15] Besides the addition of the Croissan'Wich in 1983, the breakfast menu remained almost identical to the McDonald's offerings until a menu revamp in 1985.[15] This expansion introduced BK's "Am Express" product line, which added new products such as French toast sticks and mini-muffins.[121]

As the company expanded both inside and outside the US, it introduced localized versions of its products that conform to regional tastes and cultural or religious beliefs. International variations add ingredients such as teriyaki or beetroot and fried egg to the Whopper;[122] beer in Germany, Italy and Spain; and halal or kosher products in the Middle East and Israel.[123][124][125] To generate additional sales, BK will occasionally introduce limited time offers (LTOs) that are versions of its core products, or new products intended for either long or short term sales. Items such as the Texas Double Whopper and various sandwiches made with mushrooms and Swiss cheese have been rotated in and out of its menu for several years,[126][127] while products such as its 1993 Meatloaf Specialty Sandwich offering and accompanying limited table service, along with special dinner platters, failed to generate interest and were discontinued.[128][129]

A Burger King value meal
A meal including small french fries, a Whopper, Jr., a drink, and packets of Heinz ketchup.

In order to appeal to as many demographic groups as possible and better compete with its competitor Wendy's, Burger King added a multi-tiered value menu in 1993 with items priced at 99¢, $1.99 and $2.99 (USD).[15] The additions, part of then CEO James Adamson's back to basics program also called Operation Phoenix, were an attempt to add not only a value menu, but also a line of value meals.[130] The tiered menu was replaced with a more standard value menu in 1998, while the value meals were separated into their own menu segment.[131] This value menu featured seven products: Whopper Jr., five-piece Chicken Tenders, a bacon cheeseburger, medium sized french fries, medium soft drink, medium onion rings, and small shake. In 2002 and 2006, BK revamped its value menu, adding and removing several different products such as chili and its Rodeo Cheeseburger.[132] Many of these items have since been discontinued, modified or relegated to a regional menu option.[133] To better appeal to a more adult palate and demographic, BK introduced several new products to its menu in 2003, including several new or revamped chicken products, a new salad line and its BK Joe brand of coffee. Some of the new products, including its Enormous Omelet Sandwich line and the BK Stacker line, brought negative attention due to the large portion size, and amounts of unhealthy fats and trans-fats.[134][135][136] Many of these products feature higher quality ingredients like whole chicken breast, Angus beef, and natural cheeses such as cheddar and pepper jack.[137][138] Again, not all these products, such as the BK Baguette line, have met corporate sales expectations.[29]

An Burger King kitchen
Food being prepared in a Burger King kitchen in Italy

Like its menu, the equipment the company cooks its hamburgers with has also evolved as the company grew. The burgers have always been broiled mechanically; the original unit, called an Insta-Broiler, was one of two pieces of equipment the founders of Insta-Burger King purchased before opening their new restaurant.[4]:27[118] The Insta-Broiler worked by cooking 12 burger patties in a wire basket, allowing the patties to be cooked from both sides simultaneously.[4]:27 When McLamore and Edgerton took over the company, besides dropping the "Insta-" prefix, they switched to an improved unit, which they called a "Flame Broiler". Designed by the two and featuring stationary burners that cooked the meat on a moving chain, the unit broke down less often, while maintaining a similar cooking rate.[118] The company would stay with that format for the next 40 years until Burger King began developing a variable speed broiler that could handle multiple items with different cooking rates and times.[139][140][141] These new units began testing in 1999 and eventually evolved into the two models the company deployed system-wide in 2008–2009. Accompanying these new broilers was new food-holding equipment, accompanied with a computer-based product monitoring system for its cooked products.[142] The monitoring system allows for more concise tracking of product quality, while giving the company and its franchisees a method to streamline costs by more precisely projecting sales and product usage.[143]

Advertising

Main article: Burger King advertising
A Burger King crown on Nick Van Eede
The Burger King "crown", worn by Nick Van Eede

Since its foundation in 1954, Burger King has employed varied advertising programs, both successful and unsuccessful. During the 1970s, output included its Hold the pickles, hold the lettuce... jingle, the inspiration for its current mascot the Burger King, and several well known and parodied slogans such as "Have it your way" and "It takes two hands to handle a Whopper".[144][145][146] Burger King introduced the first attack ad in the fast food industry with a pre-teen Sarah Michelle Gellar in 1981. The television spot, which claimed BK burgers were larger and better tasting than competitor McDonald's,[6]:66 so enraged executives at McDonald's parent company that they sued all parties involved.[147][148] Starting in the early 1980s and running through approximately 2001, BK engaged a series of ad agencies that produced many unsuccessful slogans and programs, including its biggest advertising flop "Where's Herb?".[149][150]

Burger King was a pioneer in the advertising practice known as "product tie-in", with a successful partnership with George Lucas' Lucasfilm, Ltd., to promote the 1977 film Star Wars in which BK sold a set of glasses featuring the main characters from the movie.[151][152] This promotion was one of the first in the fast food industry and set the pattern that continues to the present. BK's early success in the field was overshadowed by a 1982 deal between McDonald's and the Walt Disney Company to promote Disney's animated films beginning in the mid 1980s and running through the early 1990s. In 1994, Disney switched from McDonald's to Burger King, signing a 10-movie promotional contract which would include such top 10 films as Aladdin (1992), Beauty and the Beast (1991), The Lion King (1994), and Toy Story (1995).[15] A partnership in association with the Pokémon franchise at the height of its popularity in 1999 was tremendously successful for the company, with many locations rapidly selling out of the toys and the replacements.[153]

Shortly after the acquisition of Burger King by TPG Capital, L.P. in 2002, its new CEO Brad Blum set about turning around the fortunes of the company by initiating an overhaul of its flailing advertising programs. One of the first moves by the company was to reinstate its famous "Have it your way" slogan as the corporate motto. BK handed the effort off to its new advertising agency, Miami-based Crispin Porter + Bogusky (abbreviated as CP+B). CP+B was known for having a hip, subversive tack when creating campaigns for its clients, exactly what BK was looking for.[29][30] One of CP+B strategies was to revive the Burger King character used during BK's 1970s/1980s Burger King Kingdom children's advertising campaign as a caricatured variation, now simply called "the King".[154][155] The farcical nature of "the Burger King" centered advertisements inspired an internet meme where the King is edited into unusual situations that are either comical or menacing, many times followed with the phrase "Where is your God now?"[156]

Additionally, CP+B created a series of new characters like the Subservient Chicken and the faux nu metal band Coq Roq, featured in a series of viral web-based advertisements on sites such as MySpace and various BK corporate pages, to compliment various television and print promotional campaigns.[157][158][159] One of the more successful promotions that CP+B devised was the creation of a series of three advergames for the Xbox 360.[160][161] Created by UK based Blitz Games and featuring company celebrity spokesman Brooke Burke, the games sold more than 3.2 million copies, placing them as one of the top selling games along with another Xbox 360 hit, Gears of War.[162][161] These ad campaigns, coupled with other new promotions and a series of new product introductions, drew positive and negative attention to BK, and helped TPG and its partners realize about $367 million (USD) in dividends.[163][164]

With the late-2000s recession hitting the 18-35 demographic targeted by the CP+B created ads particularly hard, the company saw its market share decline and the company move into the red. After the completion of the sale of the company in late 2010, the new ownership group terminated Burger King's seven year relationship with CP+B and hired rival firm McGarryBowen to create a new campaign with an expanded market reach.[165] As part of the new campaign, McGarryBowen terminated the use of the The Burger King in the company's advertising program in favor of a new program that focused on the food and ingredients in its new advertising campaigns.[166]

See also

Book icon Book: Burger King
Wikipedia books are collections of articles that can be downloaded or ordered in print.
  • McDonald's – Largest competitor in fast food hamburger restaurants in terms of number of locations. Second largest competitor in fast food restaurants.[84]
  • Subway – Largest single brand competitor in fast food restaurants in terms of number of locations.[85]
  • Wendy's – Third largest competitor in fast food hamburger restaurants in terms of number of locations.[167]
  • Yum! Brands – Largest company in fast food restaurants in terms of number of locations.[83]
  • Drive-through

References

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Coordinates: 25°46′57.99″N 80°17′14.56″W / 25.782775°N 80.2873778°W / 25.782775; -80.2873778

Fast food and fast casual restaurant chains in the United States
Hamburgers
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Beverages
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desserts
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