Burger King 2Q profit up 60%, sales rise on new menu items

Burger King Worldwide Inc. reported Wednesday a nearly 60-percent increase in second-quarter profit, saying turnaround efforts including menu and marketing moves in the U.S. and Canada are taking hold.

The second-quarter report marks Miami-based Burger King’s first as a newly public company, following its listing earlier this month on the New York Stock Exchange. Private-equity owner 3G Capital Partners Ltd. continues to hold a 71-percent stake in the burger brand, following its market debut, which was accomplished through a reverse merger with a public investment vehicle, Justice Holdings.

For the quarter ended June 30, Burger King reported net income of $48.2 million, or 14 cents per share, compared with $30.2 million, or 9 cents per share, in the same quarter a year earlier.

Global revenue fell 9 percent to $540.8 million, in part because the company is selling units to franchisees in an ongoing move to become a 100-percent franchised business — a goal the company said it may reach within 12 months.

Systemwide same-store sales for the 12,604-unit chain rose 4.4 percent, as a result of positive trends in both traffic and average check, Burger King reported.

Same-store sales rose 4.4 percent in the U.S. and Canada, marking the region’s second consecutive quarter of positive results. Company officials expressed confidence that ongoing menu and marketing efforts at Burger King will eventually close the gap behind arch rival McDonald’s.

In the U.S., a broad menu revamp in the spring, and the more recently launched barbecue-themed summer menu, has helped expand Burger King’s audience to include more women and seniors, said Steven Wiborg, BK’s executive vice president and president of North America.

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Wiborg said guests have responded particularly well to new beverages, like smoothies and frappes, as well as the chain’s chicken platform and sweet potato fries.

Though sales slowed slightly in July, Wiborg said he had high hopes for menu offerings in the pipeline this year, which he said would expand on existing platforms and include more themed limited-time offers.

The turnaround in the U.S. and Canada will continue to focus on four pillars that include menu changes, as well as marketing, remodeling and improved operations, said Bernardo Hees, Burger King’s chief executive.

“There is no silver bullet,” he said. “It’s not just about marketing or a new product. The four pillars must work together.”

Wiborg said the company’s heavier advertising efforts in the second quarter supporting the new menu launches have been effective, particularly in social media. After the summer menu debuted, he said social media mentions grew by 12.7 percent.

In the U.S. and Canada, about 40 percent of 7,469 units have been remodeled, and those units are seeing a 12 percent to 15 percent lift in average sales, said Wiborg.

Aggressive international growth also continued in the second quarter with two new joint ventures in Russia and China.

In Russia, the master franchise partner has committed to opening several hundred restaurants over the next few years, the company said. About 1,000 units are planned in China over the next five to seven years, making it the chain’s largest multi-unit development deal to date.

Both are modeled after a successful joint venture in Brazil, which has grown Burger King’s presence there from about 60 locations to 140, with 200 expected to open before year’s end.

The chain showed its strongest same-store sales growth in Latin America and the Caribbean, where a 10.5-percent increase was driven by restaurants in Brazil and Mexico. Same-store sales in Europe, the Middle East and Africa rose 3.3 percent; and in the Asia Pacific region rose 2.1 percent, the company reported.

During the quarter, Burger King refranchised 386 company-owned restaurants domestically, including the 278 sold to Carrols Restaurant Group, the chain’s largest franchisee. Another 78 units were refranchised in international regions.

At the end of the quarter, the chain’s 12,604 restaurants included 11,786 franchise locations, and Hees said he expected the refranchising effort to be completed within 6 to 12 months.

Hees noted that Burger King has seen more merger and acquisition activity in the past 12 months than it has in the past decade.

“It shows there’s a lot of interest in the business,” he said.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout