Burger King: A fifth owner for the troubled fast food giant

Burger King has just announced that it is to be sold (again) for around £3bn. Despite its slogan, “Have It Your Way”, BK has not been having it its own way in the long-running “burger wars”. As The Economist puts it, “the jury may still be out on whether BK or McDonald’s serves up the best fries, but when it comes to popularity with stockmarket investors, the maker of the Big Mac has supersized its lead in the past two years.” What has gone wrong for the company? Here are a few ideas.

Recession has favoured McDonald’s over BK, whose share price has halved since the summer of 2008. Same-store sales at BK have fallen for five successive quarters.
One problem is that BK has always had a higher proportion of sales to younger men, who have been hit especially hard by the recession, while McDonald’s has been broadening its appeal for several years with initiatives like serving relatively healthy salads and decent coffee. BK has struggled to do the same.
A second issue has been a significant increase in beef and other ingredient costs which have hit profits.
Thirdly, BK have been a bit too successful in marketing the appeal of their value meals. Customers have enthusiastically switched towards the cheaper items.
And what about the hassles caused by constant changes of ownership? Since the 1990s when it was owned by Pillsbury, it has changed hands to Grand Metropolitan, a British conglomerate, then to Diageo, a drinks giant. In 2002 it was sold to a consortium of private-equity investors: TPG, Bain Capital and Goldman Sachs. Each new owner has had to establish effective working relationships with the franchisees who operate the vast majority of the 12,000-plus Burger King restaurants in 73 countries.
The new owners hope to run the company as a private limited company so that they will gain some protection from the short-term pressures of the stock market while it figures out and invests in a new strategy to beat McDonalds.