Burger King Isn't Clowning Around... Or Is It?
Apr 3rd 2012 2:35PM
Updated Apr 3rd 2012 4:02PM
Apparently the King being deposed from his No. 2 spot among U.S. burger chains was enough to light a fire under new Burger King owner 3G Capital to do something about it.
In what will assuredly be the most sweeping reforms of Burger King's menu in 58 years, the company is planning to move away from its young male-centric mode of thinking and target a larger swath of Americana. Over the coming years, the company plans to introduce 10 new items to its menu that include healthier options, but also options competing with what you might find at some of Burger King's peers.
In fact, as AP food industry columnist Candice Choi noted, the menu is starting to looking uncannily similar to McDonald's (NYS: MCD) . With its image growing stale in the early 2000s, McDonald's completely remodeled its stores and made them Wi-Fi friendly. It also took a hard look at its menu and introduced healthier options for a suddenly health-conscious consumer, including salads and snack wraps.
But McDonald's wasn't finished. It became a big player in the coffee market as well, taking on rival Starbucks (NAS: SBUX) by offering a high-quality brew for far less. Not only that, but it went for the smoothie market, which both Starbucks and Jamba (NAS: JMBA) have a big stake in. The key to McDonald's success remains its proactive ability to react to changing trends.
Burger King hasn't been so lucky. It has consistently been the last in the fast-food sector to innovate. Even Jack in the Box (NAS: JACK) , a considerably smaller chain, remodeled its stores a few years ago and has been growing same-store sales nicely ever since.
Burger King's plan of action includes adding Caesar salads, chicken strips, caramel frappe coffee and banana-strawberry smoothies to its menu, as well as redesigning its employees' uniforms and remodeling many of its locations. They key, of course, is getting franchisees on board with the remodel, and 3G is willing to offer a 50% discount off annual franchise fees in order to facilitate that happening.
The question now becomes whether or not this is too little, too late. Burger King's new owners bet the boat on international growth, but forgot when they were purchasing the company that domestic growth was the real issue. Since it lost the No. 2 spot in total U.S. sales to Wendy's (NYS: WEN) last month (with 1,300 more stores than Wendy's, no less), it's brutally apparent how stale the brand has become. If the King were smart, he'd be wise to give the Hamburglar a call and see if he can get any more pointers.
What do you think: Are Burger King's better days long gone, or will it mount one whopper of a comeback? Tell me about it in the comments section below.
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At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He just now realized how many terrible puns he could have made with the term "whopper" in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of McDonald's and Starbucks, as well as writing covered calls on Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that's always on the lookout for a Big Mac.
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