Burger King Case Study

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IBS, UNIVERSITI TEKNOLOGI MALAYSIA SKUDAI JOHOR BAHRU, JOHOR

EXECUTIVE MASTERS IN BUSINESS ADMINISTRATION SEMESTER II – DECEMBER 2009/ 2010

MRF 0045 CASE ANALYSIS

BURGER KING – BACK ON TRACK PREPARED BY: NAME STUDENT ID H/P GROUP E-MAIL : : : : : FEIRULSHA BIN MOHD KHALID MR 091298 019-7108225 EMBA JB feirulsha@jsh.kpjhealth.com.my

PREPARED FOR: ASSOC PROF DR ROSMINI BTE OMAR IBS, UTM, SKUDAI, JOHOR BAHRU JOHOR

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EMBA BURGER KING CASE STUDY MRF 0045 FEIRULSHA MOHD KHALID MR091298

BURGER KING – BACK ON TRACK INTRODUCTION Founded 1954, Burger King (BK), a fast food restaurant business, grew from only 5 restaurants in Miami, Florida to 12,000 restaurants world-wide currently. Their outlets are located in 73 countries around the globe where 66% of them are in the US alone.

Their flagship product, Whopper - a big sized burger, went into the market 3 years after the company was founded.

The rapid growth in the number of BK restaurants was due to the implementation of the following expansion strategies: 1. Franchise Business and 2. Selling of territorial rights to investors At the same time during the years, BK also experienced several ownership changes resulting from selling and merger of companies.

However, 48 years after that, in 2002, they found themselves burdened with financial problems which were caused by those strategies and ownership changes.

COMPANY BACKGROUND

Burger King (BK) is a restaurant and bar industry, specializing in fast food outlets. The company was founded in 1954 by James Mc Lamore and David Edgerton in Miami, Florida. BK is currently the second largest fast food chain the world after McDonald’s. As at June 2009, they owned or franchised a total of 11,925 restaurants world wide1. Having its 1

NYSE Euronext

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EMBA BURGER KING CASE STUDY MRF 0045 FEIRULSHA MOHD KHALID MR091298

headquarters in Miami-Dade County, Florida, the company currently employed more than 37,000 employees and its outlets served approximately 11.4 million customers daily.

Some of their competitors are Mc Donald’s Corporation, Subway, Wendy’s International and Yum! Brands Inc. The company was listed in NYSE on May 18, 2006. Currently, it shares were traded at US$18.72 2 Burger King Holdings’ financial statement for financial year ended June 30, 2009 reported total revenue of US$2,537 Million, generating a net income before tax of US$285 Million , a net profit margin of 11.23%. Five years results for 2005 until 2009 are tabulated as follows3:

Financial year Revenue Increase in revenue % Net profit before tax NPM %

June 30 2009 (million) 2,537 3.34

June 30 2008 (million) 2,455 9.89

June 30 2007 (million) 2.234 9.08

June 30 2006 (million) 2,048 5.57

June 30 2005 (million) 1,940 -

285 11.23

293 11.93

223 9.98

80 3.90

78 4.02

The trend of increase in revenues saw a drop from 9.89% recorded between 2008/2007 to 3.54% for 2009/2008. For 2007 and 2008, the company experienced an increase in revenue above 9% from previous year’s, however in 2009 the percentage of increase shrunk to 3.54%. It also gave effect the company Net Profit Margin which dropped slightly from 11.93% in 2008 to 11.23% in 2009. 2 3

NYSE Stock Update – 10 March 2009 moneycentral.msn.com – burgerking

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EMBA BURGER KING CASE STUDY MRF 0045 FEIRULSHA MOHD KHALID MR091298

The company’s Assets and Liabilities are summarized as per tabulation below4:

Financial year Total CA Total Assets Total CL Total Liabilities

June 30 2009 (million) 371 2,707 482 1,732

June 30 2008 (million) 404 2,687 456 1,842

June 30 2007 (million) 404 2,517 434 1,801

June 30 2006 (million) 453 2,552 492 1,985

June 30 2005 (million) 634 2,732 394 2,246

From the above, looking at their current assets and liabilities, the company may have liquidity problem as its current liabilities is more than its current assets since 2006.

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moneycentral.msn.com – burgerking

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EMBA BURGER KING...
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