At the end of 2002, Burger King, the second largest fast food hamburger chain in the world, was in financial trouble. Sales were dropping and its franchisees were confronted with heavy debts. One after another, its franchisees including its largest independent franchisee, AmeriKing, filed for bankruptcy protection. Burger King US’ sales in 2003 dropped to US$7.9 billion from US$8.3 billion the previous year. Burger King’s introduction of salad and chicken baguette sandwiches in its menu as a response to fight obesity made no significant impact on sales. The CEO of Burger King, Brad Blum was then assigned to find ways to restore Burger King’s market position and image. The key concerns were the financial situation, the marketing strategies associated with the menu, and the promotion of best practices in management.
In 1954, James McLamore and David Edgerton founded Burger King Corporation (BKC) in Miami. It started with a simple meal concept where families were served reasonably-priced broiled burgers. A drive-in facility made the eating-out experience highly convenient. Burger King also introduced dining rooms. Back then, it was the first, fast food outlet that offered such luxury. Three years later, Burger King introduced the “Whopper” burger in This case was written entirely from published sources and was prepared as a basis for class discussion. It is not in any way intended to illustrate either effective or ineffective handling of a managerial situation. The author would like to thank New Fong Yen, a UKM MBA student, for her assistance in preparing this case and Encik Ahmad Ikram Abdullah (a Fellow at Institute of Strategic and International Studies Malaysia) for editing this case.
Proceedings of …Seminar 2009: Case Studies in Malaysia
its menu. As the name implies, Whopper is a big-sized burger with sauce, cheese, lettuce, pickles and tomatoes specially prepared for those with a huge appetite. The introduction of Whopper was very successful and it soon became Burger King’s flagship product.
BURGER KING’S FRANCHISE CONCEPT
To speed up expansion, Burger King actively pursued the franchise business model. However, there was a difference. Its franchisees both owned and managed their outlets independently. The two founders of Burger King took their initial payments and left their franchisees pretty much on their own. In addition, Burger King sold exclusive territorial rights to investors and large business operators. These large business operators bought the territorial rights, build as many stores as they could possibly wish and even sold part of the territorial rights to other investors. These other investors in turn, diversified the business offerings in their restaurants. It was apparent that with this approach, McLamore and Edgerton had either very little or
totally no control over the franchisees’ business operations. Nevertheless, the system was showing good results and business expanded rapidly [2, 5, 6]. With this unique franchise method, Burger King was heavily dependent on its
franchisees. In fact, franchisees represented more than 10,000 of Burger King’s almost 11,000 restaurants worldwide and contributed a substantial portion towards the chain’s performance. Burger King’s franchisees owned the stores instead of Burger King . Also, with this highly independent structure, it is almost impossible to maintain consistent quality and service standards .
BURGER KING MANAGEMENT
Burger King began with five restaurants in Florida. It was not long before the number increased with more restaurants being opened nationwide. In 1967 however, James
McLamore and David Edgerton decided to sell the Burger King Company to Pillsbury, a home baking food giant. At that time Burger King was fast growing into becoming the third largest fast-food chain in the US. McDonald’s lead as the industry leader...