Burger King: Selling Whoppers in Japan
Burger King: Selling Whoppers in Japan
“International is where it’s at,” said Ron Paul, a Technomic consultant. “The fast-food burger category is going to find its better growth opportunity overseas. We’re close to saturation in the United States. That’s why McDonald’s has been so aggressive in overseas markets.”
That’s also why Burger King has to be so aggressive in Japan. McDonald’s entered the Japanese market 25 years ago and now has 2,000 outlets there generating $2.5 billion in sales – that’s half of the entire fast-food burger market in Japan. In addition, McDonald’s generates 4.7 percent of its corporate profits from its 7,000 units overseas; whereas Burger King generates only 19% of company sales from its 1,600 units overseas. Worldwide, Burger King ranks fourth behind McDonald’s, KFC, and Pizza Hut. With U.S. markets saturated, and the mad cow disease scare slowing sales in Europe, Burger King must find new areas to expand.
In Japan, Burger King will face stiff competition. Not only is McDonald’s well entrenched there, KFC also has 1,040 stores in Japan, making it number two in the Japanese fast-food market. Between them, Big Mac and KFC create a formidable barrier to the entry of other firms. These big players have taken most of the good locations, leaving only marginal sites for would-be competitors. Just ask the folks at Wendy’s, which made a major push in Japan in the 1980s, but after 16 years has only 67 outlets. Wendy’s is having trouble finding deep-pocket players who want to open fast-food restaurants. Even local officials of Daiei, Inc., which licenses Wendy’s in Japan, concede that the entry attempt has been a failure.
Burger King tried to enter the Japanese market once before. It began selling franchises there 20 years ago; franchisees paid an initial franchise fee plus royalties to the parent corporation. However, the royalties were too high and the operation failed. As if all that weren’t enough, the number two burger place in Japan is a
“International is where it’s at,” said Ron Paul, a Technomic consultant. “The fast-food burger category is going to find its better growth opportunity overseas. We’re close to saturation in the United States. That’s why McDonald’s has been so aggressive in overseas markets.”
That’s also why Burger King has to be so aggressive in Japan. McDonald’s entered the Japanese market 25 years ago and now has 2,000 outlets there generating $2.5 billion in sales – that’s half of the entire fast-food burger market in Japan. In addition, McDonald’s generates 4.7 percent of its corporate profits from its 7,000 units overseas; whereas Burger King generates only 19% of company sales from its 1,600 units overseas. Worldwide, Burger King ranks fourth behind McDonald’s, KFC, and Pizza Hut. With U.S. markets saturated, and the mad cow disease scare slowing sales in Europe, Burger King must find new areas to expand.
In Japan, Burger King will face stiff competition. Not only is McDonald’s well entrenched there, KFC also has 1,040 stores in Japan, making it number two in the Japanese fast-food market. Between them, Big Mac and KFC create a formidable barrier to the entry of other firms. These big players have taken most of the good locations, leaving only marginal sites for would-be competitors. Just ask the folks at Wendy’s, which made a major push in Japan in the 1980s, but after 16 years has only 67 outlets. Wendy’s is having trouble finding deep-pocket players who want to open fast-food restaurants. Even local officials of Daiei, Inc., which licenses Wendy’s in Japan, concede that the entry attempt has been a failure.
Burger King tried to enter the Japanese market once before. It began selling franchises there 20 years ago; franchisees paid an initial franchise fee plus royalties to the parent corporation. However, the royalties were too high and the operation failed. As if all that weren’t enough, the number two burger place in Japan is a