CASCAIS, PORTUGAL – Burger King signs are seen at the local fast food restaurant.
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On Friday, Burger King said it plans to spend $400 million over the next two years on advertising and renovating its restaurants as part of a broader strategy to revive declining sales. America’s lagging behind.
The International restaurant brand chain announced a turnaround plan for its U.S. business in Las Vegas at its annual franchise conference. The investments are expected to base its adjusted earnings per share for 2022 and 2023 by about 10 to 12 cents per year. The company expects investments to begin successfully in 2025.
Wall Street analysts surveyed by Refinitiv expect earnings per share of $3.24 in 2023.
For the second quarter, Burger King reported similar-store sales growth in the United States, trailing its rivals. McDonald’s and Wendy’s. The burger chain has reported poor sales in the US for the past year, causing concern for Restaurant Brands CEO Jose Cil. During his tenure as CEO, Cil has also spearheaded efforts to revive Canadian demand for Tim Hortons, Burger King’s sister chain.
A year ago, Cil also mined Domino’s Pizza runs Tom Curtis as the new president of Burger King’s US and Canadian restaurants. Initial changes to Burger King include slashing menus to speed up driving times and cutting paper coupons to drive customers to use its mobile app.
Now, Burger King is preparing to make even bolder changes. They plan to spend $200 million to fund the remodeling of about 800 sites. Another $50 million will go toward upgrading about 3,000 restaurants with technology, kitchen appliances and building improvements. The company has more than 7,000 Burger King stores in the US
According to Burger King, historically, remodeled restaurants have averaged 12% increase in revenue in the first year and outperformed older locations over time. The company hopes that being more selective and strategic with its projects will produce even stronger sales growth, although it may take longer to see results.
“We could see the tweaks start hitting the market in mid-2023 and will continue into the future,” Cil told CNBC.
Burger King will also increase its US advertising budget by 30% by investing $120 million over the next two years. Those investments will begin in the fourth quarter.
“We expect that to start having an impact on sales next quarter,” Cil said.
An additional $30 million will be spent through 2024 to improve its mobile app, exceeding the digital fees that franchisees pay the company for the technology.
Burger King’s menu will also be upgraded. The company says it has developed a multi-year blueprint to revamp the menu, including developing new Whopper flavors, betting on the Royal Chicken Crispy sandwich and investing in more staff training. .
According to Burger King, this strategy has received support from franchisees that operate 93% of restaurants in the US. Operators will spend their own money with the company for remodeling and advertising.
Curtis and his a group that brings together a group of franchisees, representing a variety of regions and experiences, to deliver a strategy over the past three to six months.
“There were a lot of long nights and plane rides,” says Curtis.
In addition to the money they receive from Burger King, franchisees who upgrade their restaurants are expected to make a lot of moneyeinvestments to finance projects.
The company is also changing its incentive structure to incentivize operators to undertake larger-scale remodeling, which can be expensive and often requires a site to be temporarily closed. Previously, Burger King operators who remodeled their restaurant received advertising discounts and royalties for seven years.
The new program will provide franchisees with cash once the project is complete and allow them to choose the discount they receive on the royalties they pay to the company.
However, if profit targets are achieved, Burger King franchisees will have to pay higher fees for advertising funds.