In 2016 Burger King Worldwide (referred to hereafter as Burger King)
was the world’s largest flame-broiled fast-food hamburger chain.
The chapter’s opening photo shows a Burger King in Tokyo, Japan.
A Bit of History
Starting out as Insta-Burger King in 1954, the company grew to five
restaurants in the next five years. In 1959, with its name shortened to
Burger King, it began domestic franchising. Beginning in the early 1960s
the company expanded internationally to the Bahamas and Puerto Rico.
Then it entered Europe, Asia, and Latin America in the 1970s.
Since 1967, Burger King has at times been publicly owned, a division
of other companies, a holding company owned by private equity
firms, and a privately-owned company. In fact, over a 20-year period,
it had seven different parents and corporate structures. The years of
transformed ownership caused changes in its emphasis, and its interests
have sometimes been secondary to those of its parent company.
Nevertheless, some of its international moves turned out to be highly
successful, and a few did not. It entered and then retreated from operations
in such countries as Colombia, France, Israel, Japan, and Oman.
(It has reentered some of these.) Much of Burger King’s early international
forays came about either because someone in another country
approached it or because a corporate manager was familiar with a
particular country and thought it would offer opportunities. Its retreats
have occurred because of not receiving adequate payments and because of having entered markets too small to support the necessary
infrastructure, such as slaughterhouse and beef-grinding facilities.
Over time, Burger King has taken a more systematic approach
toward restaurant expansion. It still sees substantial U.S. growth opportunities
but considers it to be a more mature market than other
countries. In seeking new places to enter, Burger King looks most favorably
at countries with large populations (especially young people),
high consumption of beef, availability of capital to franchisees for
growth, a safe pro-business environment, growth in shopping centers,
and availability of a potential franchisee with experience and
resources. Recently its model has been to grant franchise rights by
pairing a private equity firm with an experienced restaurant operator
in a joint venture (JV). In some cases, Burger King has become the
third party in the JV without committing capital to it.
Overall, Burger King has expanded abroad later than its primary
rival, McDonald’s. On the one hand, later entry is a drawback in very
small markets due to an inadequate number of suppliers, such as
only one slaughterhouse whose owners may be unwilling to work
with more than one customer. On the other hand, its later entry into
larger markets allows Burger King to benefit from earlier entrants’
creation of product demand and supply infrastructure. In Latin
America and the Caribbean, McDonald’s and Burger King compete in
almost all countries and territories, with Burger King currently leading
in the number of restaurants in about half of those markets.
Burger King’s Latin America and Caribbean group has many
sparsely populated countries (e.g., the Cayman Islands, Aruba, and
Saint Lucia) in which Burger King developed a presence long before entering more abundantly populated countries such as China, Russia,
and South Africa. The reason is largely due to its headquarters location
in Miami, which is often called “the capital of Latin America.â€
Because so many people from that region go to or through Miami, the
Burger King reputation spilled over there early on, which simplified
gaining brand recognition and acceptance. Further, Miami’s nearness
to Latin America and the Caribbean enhances the ability of Burger
King’s executives and franchisees to visit each other.
Reentering Colombia And France
Colombia
Burger King entered Colombia in the early 1980s but departed because
of Colombian royalty expatriation restrictions and prolonged economic
and political turmoil. By the time Burger King re-entered the country in
2008, the cities were safe for people to go out to eat, the peso was
strong, families had disposable income to eat out, and all the major
cities had large new shopping centers with food courts. Although incomes
were unevenly distributed, the richest 20 percent of the population
(almost 9 million people) had a per capita expenditure in 2007 of
over US$17,000. In addition, Burger King was able to sign franchise
rights with two well-established and experienced companies.
France
Burger King entered France in 1979, departed in 2001, and reentered
in 2013. When entering, Quick (a Belgian fast-food operator)
and McDonald’s were already well established there. Burger King’s
British parent, Grand Metropolitan, also owned Wimpy, a chain of
U.K. hamburger restaurants, and required Burger King to absorb the
chain. This sapped the resources needed for French expansion. When
Burger King left the French market, it had grown to only 16 restaurants
there, whereas McDonald’s had about 450.
When reentering France, Burger King was determined to put in
enough effort to compete. By 2015, it grew to 50 restaurants there,
and it then acquired Quick, which had about 500 restaurants. Those
in France will be re-branded as Burger King; whereas those in
Belgium and Luxembourg will maintain the Quick brand.
The BRICS
The possibilities in the BRIC countries are too great to ignore. Burger
King opened its first Brazilian and Chinese restaurants in 2004. While
Burger King has had success in both these countries, it has been able
to expand much faster in the former due largely to its recognition
advantage in Brazil. A half-million Brazilians fly into Florida each year,
where Burger King’s restaurants abound. In addition, about 300,000
Brazilians live in South Florida, most of whom maintain contact with
relatives and friends back home.
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