Image source: WTSP
On Friday, Burger King announced plans to spend $400 million over the next two years to promote and renovate its restaurants.
The decision is part of a broader strategy to revive US sales.
Investment
Burger King shared its plans for Las Vegas at its annual franchisee conference.
The investment is expected to increase by 10 to 12 cents a year based on adjusted earnings per share this year and next.
The company expects the investment to pay off in 2025.
Meanwhile, Wall Street analysts polled by Refinitiv expect earnings per share of $3.24. share next year.
Sale
Burger King’s US same-store sales growth was flat in the second quarter.
The burger chain has fallen behind rivals like McDonald’s and Wendy’s, with weak U.S. sales over the past year.
The sales numbers have worried Restaurant Brands CEO Jose Cil.
During his tenure as CEO, Cil worked to revive demand for Burger King’s sister chain, Tim Hortons, in Canada.
Last year, he also hired former Domino’s Pizza CEO Tom Curtis as Burger King’s new president in the US and Canada.
Some of Burger King’s changes include a more streamlined menu to reduce wait times and fewer paper coupons to encourage customers to use their mobile app instead.
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Changes
Burger King will make bolder changes.
The company plans to spend $200 million to finance renovations at more than 800 locations.
More than $50 million will go toward upgrading more than 3,000 restaurants, including improvements to technology, kitchen equipment, and buildings.
Burger King hopes that a more selective and strategic approach to other projects will lead to better revenue growth, although it may take some time to see results.
“We might see remodels start to hit the market mid-2023 and going forward,” said Cil.
“It should really be a gradual ramp of the business over the course of the couple of years.”
The company also increased its advertising budget by 30%, investing $120 million over the next two years. Investments will start in the fourth quarter.
“We expect that to start having an impact on sales over the next quarter,” Cil said.
$30 million will be spent on improving mobile apps by 2024.
Burger King also plans to improve its menu through a multi-year project, including developing new Whopper flavors, committing to the Royal Chicken Crisp Sandwich and investing in more employee training.
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Franchise support
Burger King’s strategy is supported by subsidiaries that operate 93 percent of its restaurants in the United States.
Operators and companies will spend money on renovations and advertising.
Tom Curtis and his team have been building a group of franchisees over the past three to six months to develop a strategy.
In addition to Burger King’s funding, franchisees upgrading restaurants must make similar investments to finance these projects.
Burger King is also changing its incentive structure, prompting operators to do a major makeover.
The operator of the previously renovated Burger King restaurant received discounts on advertising and license fees for more than seven years.
The new program also gives them money after projects are completed and allows them to choose a discount on the royalties they pay to the company.
However, if profitability targets are met, Burger King franchisees will have to pay higher ad fund fees.
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