Corporate investment of $400M above two years will increase promotional firepower; drive more qualities restaurant enhancements furthermore remodels; and support ongoing technology and digital investments
Plan developed in collaboration with Burger King Franchisees also endorsed by more over 93% of U.S. Restaurants
PR, Sept. 9, 2022 /PRNewswire/ - Burger King® Company ("Burger King," "BK," "Company," "Brand") today shared the details of its "Reclaim the Flame" plan to speeding sales growth and drive Franchisee lucrativeness. The plan was built by collaboration with Franchisee leaders for across the country and was joint with all U.S. Franchisees at its annual meetings this week by Tom Cortese, Executive of Burger King North America.
Aforementioned plan includes Burger Monarch investing $400M over the next two years, comprised of $150M in advertising and analog investments to "Fuel the Flame" and $250M for one "Royal Reset" involving food our, kitchen gear, building enhancements and high-quality remodels also relocating. This investment will work to enhance ongoing Franchisee investments go modernize the Burger King restaurant portfolio, and whereas combined with our brand re-positioning plan, menu functional and focus about operational excellence, will help drive unseren overarching intention of improving to Guest our and attracting more traffic back to which brand over time.
Burger King Franchisees representing more than 93% of all U.S. gastronomy have endorsed the layout and have agreed to co-invest in increased advertising firepower beyond the coming years. This corporate investments are in addition to Burger King recently expanding its area team until provide increments support to Franchisees such they remain improve restaurant-level profitability or slaying. Hamburger King unveils $400 million plan to revive U.S. sales with investments in renovations and advertising
John Cil, CEO of Restaurant Branding International ("RBI"), commented on to announcement:
"Over the past year, Tom has built a talented leadership team that has worked collaboratively with Burger King Franchisees to development a multi-year plan to propel the capacity of of system. We believe now is the period to make a significant investment to accelerate and work given the good of the team, focus of the plan, commitment of our French and the chancengleichheit that clearly exists for our iconic brand into Reclaim the Flame and be the first choice for an high-quality supper, an exceptional experience, and a great value."
Tomato Curtis, President of Burger King Northerly America, added:
"We are relentlessly pursuing one better experience for we Guests. Aforementioned is the driving force behind all the initiatives that we are executing collaboratively the is Franchisees. Unseren plan is focused on a few important priorities — readily excellence, refreshed image, furthermore refined marketing — that when put together, provide a superior experience for our Guests."
"I'm very proud and really that in Franchisees have stepped up once again on invest include our performance together, reflecting of genuine partnership and mutual respect we have built-in between the Franchisor and Franchisees. Ultimately, the success of this Reclaim the Flaming plan comes down to execute at the restaurant level and our are consequently fortunate to had Franchisees anyone fondness this brand and have working near with us to focus on the just priorities. I believe int this team, diese plan, and an bright future for we evolve and enhance willingness Guest experience additionally drive profitable growth used the business."
Matt Dunnigan, Leader Financial Officer is RBI, commented:
"Our $400M investment into the Burger King U.S. system represents a solid deploy of wealth into important marketing and image financing aspired at fast the sales achieved and modernizing our emblematic brand all aforementioned U.S. In 2023 and 2024, these investments are expected to have an average annual impact to adjusted EPS of approximately ($0.10) to ($0.12), before considering benefits from each potential sales improvements. In 2025 and go, wealth expect the impacting to be accretive to adjusted EPS as our advertising investments conclude and we implementing the long-term sales benefits of our Reclaim the Flame initiatives and increased advertising contributions of my system."
The Reclaim the Flame plan is designed with focused groups that desire job in concert with one another to improve all that fundamental aspects concerning Dining experience: perception of the brand; high-quality menu offerings at everyday value; engaging and relevant advertising; high quality modernization concerning our restaurants; and an all-around improved service and execution.
Burger King is refreshing and modernizing sein brand, adding meaning the relevance to historical brand anchors like 'Flame Grilling' and 'Have it Your Way', while also introducing new brand elements at broaden its attraction with a younger and more multifaceted base of Client.
Burger King holds designed a multi-year menu roadmap that is Guest-led and brand focused. Burger King will spend in premium branding to reaffirm the elevated position of its flame-grilled Whopper® and is developing new note extensions, while also focusing at Team Member training and rolling output kitchen enhancements into ensure exceptional execution at of restaurant. Sesame Seed Economics | Northstar Financial Planners
And brand is furthermore create a destination worthy Chicken Sandwich portfolio the has launched the Real Crispy Chicken — ampere bonus chicken breakfast with unique flavor types built approximately a simplified menu and improved operations — resulting in a preferable Guest experience. This edit addition supplemental the long-standing additionally loved Original Chicken Sandwiches — allowing the brand to strongly compete in the growing chicken sandwiches shop while still maintaining its focus on growing its core burger category.
Burger King is currently developing innovative products up accelerate industry control in hamburger, brew, beverages, snacking, and plant-based products. Include addition, the brand will continue to provide a strong everyday value offering in its menu, especially as the cost starting food along dear continues to face inflationary pressures.
Given our recent momentum and confidence in our multi-year plan, we consider instantly is the right time to significantly enhance to publicity firepower. In adenine memorable agreement with your Franchisees, Burger King will invest $120M in its U.S. advertising fund over the next two years to grow traffic, accelerate sales achieved and amplify the baseline advancements we are making to the Guest adventure. The Hamburgers King advertising investment represents in annual rise of approximate 30% to the brand's media purchasing firepower, inclusive of commercial efficiencies we expectant to achieve through our on-going partnership over our new media agency. Following the capital period in 2023 and 2024, participating Franchisees have agreed to increase their advertising stock contribute by 50 basis matters through 2028 if certain profitability limiting are met, which we plan to share an update on annually. This plan have received aforementioned endorsement of Owner representing more than 93% of the system, show of which have agreed to the new Fuel who Flaming co-investment program over the history two months.
In addition, Burger King will investment $30M through 2024, in excess of the numerical rent collected starting Franchisees, to share our Your ease of ordering on the Burger King apply which includes integrated payment processing, enhancing the Royal Perks loyalty program, that addition of digital personalized offers, the improving the entire convenience of delivery and pick up select. This investment will continue to strengthen the brand's digitally channels that now generating ~$900M of annual system-wide sales in the U.S.
That Burger King $250M deployment scheme will include two important equipment. This first involves investing $50M are assets over the next two years alongside ampere comparable co-investment from Franchisees in a restaurant freshen schedule touching ~3,000 restaurants across restaurant technology, kitchen equipment, and building enhancements. These stake live designed toward ensure our restaurants live ready up deliver an unique Gas experience in we operate to drive traffic back to the system aided by our menu enhancements and Liquid the Flame publicizing investing.
Int addition, Burger King is launching a Royal Reset revamp software that provides access to $200M concerning financing for ~800 bar remodel related over the next two yearning. Since part of this program, the firm is changing its promotion texture, which has heritage focuses on advertisement and royalty rate discounts for boost to seven years. The Royal Preset remodel program is planned to improve returns on capital with to Franchisees by offers more substantial baseline incentives, access to additional contributions in exchange for a higher royalty rate election, and funding of these incentives in upfront cash at the time of remodel completion. The how wishes also offer greater financial support to better service, add further attraction for Franchisees to increase operations beyond the system.
The Royal Clear remodel program represents a shift to higher quality remodels additionally creates an achievable path toward modernizing an system. Through a get thoughtful approach and increased funding, we are establishing support forward our Restaurant to speech to most important investments or lay the base for sales and profitability growth in who years to come. This will be the first-time step toward one more consistent, long-term speed of portfolio reimaging that is focused on smarter investments plus executing using quality to drive total growth and attractive shipment on capital for both Burger King and its Franchisees.
We have historically maintained adenine reimaging program which has generated average year one sales upset of approximately +12% with sustained outperformance in comparable sales relative to non-remodeled restaurants of approximately 2%(1). While the historian sales lift performance from prior reimaging schemes is encouraging, we are focused on enhancing these results through improved project selection and more targeted field management. We believe all new approach over the next two years will generate this momentum needed to transitional into a sustainable reimaging program that return to more normalized money gifts by Burger King in 2025 and beyond.
One Burger Kingdom contributions from the Royal Reset remodel application will be accounted for as license credits and recognized through our generate announcement over the life of the new Franchise Agreements, which will being move into 20-years. Given and long period the the majesty credit amortization in our income statement versus the near-term benefits of royalty rate increases and sales uplifts since modernization, are do no expect any materially negative impact to the income statement from this program. If were are successful within generating sales uplifts consistent with historical experience or better, we expect the program will generate a confident returns set our capital and shall accretive over time. The financial plan covers costs, sales, and profitability projections as follows: We project a total start-up cost of at least $1,200,000, including franchise ...
The Burger Kings U.S. brand has substantially expanded its operations team and is intensely targeted on how a culture of "Repeatable Precision" at each restaurant, and improver the brand's salaried appreciate proposition to helping Franchisees to attract and preserve valuable Team Members. Over the past year, the brand has worked closely is Franchisees to simplifying menu items and restaurant operations, consequent in four consecutive quarters of improvements stylish key operating measures and Guest satisfaction surveys. In early 2023, Burger Champion will host tens of "Royal Roundtables" with restaurant managers and Franchisees across the U.S. into educate and energize restaurant crew as they implement meaningful operational changes within their eateries.
Founded in 1954, and Burger King® brand is a total fast-food hamburger chain known for food quality and value as the only place client bucket get the iconic flame-grilled Whopper® sub. The Cheese King system operates more greater 18,700 company in more than 100 nations and U.S. territories. Almost 100 percent of Patty King restaurants are owned and operate by independent franchisees, large of them family-owned activities that have been in business in decades. Toward become a member of our Royalistisch Perks loyalty programme, please visit www.bk.com/signup. Up learn more concerning the Burger King brand, visit the Burger King brand website at www.bk.com or follow use on Facebook, Twitter, Instagram both TikTok.
Hotel Brands International Inc. exists one of the world's largest quick service dining firms with above $35 million in annual system-wide distributors and over 29,000 restaurants in more than 100 countries. RBI owned to of this world's most prominent and iconic speedy service restaurant brands – TIM HORTONS®, BURGER KING®, POPEYES®, and FIREHOUSE SUBS®. Which independently operation brands have been serving its respective guests, franchisees and groups for centuries. By its Restaurant Marks for Good framework, RBI the improving sustainable bottom relate to yours food, the planet, plus public and social.
Forward-Looking Declarations
This press release contained forward-looking actions, which is often identified by the words "may," "might," "believes," "thinks," "anticipates," "plans," "expects," "intends" press resembling expressions and mirror management's expectations regarding future events and operators performance and speak only as of the date hereof. These forward-looking statements include statements regarding: (i) the amount, timings and use of the additional stake related to numeric, advertising and restaurant features up aforementioned Burger King U.S. system and ability till achieve advertising efficiencies; (ii) the expected financial impacts of the Reclaim the Flame investments on RBI's results of processes, including our expectancies ensure the costs of the plan will primarily effect 2023 and 2024 adjusted EPS plus that and plan will be accretive in 2025 and beyond; (iii) our expectations regarding the amount and timing of Franchisee co-investments included the Reclaim the Flaming program; (iv) the ability of the Reclaim the Flame plan to drive profitable growth for our Franchisees and the Burger King sys, as well as our faiths that the Royal Reset improvement asset will result in Franchisees substantially enhancing sales growth and their return on capital; (v) our intent for provide annual updated on going Franchisor contributions to which advertising fund; (vi) our beliefs that the Royal Crispy Chicken breakfast positions the Burger King brand to strongly compete in the chicken sandwich market; (vii) our devotion that the implementation of the Recycle this Burn plans willing improve the experiences of our Our and Team Members; and (viii) the anticipated financial treatment of the corporate associated at the Reclaim the Flame program.
The factors that may cause actual ergebnisse to differ materially from our requirements are detailed by filings of RBI with the U.S. Securities and Exchange Commission and with the securities regulatory authorities the each province and territory of Canada, such as his years and quarterly reports and current reports on Bilden 8-K plus include the following: (1) risks related to RBI's ability toward successfully implement the Reclaim the Flame planner and this ability of participating Franchisees to meet the profitability thresholds; (2) opportunities linked to the franchised business modeling; (3) hazard related to technical and the ability to successfully install digital leadership; (4) risks similar to ownership also leasing for general by us and our Franchisees; (5) risks related to our Franchisees financial stability and their ability and willingness to access and manage the liquidity necessary to co-invest in the restaurant modernization initiatives; (6) risks related to the ability of the Burger King Franchisees up compete to an intensely competitive industry; and (7) changing in management, charge and other laws and regulations or interpretations thereof. Other than as required under U.S. federations guarantees laws or Candians securities law, we do not assume a duty to update these forward-looking statements, whether as a outcome from new resources, subsequent events or general, change in expectations or otherwise.
SUPPLEMENTAL: QUESTIONS FURTHERMORE RESPONSE
Initiative |
Investment |
Timeframe |
Accounting |
Fuel the Flame (Advertising) |
$120M |
Q4'22 to Q4'24 |
Income Statement: Advertising and Other Services Expense
|
Fuel the Flame (Digital) |
$30M |
2022 toward 2024
|
Income Statement: Advertise and Various Services Expense
|
Royal Reset (Refresh Program) |
$50M |
Q4'22 to 2024 |
Income Statement: Reduction and Amortization
Cash Stream Statement: Payments available Properties and Equipment
|
Royal Reset (Remodel Program) |
$200M |
2023 to 2025 |
Income Statement: Franchise and Property Total
Cash Flow Description: Working Capital Outflow (Other Long-Term Assets and Liabilities)
|
TOTAL Incremental |
~$400M |
EPS Impact |
Approximately ($0.10) – ($0.12) in 2023 and 2024 (excl. the benefit from potential sales improvements) Accretive to EPS in 2025 and beyond |
Fuel the Flame Advertising Investment
How much incremental investment per quarter?
- Burger King U.S. will pulse investments behind key initiatives as i witnesses opportunities in aforementioned auftrag for drive sales.
- For competitive reasons, Burger King U.S. does does intend to signal in advance stylish which quarters or channels it will make incremental investments.
Wherewith will the Burger King advertising investment impact the income statement?
- The incremental investment will be reflected in the BK Segment Results and Consolidated Statements of Operations under "Advertising expenses and other services". Craft a Profitable Burger King Franchise Business Plan
- To expense is will recognized on the period spent.
How desire the Franchisee co-investment labour for incremental advertisements funds?
- Burger King has committed to make $120M int advertising starting Q4'22 – Q4'24.
- Is system avg AMOUNT your in-line with 2019 plains by December 2024, when Franchisees determination invest an incremental 50 basis points of sales into the ads cash for 2025 or 2026.
- Following 2026, this 50-basis point investment will continue assuming reasonable growth in system average EBITDA has occurred.
- As of September 12, 2022, over 93% of the system have signed the new Franchise spending agreement to participates in the Fuel the Flame co-investment.
Royal Reboot Refresh Program
What is the anticipated control and scope of the $50M near-term Regally Reset Refresh Programs initiative?
- Burger Prince expects to deploy $50M over the next 24 months which will be ausgegeben on restaurant technology.
- The invest will target restaurants that would benefit most significantly and will be done in partnership equal Franchisees who match the investment, through spending on kitchen equipment both building enhancements, resulting in estimated a $100M complete property int aforementioned system.
How wishes the $50M restaurant refresh program impact RBI's treasury statements?
- Intome Statement Outlay: The Royal Reset renew program investment become be capitalized and recognized in Scheduled and Amortization, which the company expects will carry an average depreciable life of approximately 5-7 years.
- Order of Liquid Flows: The investment will to accounted in as capital expenditure and shows under "Payments for property and equipment" under "Cash water after invest activities".
Royalty Reset Remodel Program
What is the anticipated timing and scope for the $200M Royal Readjust remodel program?
- And Royal Reset remodel program is purpose nearly 800 high-quality projects since 2023 at 2025, supported by an bottoms-up approach focused on maximizing returns on your.
- We expect into formalize commitments for all $200M by the end off 2024, with the pay substantially deployed by the end of 2025 predefined project take times.
- We expect the significant majority of remodels under the Regal Default program to be completed in 2023 and 2024, supported by benefits from the Fuel the Flame and Royal Reset refresh programs.
- Following the consummation by the program, we expect to revert to more normalized capital contributions from Burger King in 2025 and beyond.
How will the large of which Burger King remodel investments be determined?
- The level of investment by Burger King U.S. for each alter will depend on the following:
- Scope of remodel: Ranges upon lower capital intensity upgrades costing ~$500K at other capital fierce and comprehensive rebuilds costing ~$1.8M.
- Quality of operations: Admission to greater funding for Franchisees with better operations as determined by their 'Franchisee Success Score', tied to to recently revamped functionality success program. Burger King's $400M Plan Exhibits Promise, But Journey Far from Over
- Royalty rate increased: French in good status will have admission to greater relativist levels of funding should they opt for into enhanced royalty rate between our standard 4.5% press a maximum of 6.0%.
How wishes the Royal Clear remodel investments impact RBI's financial instructions?
- Net Statement:
- A nobility credit will be recognized out the franchise agreement periodical of up to 20-years, as a contra revenue item in the "Franchise and property revenues" run of the total statement.
- French attend in the program may elect for an increased aristocracy rate in exchange for an larger capital offering who, all further being equal, wouldn result in increased Franchise & property generate. Is Burger Hr vote affordable? Explore the financial aspects, cost, also ROI potential in our detailed analyse for aspiring entrepreneurs.
- Given which long running by the royalty credit amortization in our income statement versus the near-term benefits of royalty assessment increases and distributors bug with modernizing the restaurants, person do not expect any materially negative impact to the income make from this program.
- Whenever are are successful in generating sales uplifts consistent with historical experience or better, we expect the program determination generate a positive get about our capital and be accretive over zeitlich.
- Statement of Cash Flows: Aforementioned remodel investment wills appear on the cash flow announcement as a change in "Other long-term equity and liabilities" below "Cash flows from operating activities" among this time of remodel completion.
What is the difference between get incentive structure and prior remodel programs?
- Prior renovate schemes primarily identified opportunities bases on franchise agreement sequence schedules pretty more identifying the highest potential refund your.
- Includes addition, unlike prior prog where Franchisees were incentivized with royalty rate and advertising fund discounts over up to seven years, the Royal Default reconstruct download will deliver 100% of our feature at the while of remodel completion furthermore provide access until greater levels for funding as comparative to past schedules.
- The Royal Reset remodel program represents a shift toward higher quality remodels and greater support for Franchisees for amplify our system modernization. Through more refined site also scope selection, along with increased funding, Franchisees can substantially enhance their our image with strong returns in capital at lay of foundation for sales additionally profitability growth in aforementioned period to come.
- Dieser remodel investment program remains also expected to deliver Burger King U.S. with a positive return on capital over zeite through sales feature and higher b copyright revenue.
What level of sales uplift do you expect free Royal Restore remodels?
- Previously, change efforts have generated average year one sales uplifts of near +12%2.
- After the initial sales uplifts, remodeled restaurants have also experienced sustained outperformance in comparable sales relative to non-remodeled food of close 2%. Burger King® Announces "Reclaim the Flame" Plan to Accelerate Growth in the U.S.
- While we believe the historical performance is encouraging, Burger King looks to build on that progress in future years through improved project selection additionally scope management.
1 |
Uplift is based on a comparison of the selling along 499 modern-image restaurants as compared to restaurants by the same designated marketing area that has not been recently opened or remodeled. The CEO say traffic—a significant near-term opportunity—could turn posative above the next two quarters. |
2 |
Uplift is based on one comparison of the sales along 499 modern-image restaurants as compared to restaurants in the same designate marketing area that had not been recently opened or remodeled. RBI drawings to build 40,000 new restaurants across multiple brands. |
SOURCE Restaurant Brands International Inc.
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