Burger King franchise
The second largest hamburger chain in the US and one of the largest in Europe, Burger King has over 16,000 locations around the world. Over the decades, the company has used the franchise model incredibly successfully and today the vast majority of its outlets are owned by franchisees. Franchising has allowed Burger King to expand around the world quickly and efficiently, turning it into a household name in the process.
As one of the best-known brands on the high street, Burger King is understandably an attractive option for entrepreneurs looking to invest in a franchise opportunity. Instantly recognisable and with a worldwide reputation, Burger King offers franchisees excellent brand awareness and the opportunity to be part of an international operation.
Before investing in any franchise, it’s important to take an in-depth look at its origins, its path to success and its aspirations. Understanding where a company has come from will help franchisees to get a clearer idea of its core values and how the business may develop in the future.
Origins of the Burger King Franchise
Like many of the biggest names in fast food, Burger King traces its history back to post-war America. In 1950s Jacksonville, a man named Keith Kramer was searching for a restaurant idea to invest in with business partner and relative Matthew Burns. Kramer got the idea for the fast food restaurant after visiting one of the early McDonalds locations. He realised that demand for this type of instant, affordable food was on the up and so decided to launch a venture of his own.
In 1953, they invented a stove called the Insta-Broiler and they named their restaurant Insta Burger King. The potential of the brand was soon spotted by two Cornell University students, James McLamore and David Edgerton. In 1954, these two eagle-eyed entrepreneurs bought one of the first Burger King franchises and opened a restaurant of their own.
Move to Miami
McLamore and Edgerton realised that the rapidly growing city of Miami was the perfect place to base their enterprise. Unlike Kramer and Burns, McLamore and Edgerton used a flame broiler instead of the insta broiler. This helped to streamline the process and removed many of the issues that the original Burger King had been struggling with.
By 1959, Burns and Kramer had begun to run into difficulties and started looking for buyers for the brand. McLamore and Edgerton’s restaurants on the other hand were going from strength to strength and so the two franchisees bought the company from the founders. By 1961, the newly re-named Burger King began selling its signature Whopper and franchises quickly began to spread across the US.
Pillsbury Company take over the Burger King franchise
By the late 1960s, Burger King had grown to become a major brand and in 1967 the Pillsbury Company bought the business for a huge $18 million. The investment provided by the new owners allowed Burger King to expand even more rapidly. More and more franchises opened across the country and just ten years later Burger King was the second largest burger chain in the US.
In an effort to outdo their rivals, Burger King poached McDonalds executive Donald N. Smith in 1978. He brought in several changes, one of the most important of which was that franchisees were no longer allowed to own franchises in other chains. Smith hoped that by limiting franchisees to the Burger King brand, they’d be more loyal and more motivated to make the brand a success. Smith also insisted that franchisees had to live within an hour from their locations. This rule was designed to cut down on absentee ownership and boost standards across the brand.
Although these changes forced some franchisees to sell up, in general these were unprofitable locations and poorly run restaurants. This allowed Burger King to raise its standards across the board and prevent sub-standard restaurants from bringing the brand down.
It was also during this period that Burger King began to directly rival other brands. To counter Ronald McDonalds’ popularity with children, the company introduced the Burger King, the Wizard of Fries and Sir Shake-a-Lot. The brand also introduced fish sandwiches to challenge popular chain Long John Silver’s and chicken sandwiches to rival KFC and Wendy’s.
These campaigns had a big impact on Burger Kings’ popularity and by 1980 profits were up 15%. However, this success didn’t go unnoticed and Donald N. Smith was soon poached again, this time to work at PepsiCo.
Norman Brinker and targeted advertising
When Smith left for PepsiCo, the challenge of beating McDonalds fell to Norman Brinker. Brinker had become part of the Pillsbury Company when his chain, Steak and Ale, was bought by the business and he was seen as the right man to win the burger race once and for all.
To this end, Brinker ran an ad campaign that specifically said Burger King burgers were bigger and better than those of their rivals. This campaign ignited the ‘burger wars’, raising the company’s profile in the process.
Although the ads were a success, Brinker soon left the company and sales quickly began to drop. This decline led to a takeover bid from British firm Grand Metropolitan PLC in 1989.
Burger King franchise and partners
Grand Metropolitan soon made some significant changes at Burger King. The company switched their soft drink contract from PepsiCo to Coca-Cola and worked with Walt Disney to tie their offers and promotions in with upcoming Disney films. This helped the company to boost brand awareness globally and increase its appeal to children and families, two things that were good for business.
During this time Grand Metropolitan acquired British burger chain Wimpy. This gave them the opportunity to rapidly expand Burger King’s presence in the UK and across Europe and was a major boost for the business.
Grand Metropolitan becomes Diageo
In 1997, Grand Metropolitan merged with Guinness to form Diageo PLC. This new firm soon began to focus on its drinks companies and Burger King seemed to be forgotten. This apparent neglect caused tension with franchisees and damaged the reputation of the brand.
In 2000, Diageo decided to focus solely on its drinks businesses and in 2002, Burger King was sold to TPG Capital for $1.5 billion. In 2006, TPG turned Burger King into a privately traded company and it began trading on the New York Stock Exchange on 18 May of that year. The sale of stock generated $425 million in revenue, the largest IPO of a US-based restaurant chain on record.
Buying a Burger King franchise
Although the Burger King franchise has had its ups and downs, it remains a world-famous brand and a household name. To become a franchisee, investors will need to have a net worth of between $1 million and $1.5 million as well as liquid assets of $300,000. Potential franchisees will also have to go through a rigorous interview process to ensure that they’re fully committed to the brand and have the drive necessary to make their venture a success.
If you’re interested in investing in fast food franchises, or if you want to find out more about the benefits of the franchise model, you’ll find lots of information on our site. Take look around today to find out more.