Burger King beefs up global operations

This great fast food franchise was founded in 1954 by James Mclamore and his partner David Edgerton who are basically two very successful businessman in the fast food industry. Actually it’s because they had the knowledge of how to run restaurants successfully that they were able to make a great history of Burger King. The first outlet was created in Miami, Florida and at that time the restaurant we all know today was not called Burger King.It was called Insta Burger King because they wanted to emphasize the fact that their food was done instantly so they could eat on the go. A Burger King franchise is expensive and you’d be surprised that although it is expensive almost 90% of franchises are not run by major enterprises. In fact many of them are run by family businesses and independent owners.

Issue

Should Burger King develop and strategy where a greater percentage of it’s restaurants are company owned vs. franchised? Analysis : Yes – Answer (Why) :

Improved control over operations at the retail level.

Franchising provides both a legal and institutional structure allowing detailed control over the individual unit’s marketing and operational programs. If you believe that it is critical for each unit’s success (as well as that of the system as a whole) that each unit follow recommended marketing and operational guidelines, franchising provides one of the strongest methods of achieving that objective.

Ownership mentality.Similar to a dealership, but with more emphasis in franchising, particularly where being a business owner (not merely dealing with one product line among many) and is more likely to devote time, attention and capital to growing the business, following the approved system and not walking away from occasional business challenges. As one observer put it: “The best fertilizer for growing a business is the owner’s foot firmly planted on the premises.

• Protect the Burger King image.
• Building the Burger King reputation.
• Greater loyalty to Burger King coporation. Company, wide marketing and support.
• Easier franchise sales (both individual units and area development arrangements).
• Clustering units to achieve dominant local presence.
• Easier retail sales for franchised and company-owned units.
• Fewer “breakaways” from the system.
• Regional and national market penetration, with establishment of dominant market share
• Easier access to lenders and other financing sources.
• Easier access to desirable locations and favorable lease terms.
• Increased barriers to entry by competitive concepts.

Analysis : No – Answer (Why) :

• Loss of franchise revenues in crisis risk to the Burger King corporation. Although not unique to franchising, the franchise model (when well managed) often incorporates valuable strategic options including franchisee input and creative participation by franchisees. Since all of the participants are part of a single “system” with a common identity, franchisees are more likely to participate in initiatives for the expansion and proper operation of the entire enterprise, sometimes producing new ideas as well as alerting the franchisor to operational non-compliance problems created by other franchisees in the systems. Franchising provides both a legal and institutional structure allowing detailed control over the individual unit’s marketing and operational programs. If you believe that it is critical for each unit’s success (as well as that of the system as a whole) that each unit follow recommended marketing and operational guidelines, franchising provides one of the strongest methods of achieving that objective. Both among prospective owners and with the consuming public, franchise systems generally have a superior image over other distribution approaches, particularly if there is uniformity as to retail presentation, marketing methodology, operational compliance, etc. , precisely the things which are easier to achieve within a franchise framework.
• Higher initial franchise fees.
• Higher royalty levels.
• Ability to leverage brand identity and require Franchisees to finance marketing campaigns.
• Greater value when the Franchisor goes public or otherwise realizes the value attached to the brand.

Conclusion

The history of Burger King shows that the founders wanted to create a warm feeling for the customers when they arrive in their restaurant and what better way of doing that than by handling the management over another family? It has been a little bit over 50 years now since its first outlet in the corporation is still running very strong. With a new competitor it becomes even harder and harder to create your own franchise and there is absolutely no sign of Burger King slowing down.