Burger King: SWOT Analysis

Strengths

Geographic Diversification

Burger King has over 11,500 fast food restaurants located in over 70 countries. 7,207 of its restaurants are located in the United States (62%) and another 4,358 are established in international locations (389%) such as Asia, the Middle East, Africa and Canada.

Established Market Share

Among Fast Food restaurant chains, Burger King is second only to McDonalds and holds a 15% share of the United States market. The company’s profitability has also increased in recent years. In the period 2006-08, its operating profit has increased from $170 million in FY2006 to $354 million in FY2008.

Globally Recognized Brand

Burger King is able to boast a brand that is widely recognized thanks to its flagship slogan “have it your way”, the whopper sandwich and most recently enhanced by its mascot known as “the King”. The company was recently ranked 7th in brand awareness.

Superior Growth Plan

Approximately 90% of Burger King Restaurants are owned and operated by independent franchisees, many of them family-owned units that have been in business for decades. The company is able to grow while minimizing large capital expenditure, meanwhile it collects fees and royalties from each franchise added.

Weaknesses

Vulnerability to Labor and Regulatory Influences

Although the company operates in many international venues, the majority of restaurants are in the United States. This concentration of operations in one geographic area increases company’s exposure to local factors such as labor strikes and the influence of regulatory changes.

Reliance on so-called “Super Customers”

There is some indication that Burger King may have been slow to transition to leaner and healthier restaurant fare in favor of pleasing its long term customers who are fans of the big larger portion sandwiches.

Opportunities

New Breakfast Food Initiative

Burger King is seeking to overhaul its breakfast menu and will add Starbucks Corp.’s Seattle’s Best Coffee to all its U.S. restaurants. It has introduced earlier restaurant opening times in its United Kingdom locations.

New Healthier Menu Items

Burger King sponsoring its biggest new product launch in years by introducing the Tendercrisp, Premium Chicken Burger and accompanying the launch with a marketing campaign called “cheat on beef”.

National Urban Community Marketing Initiative

Burger King is seeking to strengthen its standing in the African American Community through its new “next best move” promotion which includes a well publicized tour of 41 urban communities across the country.

Brand Licensing Project

Burger King has entered into a licensing arrangement (brokered by Broad Street Licensing Group) to further increase the company’s’ brand awareness and broaden the presence of the iconic “King” character, various licensees of Burger King Corp. will soon launch a line of branded T-shirts, and also an exclusive collection of sleepware and lounge ware.

Threats

Unrest among Franchisees

Burger Kings’ new dollar cheese burger initiative and loss leader strategy has upset some of its franchise owners who feel the pricing violates the franchise agreement. The dispute spurred the National Franchisee Association to file a lawsuit against the company. In 2009 Franchisees voted twice against the new promotions. The company reportedly has dropped the $1 burger promotion, but there may be bad feelings lingering for a while.

The Slow Recovering Economy

The challenging global economy continues to hamper the company’s financial strength (ranked 238th among its peers). Burger King posted weaker-than-expected quarterly results in the last half of 2009, and missed stock analysts’ expectations. The decline was driven in part by continued adverse macroeconomic conditions, including record levels of unemployed.

Changing Consumer Eating Habits

Burger King’s same-store sales in the U.S. and Canada declined 4.6% in the
three months ended Sept. 30, 2009. People 18 to 34 cut their consumption of fast-food meals from November 2006 to November 2009 according to the market-research firm NPD Group. The combination of the economy and better health information has influenced people to eat at home and to opt for leaner lower calorie foods.

More Strengths

Strong market position:

• BKC is the world’s second-largest Fast Food Hamburger Restaurant (FFHR)chain as measured by the total number of restaurants and system-wide sales.The company’s specialty is burgers and fries which it sells through over 12,150flagship fast-food restaurants. The company leverages its strong market positionto gain economies of scale and increase its bargaining power.
• bBK has more than 12,150 restaurants in all 50 states and in 76 countries and U.S. territories worldwide. Burger King’s target audience is males, aged 18 to 35 who eat fast-food 9 to 16 times per month. While they are just 18% of Burger King’s customers, they account for about half of all visits to the stores.

From the Market Facts Summary we know Burger Kings segments include:

• Segment one: Tweens who keep up with the latest fashion and music trends for their age group.
• Segment two: Blue collar workers who live very busy lifestyles, balancing children and possibly more than one job. They look for quick and convenient meals in their hectic lives.
• Segment three: Lower and middle class families with children.
• Segment four: Young adults busy with school and work, such as college students.
• Segment five: Individuals who have a passion for fast food.

Burger King refers to these individuals as “SuperFans”, “an audience with an unapologetic love of fast food. They are defined by the way they seek convenience, their desire for value and the frequency with.