Burger King

Burger King Analysis

1. Business overview

Every Day, more than 15.7 million people all around the world visit Burger King franchises. Founded in 1954, Burger King is the second largest hamburger fast food chain trailing McDonalds. Burger King has more than 18,700 locations in more than 100 countries as well. They also have more than 34,000 employees. Burger King offers goods such as the Whopper, Sliders, Beverages, deserts, and more. Burger king has unique foods as well such as “chicken fries” which are skinny chicken tenders.

Burger King offers foods similar to restaurants such as McDonalds, KFC, Jack in the Box, Dairy King, Sonic, and more. Fast food is a competitive industry, and pricing, taste, cuisine, location, and quality all matter significantly.

Burger King needs a product that will satisfy the customers expectations, and encourage them to visit again. Fast food is a fierce competition, and every restaurant is fighting for each customer. They need something unique that separates them from the other restaurants, and an incentive to come to their restaurant.

Burger king has 3 ways that they generate their revenue from. The first is Sales from their company restaurants. The Second way is royalty and franchise fees paid by their franchisees. The Third way is property income from certain franchise restaurants that lease or sublease property from them.

1. Size

Burger king is known for their great tasting burgers, and their flavorful food. However, McDonalds is slowly taking over more market share from Burger King. In 2020, Burger King had just 1.2% market share which is a measly number compared to McDonalds 21.4%.

More people view McDonalds food as a bigger value and a better option than Burger King. As I said before, over a million customers visit the franchise every single day. Burger King has over 18,700 restaurants in over 100 different countries with over 34,000 employees. However, McDonalds has double the locations and a significant amount more distribution and density.

An average Burger King would sell on average 6575 burgers every day. Additionally, about 2.4 billion burgers are sold each year total on average. Burger King’s 3 top selling items include the Whopper, which is a normal hamburger. Second is their french fries, followed by the whopper jr. This is just a smaller version of the Whopper.

Burger king needs a product that is unique and different from other fast food restaurants. This is because they need to have something that will bring a customer to eat at Burger King and not at a different restaurant. As Burger King loses more and more customers, they will keep losing revenues and profits.

1. Growth

Revenue

Year20172018201920202021$ in Millions4,5775,3575,6034,9685,739

Net Revenue

Year20172018201920202021$ in Millions277362400492511

We can see from the table, Burger Kings revenue has been on the increase, but had a small dip in 2020. This is because of the COVID outbreak, but once again increased back in 2021. This shows Burger King as a growing company with people buying more and more goods each year.

Low probabilityMed probabilityLarge probabilityLarge Payoff Duplication gun releases and Burger King can duplicate burgers and other products as well.Burger king increases distribution in international areasStart releasing products that is wanted by consumers and is trendingMedium PayoffMcDonalds forgets their formula and it gets destroyed, forgetting how to make burgers.Burger king gets better quality ingredients to improve taste and qualityRevenues will keep increasing as Burger King increases locations across the worldSmall PayoffBurger King finds a new formula and uses it to make cheaper and higher quality burgers and other foodsBurger king increases prices on goods to increase profit margins.Burger king continues to make digital improvements like advertising, and improve their app on the app store and playstore

If Burger King expands on products to consumer demand, consumers may not like the product. This can result in a decrease of sales which turns into a decrease of revenue. However, the product can turn into a huge hit, and more customers will be attracted. Sales will go up, and that means revenues will also go up.

If Burger King gets better ingredients, they most likely will have to pay more money to buy them which could affect profit margins. Customers however could enjoy the better tasting food, and would come more often to Burger king. This could increase sales which will increase revenues.

If Burger King increases the prices on their goods, people may not like the idea of spending more money on food, and they could lose customers. This would decrease revenues, and profits. However, it could increase profit margins and they could make more money off each product.

Burger king can improve the interface of their app. This would encourage people to spend more time on the app, which could improve customer loyalty and spending. They could add games that could provide points, or trivia type events to attract attention. The downside is that Burger King would have to divert some of their resources and time to improve this app. If the app doesn't exceed or meet the expectations, they could lose their time and resources.

1. Margins

Operating Margins

Year20172018201920202021%37.9235.7835.8228.6232.74

Operating margins have been up and down, but had a significant decrease in 2020 because of the pandemic. In 2021, they had a good bounce back where they increased their margins by more than 4%.

1. Cash Flow

Year20172018201920202021$1.380 B1.087 B1.422 B816 million1.636 B

Burger King seems to have had less cash intake in 2020 which is caused by the pandemic. Many businesses made less revenue and businesses were at an all time low.

1. Business Risk

Low probabilityMed Probability High probability Large lossMonkeys take over the world and destroy all Burger King locations.McDonalds keeps expanding locations at a faster rate than Burger King, and McDonalds gets more customers because there is more density of McDonald stores.McDonalds continues to take customers from Burger King because they serve better burgers, and they start to fail to generate enough revenue.Medium lossBurger King stops selling food and starts selling technology based products.Lots of people will eventually stop eating at fast food chains due to unhealthy eating habits that go along with these types of foods.Labor costs start increasing and takes an impact on profits.Small lossNatural disasters don't let people out of their houses, and Burger King loses customers.Articles come out and suggest backlash towards the Burger King franchise.Burger King tries to change the menu, but people don't enjoy it, and they lose revenue.

1. Stock Performance

Burger king's stock has had a slow and steady increase until the drop in 2020 because of the virus. After 2020, there has been a significant increase and an exponential growth. It has recently decreased because of the war with Ukraine and Russia. I feel like Burger King's stock can go either way as it seems as McDonalds is a huge competitor for them, however, Burger King had a great bounce back from the 2020 drop.