Burger King is rethinking the flashy “20/20” restaurant design with red-flame chandeliers that cost about $500,000 per store to create. With comp sales still in the red, does Burger King have that kind of money for its 12,251-store network? Rival McDonald’s, however, has capital and plans, announced last year, to spend $1 billion on remodeling over the next several years.
In October 2009, former Burger King CEO John Chidsey announced a grand plan to remodel all 12,000+ Burger Kings worldwide to the slick “20/20” design, which he called “contemporary, edgy, futuristic.” Some franchisees called it expensive. On Thursday, with Chidsey having recently departed Burger King’s management team, EVP-CFO Daniel Schwartz told analysts the chain is testing a “lower-cost remodel solution” that will require “substantially, meaningfully less” than the $500,000 to $600,000 per store he says was previously involved. He declined to give details or estimate how much the new remodeling plan will cost, but some level of modernization is a must. Most of the chain’s stores sport a unit design that Chuck Fallon, who left his post as North American president last October, had called a “20-year-old” image.
Scaling back the futuristic remodeling dreams is in line with a new strategic approach for Burger King now that it is owned by private-equity firm 3G Capital. Schwartz emphasized that the brand is refocusing on the bottom line as it creates a new “sales-driven marketing culture” built around Burger King’s historic brand attributes: flame broiling of its burgers and “Have it your way” customization. Last month it parted company with lead ad agency Crispin Porter + Bogusky and is reviewing the account, worth $300 million-plus in the U.S.
Burger King introduced the “Have it your way” tagline in Japan this week, where the campaign includes a new beef/chicken/pork Meat Monster Whopper.
Burger King, which has shifted its fiscal-year close to Dec. 31 from June, released sales figures for the last six months of 2010. Same-store sales systemwide (company and franchise) were -2.7% (compared with -2.3% for fiscal 2010). The worst performances came in the U.S. and Canada for company (-4.9%) and franchised units (-5.0%). The lone positive was a +6.2% sales spurt for franchised stores in Latin America (from where new Burger King CEO Bernardo Hees hails). Unfortunately only about 9% of Burger King’s 12,251 restaurants are in Latin America. North America is 61% of the system. Average unit sales for Burger King was flat at $1.2 million.
McDonald’s, which had worldwide systemwide sales of $77.4 billion in 2010 (compared with an estimated $14.5 billion for Burger King) and has average unit sales above $2 million, isn’t pulling back on its remodeling plans. Last year, it announced plans to redo 2,000 of its stores in 2010 as it continues to refresh its 32,800 stores at a cost to operators of $250,000 to $500,000 per store. In January, CEO Jim Skinner told analysts that nearly 70% of European store interiors and 40% of exteriors have been remodeled, “making our brand more contemporary and relevant.”
That new global McDonald’s look is evident in Japan where, sadly, it had just completed a widespread reimaging program just before the recent earthquake. Interiors have been redone in brighter but more modern colors and new bistro-look crew uniforms are being introduced.