"Marketing Strategy of Burger King"
QUICK-SERVICE INDUSTRY OVERVIEW SONGKI KIM DANA WILLIAMS JEFF OHLMAN JORGE DIETRICH NADINE CHAMSEDDINE JOSE GUZMAN Margin Trends 2004 Burger’s Big Three McDonald % 10 Burger King % -10.5 Wendy‟s % 3 McKey Foods: Burgers [McDonalds sub.] Sun Valley: Chicken [TGWU union] McCain Foods GB Ltd: Chips [North York] Sweetheart International: Ronald McDonald cups and straws [Holland] Compare 2004 Sales (Mil.) McDonald Yum Market Share 2004 Burger’s Big Three McDonald % 59 Burger King % 21 Wendy‟s % 20 Porter’s Five Competitive Forces Entrants - Low/Moderate- Brand awareness and lower cost competitive advantage. Require time and large capital Investment Rivalry – High- Burger King, Wendy‟s, J.B., are heavy competitors Power of Suppliers – Low- Most have the purchasing power to negotiate lower prices Porter’s Five Competitive Forces Competitive Force - Threat/Power- Prices and product offering are the main sources of competition Substitutes- Low/Moderate- Trends show consumers prefer healthier and more exotic alternatives Buying power -Most players have a lower cost competitive advantage. Top players also achieve economies of scale via this Rivalry among Existing Competitors Intense rivalry and competition market share among existing fast-food competitors Slowing growth rate of sales To attract customers…. - increase advertising - price discount - offer new product Threat of New Entrants Economies of scale force new entrants to enter at a cost disadvantage Require higher fixed costs to enter existing market Have strong customer loyalty Willing to defend new entrants with price discounting and advertising Threat of Substitute Products There are…. - numerous restaurants and other eating alternatives - a variety of high-quality, reasonably priced eating alternatives Customer switching costs are low McDonalds Corporation McDonald’s History In 1955 Milkshake-Machine Salesman Ray Kroc took out a franchise on a hamburger store owned by two McDonald brothers. Today McDonald‟s is the largest fast food operator in the world. 50 Million customers every day, 12000 Restaurants in the USA, and 30,000 Worldwide in 119 countries The chain has grown by one new outlet every 17 hours in the last decade. Marketing Strategy Global Brand Awareness „Golden Arches” Marketing Alliances Global Sponsorship Alignment with country-level marketing activities Focused on its customers Marketing Budget Advertising Costs: • [In Millions] 2004 $ 619.50 2003 $ 596.70 2002 $ 532.30 Subsidiaries Boston Market Chipotle Mexican Grill Donatos Pizzeria Business Note: in December 2003 McDonalds sold Donatos Pizzeria Business Suppliers Europe Golden West Foods: Buns, Ketchup, Syrup, milkshake mix [McDonald‟s subsidiary] SWOT Analysis Strengths Financial Power- McDonald‟s spends more on advertising on a single brand than any other organization. In 1986 a colossal $789m, or 6.3% of system wide sales, went to advertising. It is one of the five largest television advertisers in the US, with children as its prime target. After Santa Claus, Ronald McDonald is the figure best known to US Children. Recipe for Success- McDonalds revolutionized the fast food Industry. They introduced a new production process that lowered labor costs. SWOT Analysis Weaknesses/Opportunities/Threats Weakness-It is possible that a company can become so large it saturates the market. Opportunities- Because of its financial power McDonalds could move into to other industries/products at any time. Threats- Competitors, Suppliers, Workers Unions, Attacks of health campaigns, and Environment. Burger King Competitive Trend Analysis BK Background Founded in 1954 Second Largest Fast Food Chain Worldwide Global operations of the $11.3 billion company BURGER KING® restaurants serve approximately 1,072 customers per restaurant, per day, or approximately 11.8 million customers daily worldwide The BURGER KING® system employs more than 300,000 people system wide Fascinating BK Facts Today, Burger King operates the #2 hamburger chain (behind McDonald's) with more than 11,200 restaurants across the US and in about 55 other countries Since its founding in 1955, BURGER KING® has sold well over 2.1 billion hamburgers annually BK Brand Strategy Brand image • Masculine oriented (Burger „King‟ – not Burger Queen) • „„King‟: The larger size than the average burger Food • Great-taste • High quality • Fun • Value • Portability Slogan: „Have it your way‟ • Customized • Customer-oriented • Differentiation from other fast-food competitors BK Marketing Mix Strategy Product (Whopper) Price (Compare with McDonald, Wendy‟s, Yum! and Subway) Promotion (Stick with the jumbo size burger – the opposite force against the recent trend of Low Carb) Place(Distribution) BK Marketing Mix-Product Whopper Sandwich Fire Grilled Burgers Chicken, Fish & Veggies Salads Breakfast Treats Sides & Beverages Kids Menu BK Marketing Mix-Price Price Range - $4 - $8 for a value meal The value meal for breakfast - For example, suggested Enormous Omelet Sandwich retail price: $2.99, or $3.49 BK Marketing Mix-Promotion Advertising Slogan (2004-present) “Have it your way” Star Wars deal - The fast-food chain's first global promotion Burger King Offering Low Carb - Allow substitutions of french fries with salads and bottled water for soft drinks A Big Breakfast at Burger King - Debuts Enormous Omelet Sandwich Burger King Target Audience Customer with the sophisticated taste but still need fast food service Middle class household with the discretionary income Family with kids Financial Picture Private company – hard to obtain numbers 11,200 restaurants 2004 sales 13 billion 2004 sales growth 18.2 Burger King Largest Franchises AAFES HMS Host AmeriKing Nath Aramark Quality Dining C&L Sodexho-Marriott Carrolls Corp #1 Sydran franchise TA Operating Group Cimm's Veterans Canteen Compass Westwind Deignan-Kauffman Exclusive Supplier Restaurant Services, Inc. (RSI) Cooperative serving BURGER KING® restaurant owners in the United States. Founded in 1991 Purchasing agent for U. S. Burger King system. SWOT Analysis Strengths Global Brand Equity The second largest fast food chain (18.8% of US fast-food hamburger business) Successful items: WHOPPER® Sandwich More than 55 Global market operations Customized Fast Food service Real Estate investment (pursuit of the best location in town) Financial support from the parent company (Texas Pacific Group) Strengths 2nd Largest burger chain Brand recognition and recall Over 11,000 locations worldwide WHOPPER has highest brand recognition Economy of scale provides buying power Unique product to differentiate product (flame broiled). Customization allows customer to “have it your way” Weaknesses Declining market share Self-restricted the diversification of product development because of stickiness to strong „Burger King‟ brand image Weak product development Slowed revenue and income growth Weakness We are in a “Burger Slump” BK has no other business segment Ameriking , 2nd largest franchise filed for Chapter 11 “Revolving” door in corporate board room, 10 CEOs in 14 years High franchise rate makes BK vulnerable to multiple disparate policies Failure to introduce new brand lines 3 of 10 largest franchises are in chapter 11 Lackluster marketing Opportunities International expansion Only serving 1% of the world‟s population (Potential growth in China & India with new product development) Growing dining-out market Opportunities Consumers have positive perception of brand. Take advantage of healthy eating trend. Consider new brands and franchises. Reduce cost of entry for BK franchise Expand in Asia market Reduce underperforming outlets THREATS Mature industry Fiercely competitive environment • With other franchises (McDonald) • With the local competitor Growing health-conscious consumers (Low Carb Trend) • The social issue of McDonald‟s „Supersize me‟ Changing demographics (Rapid transition into the aging society) Vulnerability to the fluctuation of foreign exchange rates from expanding global operations Unreliability of supplier for the recent cow-related disease (i.e. Mad Cow Disease) BK Marketing Mix-Place AmeriServe Food Distribution - It plans an orderly transition of distribution services - Approximately 5,800 Burger King restaurants currently served H & H Foods - Supply South Texas-area Burger King ® restaurants with beef patties Restaurant Services, Inc. (RSI) - The exclusive purchasing agent for the vast majority of products and services used by BURGER KING® restaurant owners in the United States and is manager of the system's supply chain. Bibliography Corporate Information http://proquest.umi.com/pqdweb?index=0&did=168203801&SrchMode=1&sid=1&Fmt=3&VInst =PROD&VType=PQD&RQT=309&VName=PQD&TS=1126476479&clientId=30358 Franchise list http://www.prnewswire.com/cgi- bin/stories.pl?ACCT=105&STORY=/www/story/11-12-2002/0001839842 Marketing Strategy http://proquest.umi.com/pqdweb?index=3&did=818659331&SrchMode=1&sid=1&Fmt=4&VInst =PROD&VType=PQD&RQT=309&VName =PQD&TS=1126477227&clientId=30358 SWOT http://search.epnet.com/login.aspx?direct=true&db=buh&an=16823714 Corporate Info - http://www.bk.com/CompanyInfo/index.aspx Sonics Annual Report (2004) - http://www.sonicdrivein.com/pdfs/annualReports/04_12annualReport.pdf Financial Info - http://www.hoovers.com/burger-king/--ID__54531,ticker__--/free-co-fin-factsheet.xhtml SONIC DRIVE-IN Sonic, America‟s drive-in, originally Top Hat drive- in,started as a hamburger and root beer stand in 1953. Sonic is the largest chain of drive-in restaurants in the United States and Mexico, with more than 1 million customers a day Sonic has 3000 drive-ins coast to coast Sonic Marketing strategy Multi-layered growth strategy, targeting earnings per share of approximately 20% for the year ending September 2005. • Addition of drive-ins • Increasing media expenditure to boost brand awareness • Accelerating franchise development and ascending royalty rate Sonic Marketing strategy Highly differentiated concept, through personalized carhop service, and a variety of menu choices. Accelerated Expansion program • Opening 167 new franchises in 2004 • Opening 188 new drive-ins in 2004 • Planning to open 185 drive-ins in 2005 Sonic Marketing strategy Solid Sales Trends • Sales increase of 13% in 2004, and 6.5% same store sales • Sales increase of 18% in 2005, and 6.8% same store sales Sonic Marketing strategy Solid Financial performance • Revenues rose 20% to $536 million 2004 and 18% in the first nine months of 2005 • Net income per diluted share rose 19% in 2004 and is up to 21% the first nine months of 2005 • ROE has exceeded 20% for five consecutive years. Sonic Subsidiaries Sonic Industries Sonic Restaurant Sonic Strengths Carhop Service: many customers enjoy the personal carhop who delivers the order to the car with a free mint Overall Good Company: Listed for the 10th consecutive year by Forbes magazine to be one of the “ 200 best small companies in America” Sonic Strengths Multi-layered growth strategy: • Listed at number 50 for percentage increase in sales on the top 50 Growth chains list( Restaurant Business, July 2003) • Ranked number 80 on the Hot Growth Companies list ( Business Week, June 2003) Good Franchise: Listed in the top 10 on Entrepreneur magazine‟s “Franchise 500 list” (January 2003) Great Sales Records: Increase of 13% in 2004 , and 18% in the first 9 months of 2005. Continuously increased revenue ( chart 1) Sonic Strengths Menu • Unique menu items that include Toaster Sandwiches, extra- long cheese coneys, hand battered onion rings, and a variety of drinks and deserts • Quality Burgers: named one of the top three in the Best Overall burger QSR category for seven consecutive years( Restaurants & Institutions Annual Choice in Chains Awards, March 2003) • Cream pie shake distinguished as most appealing and unique beverage in its category and receives “Best in Class” award ( Restaurant Business, May 2001) Sonic Weaknesses International Presence: Except for 7 drive-ins in Mexico, Sonic Does not have a well established international market Brand awareness: although Sonic has a differentiated service that is the carhop, and a quality burger, it is still not viewed as the leader in the fast food industry. Cost of the international franchise: To get a Sonic international franchise, the investor must have $3.5 million in assets and $2.5 million in cash which could hinder the development of new franchises abroad Sonic Opportunities International market growth National market: more than half of the 3000 drive-ins are located in 9 states, the rest are developing markets Sonic Threats Obesity awareness: this will push sonic to include light meals Gas prices: the rise of gas prices will increase the prices of sonic Hurricane Katrina will have negative impact on the Sonic Franchises since Louisiana and Mississippi are two core markets for Sonic. 60 restaurants in Louisiana, Mississippi and Alabama were damaged by Katrina. Mad Cow disease: This may eventually lead to customers shifting to other fast foods alternatives Sonic Revenue Revenue for the fiscal year ended August 31,2004 Revenue for the nine months ended May 31,2005 Projected revenue for the year ended August 31, 2005 Sonic Drive-in Sales Sales for the fiscal year ended August 31,2004 Sales for the nine months ended May 31,2005 Projected sales for the year ended August 31, 2005 Sonic Porter’s Analysis High rivalry among competitors • Little product differentiation • Low customer loyalty which leads customers to shift easily to another fast food chain. • High number of fast food restaurants. Sonic Porter’s Analysis Low threat of new entrants • Economies of scale. Sonic alone has 3000 drive ins which makes the cost of manufacturing low, and thus giving it a competitive advantage • High Capital requirement ( equipment and training) • Service differentiation through carhops Sonic Porter’s Analysis Low bargaining power of supplier • Cost of shifting suppliers is low • Substitute products are not an option because beef is part of the burger Sonic Porter’s Analysis Threat of substitutes • People can shift to a different fast food Low bargaining power of buyer • No buyer concentration Sonic References http://www.fastfoodfacts.info/blog/ http://www.entrepreneur.com/franzone/d etails/0,5885,12-12---282811-,00.html www.Sonicdrivein.com JACK & THE BOX COMPETITIVE ANALYSIS IMPORTANT DATES Born in San Diego California 1.951 as a Pioneers in the “Drive-Thru” serving system Major expansion to 1000 restaurants in the Western and Southwestern markets They become a private owned company in 1988 1.992 went public with 17.2 million shares 1995 Great advertising campaign with expansion to Southeastern markets until 2001 With a long-term goal of becoming a national restaurant company, Jack in the Box entered the fast-casual restaurant category in 2003 STRATEGY Jack in the Box Inc., founded in 1951, is a restaurant company that operates and franchises Jack in the Box® restaurants and, through a wholly owned subsidiary, Qdoba Mexican Grill®. The company also operates approximately 40 proprietary convenience stores called Quick Stuff, which is a major-branded fuel station and is usually developed adjacent to a full-size Jack in the Box restaurant. COMPANY STRATEGY… Jack in the Box is among the nation's leading fast-food hamburger chains, with more than 2,000 quick-serve restaurants in 17 states. As the first major hamburger chain to develop and expand the concept of drive-thru dining. Jack in the Box has always emphasized on-the-go convenience, with approximately 85 percent of the half- billion guests served annually buying food at the drive- thru or for take-out. In addition to drive-thru windows, most restaurants have indoor dining areas and are open 18-24 hours a day. COMPANY STRATEGY… Jack in the Box offers a broad selection of distinctive, innovative products targeted at the adult fast-food consumer, including hamburgers, specialty sandwiches, salads and ice cream shakes. Hamburgers represent the core of the menu, including the signature Jumbo Jack, Sourdough Jack and Ultimate Cheeseburger. And, because value is important to fast-food customers, the company also offers value-priced products on "Jack's Value Menu," including tacos, a chicken sandwich and Breakfast Jack. SUBSIDIARIES Qdoba Mexican Grill, which was acquired by Jack in the Box Inc. in January 2003, is an emerging leader in fast-casual dining Operates more than 230 restaurants in 35 states. Qdoba is renowned for offering nouveau Mexican cuisine SWOT ANALYSIS Strengths The revenues of the company for the last four years are continually growing The company is also showing good profits The company is remodeling 200 stores per year Offers higher quality customer service Weakness The company has to spend an a higher percentage of money in advertising, assets, and strategic planning. They do not have much presence in the Southeast region which is a profitable market. OPPORTUNITIES Since Jack in the Box is a very well known company in the Southwest they can always use this good-will in order to attack other markets now that the company is growing . THREATS The late increase in the meat and oil prices Changing consumer tastes & preferences Large investments required to stay competitive are eating away at profit margin TRENDS TRENDS TRENDS Yum! Brands, inc. Yum! Brands inc. is the largest restaurant company with more than 34,000 company, franchise, license, and joint ventures, in more than 100 counties. . Yum! Brands, inc. Oct 1997 Pepsi co. owner of KFC, pizza hut, and Taco bell formed a publicly owned and independent company: Tricon Global restaurants inc.( Yum! Brands former name) May 2002 the company acquired Yorkshire Global restaurants, Inc. and changed the name to Yum! Brands, inc. Yum! Brands, inc. Growth Strategies Build dominant China brands • China is the number one market for new company development • China division operating profits were more than $200 million in 2004 Run great restaurants • 100% CHAMPS culture restaurants (Cleanliness, hospitality, Accuracy, Maintenance, Product Quality and Speed) Yum! Brands, inc. Growth Dtrategies Multi-brand great brands • Yum! Is the world leader in multi-branding, offering consumers more choice by combining two brands under one roof • Yum! Owns 2900 multi-brand restaurants Worldwide. Yum! Brands, inc. Growth strategies Drive profitable international growth • Yum! Restaurants International (YRI) owns more than 11,000 restaurants outside the US • YRI opened 700 restaurants every year for the past 5 years. And in 2004 YRI opened 3 new restaurants each day of the year. • In 2004 YRI revenues totaled $2.1 billion, and operating profit reached $337 million Yum! Brands, inc. A & W Restaurants, inc. Is based in Louisville, KY Founded in 1919, serving all American pure beef hamburger and hot dogs. Owns 600 food outlets in 13 countries and territories around the world and 600 points of distribution at Yum! Multibramds restaurants. Yum! Brands, inc. KFC Corporation Is the most popular chicken restaurants chain Is based in Louisville, KY Was founded in 1953 and specializing in Original recipe, Extra Crispy, and Colonel‟s Crispy Strips with home style sides, BBQ Wings, and Chicken sandwiches. Owns 13000 outlets in more than 80 countries Yum! Brands, inc. Long John Silver’s, inc. Is the world‟s largest quick-service seafood chain. Is based in Louisville, KY Was founded in 1969and specializing in batter-dipped fish, chicken, shrimp, and hush-puppies. Owns 1200 restaurants worldwide, and 200 additional points of distribution in multi-brand restaurants Yum! Brands, inc Pizza Hut Inc. Is the World‟s largest pizza restaurant company Is based in Dallas, TX Specializes in pan pizza, thin n crispy pizza, hand tossed style pizza, and stuffed crust pizza Owns 7500 restaurants in the USA, and more than 4500 restaurants in over 80 countries Yum! Brands, inc Taco Bell Corp. Is the nation‟s leading Mexican-style quick service restaurant Specializes in Tacos, burritos, quesadillas, border bowls, and nachos Owns 6000 restaurants in the USA and serves 35 million people. Yum! Brands, inc. Corporate Responsibility Community involvement • Yum! Brands foundation corporate sponsor of dare to care program to end hunger • YUMeals program to end hunger in the USA • Pizza Hut book it program to help develop reading interest for children • KFC colonel kids charity to provide nationwide access to childcare • Taco bell teen programs Yum! Brands, inc. Corporate Responsibility Diversity • For the past two years, Yum! Has been recognized in Fortune magazine‟s top 50 “ Best Companies for Minorities” • Yum! Has been recognized in Black Enterprise magazine as one of the 30 best companies in diversity