Burger King

International Business Project

DG KU ZURAIDAH BT AG. MAJID FATIN AMIRA HANAFIAH NOOR ZALIFAH MOHAMED TAHA NASIR AMR MAGDELDIN ABDELWAHID

11739 12334 12468 11744 9561

May 11

Burger King May 11

TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 3 BURGER KING INTERNATIONAL ............................................................................................ 6 BURGER KING IN MALAYSIA .................................................................................................. 8 Malaysia: Attractive Market Trend............................................................................................. 8 Malaysia: High Encouragement from Government .................................................................. 11 Malaysia: Strong Financial Support ......................................................................................... 11 PRODUCTS AND BUSINESSES OF BK ................................................................................... 13 BURGER KING STRATEGIES .................................................................................................. 18 International Strategies ............................................................................................................. 19 Place ...................................................................................................................................... 19 Product .................................................................................................................................. 21 Malaysian Strategy ................................................................................................................... 23 Place ...................................................................................................................................... 23 Product .................................................................................................................................. 24 Promotion.............................................................................................................................. 28 WORST CHALLENGES/OBSTACLES FACED BY BURGER KING .................................... 32 Of Franchisees and Ownership ................................................................................................. 32 Of Marketing and Advertisement Dilemmas ............................................................................ 33 The Woes of Competition ......................................................................................................... 34 Of the Kings Reign in Malaysia .............................................................................................. 35 REFERENCES ............................................................................................................................. 36 2

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

INTRODUCTION

urger King Corporation (BKC), a global chain of hamburger fast food restaurants started off in 1953 in the state of Florida in the United States. Before the enthronement of the King, it was known as Insta-Burger, which was based in Jacksonville, and due to financial issues faced by the founders, Kramer and Burns, it was sold to its franchisees in Miami, whom gave the Burger a kingdom and thus Burger King was born. It has been 56 years since David Edgerton and James McLamore had founded the newly-branded franchise and today BK has over twelve thousand outlets in 73 countries. In 1957, the sensational burger that became the major stakeholder in the variety of burgers was introduced, they named it The Whopper. It became a hit and Burger King became known especially for its flame-broiled burgers. Apart from the Whopper, BK offers a variety of other products ranging from chicken sandwiches, salads, desert, beverages, sides, and now even breakfast items. Nearly all of todays stand-alone BK restaurants have drive-through services apart from the usual dine-in. 1959 brought about an expansion around the States and by 1963 it had its first foreign restaurant in Puerto Rico. After 245 restaurants, BKC was sold to Pillsbury Company for further expansion. After many years of expansion with Pillsbury Company, BKC came to a problematic phase where it could not control its European franchisees well. Grand Metropolitan PLC stepped into the picture and bought over Pillsbury Company and under their hood the European domination started. They took over another chain of fast-food called Wimpys and converted all the chains into BKs. 1997 marked a major merger of Grand Metropolitan PLC with Guiness & Co. forming the grand company, Diageo PLC, whom becomes a world leader in the food and drink industry. After 15 years of British rule the King returned to the States due to BKC being sold to 3 major companies; Texas Pacific Group, Bain Capital Partners and Goldman Sachs Capital Partners. 3

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

In 2006 the corporation went public due to the many problems faced by the many owners over the past years and in 2010, 3G Capital; a Brazilian investment company, bought 90% of the shares to become the owner of the corporation. Today BK is on the number 2 spot of the fast food industry well behind McDonalds whom still has the most people loving it. Figure 1.1 shows the various countries that BK operates in today.

1954

James McLamore and David Edgerton establish Burger King Corporation. The Whopper is launched. The company begins to expand through franchising. Burger King is sold to Pillsbury. Donald Smith is hired to restructure the firm's franchise system. Burger King claims its grilled burgers are better than competitors McDonald's and Wendy's fried burgers. Grand Metropolitan plc acquires Pillsbury. The firm launches a $70 million french fry advertising campaign; Grand Metropolitan merges with Guinness to form Diageo plc. A group of investors led by Texas Pacific Group acquire Burger King. BKC goes public on the NYSE BKC has new ownership, 3G Capital, a Brazilian investment group who bought 90% of the shares

1957

1959

1967

1977

1982

1989

1997

2002

2006

2010

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

North America Canada Mexico United States of America Latin America & Caribbean Argentina Aruba Bahamas Bolivia Brazil Cayman Islands Chile Colombia Costa Rica Curacao Dominican Republic El Salvador Guatemala Honduras Jamaica Nicaragua Panama Paraguay Peru Puerto Rico St. Lucia ST. Marten Surineme Trinidad Urugury Venezuala Europe, Middle East & Africa AAFES Europe Andorra Austria Cyprus Denmark France Germany Gibraltar Hungary Iceland Israel Israel Italy Malta Netherlands Norway Portugal Spain Sweden Switzerland Turkey United Kingdom Bahrain Jordan Kuwait Lebanon Qatar Saudi Arabia UAE Asia Pacific AAFES Australia China Guam Hong Kong Korea Malaysia New Zealand Phillipines Singapore Taiwan Thailand

Figure 1.1: List of Countries of BK Operations

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

BURGER KING INTERNATIONAL

On September 2, 2010, Burger King Holding Incorporated (BK) announced that they agreed to be acquired by 3G Capital ( Burger King Corporation, 2010). 3G Capital bought BK for $4 billion (DREA, 2010). It is one of the best opportunities to BK particularly when looking on BKs financial condition. Bloomberg reported that BK has been facing a decrease on its sales growth for two straight years as a result of U.S. economic slump (Stanford & Helm, 2010). Hence, it is believed that 3G Capital will be able to support BK financially as 3G Capital is a multi-billion dollar, global investment firm (LinkedIn Corporation). Besides that, Tom Forte, an analyst from Telsey Advisory Group stated that the price offered by 3G Capital is a good price wherein none is able to offer a higher price than the one offered by 3G Capital (Baertlein, 2010). Stifel Nicolaus, a restaurant analyst of Steve West also stated that BK will not be able to receive such good offer anymore (Baertlein, 2010). In addition, with this acquisition, BK gained an opportunity to fix its business as BK is becoming a public company. Analysts said that, going public would release BK from having to worry about the need to please its shareholders while wanting to make any major changes in its business - in contrast to how it was previously managed (Baertlein, 2010) (Wikimedia Foundation Inc., 2011). Subsequently, BK will be able to focus on repairing its fundamental businesses structures while continue to work on closing its gap with McDonald (Wikimedia Foundation Inc., 2011). It is because, there is a huge gap between McDonald although BK is place as second in worlds hamburger chain after McDonald; McDonald is place as first in worlds hamburger chain (Brady, 2010). For instance, BK currently has 12, 174 restaurants worldwide whereas McDonald has 32, 466 restaurants worldwide (Brady, 2010). Other than that, BK is able to easily penetrate Brazils market. It is because 3G Capital is owned by the Brazilians (DREA, 2010). Hence, 3G Capital has experience and connections in Brazil (Brady, 2010). BK can expand its business into Brazils market while at the same time; it is a one step to further in closing its gap with McDonald. This is of the reason that, many U.S. Universiti Teknologi PETRONAS | International Business Project 6

Burger King May 11

food chains including McDonald has difficulty in expanding their businesses to Brazil as it is difficult to find qualified franchisees in Brazil (Brady, 2010). Moreover, not only Brazil, BK is able to expand more of its business internationally. 3G Capital announced that they are planning to build out BK internationally (DREA, 2010) (Heher & Fredrix, 2010). 3G Capital is planning to open more franchises in Latin America and invest more in Asia (DREA, 2010) (Heher & Fredrix, 2010).

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

BURGER KING IN MALAYSIA

In December 1997, BURGER KING returns to Malaysia with a different management group that operates under a new franchisee i.e. Cosmo Restaurants Sdn. Bhd. The first restaurant was located at Overhead Bridge Sg. Buloh. It was officiated by the former Prime Minister i.e. Y.A.B Tun Dr. Mahathir Mohamad. To date there are 22 restaurants in Malaysia, with more outlets soon to come in the near future. There are currently, 3 franchise holders in Malaysia. The largest operating restaurant is managed by Cosmo Restaurants Sdn. Bhd. While outlets located in KLIA are under the management of Dewina Hosts Sdn. Bhd, outlets in Sabah are operated by another franchisee, Living Bread Sdn. Bhd. They have all been approved by the Jabatan Kemajuan Islam Malaysia (JAKIM). One of the franchisee of Burger King Restaurants in Malaysia, announced plans in 2009 plans to spend 27 million ringgit to open around 50 outlets throughout Malaysia in the following five years. As many more fast food chains are opening up, BK is facing much competition and has not been able to claim any spot in the top 5 list as yet due to its slow expansion in Malaysia. McDonalds still rules the top spot followed closely by KFC.

Malaysia: Attractive Market Trend

The reasons below shows why there is an attractive market trend for franchising in Malaysia: 1. Great potential of growth for franchising industry in Malaysia

According to a report written by Digital Media Network Inc., franchising industry in Malaysia is still in the early stage in which franchising industry only contribute to 5% of Malaysias annual retail sales. The percentage is much lower than U.S. In U.S., franchising industry contribute to 8

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

40% of U.S.s annual retail sales. The low percentage indicates that there is great potential of growth for franchising industry in Malaysia. Since franchising industry in Malaysia is still new and it has a lot of potential to grow, Burger King can take this opportunity by entering Malaysias franchising industry and gain advantages by being one of the first-movers among the U.S. franchises that penetrate into Malaysias franchising market. One of the advantages that Burger King can obtain by being one of the first movers is that, it will be difficult for the latecomers to penetrate the market or even to surpass Burger King because comparing to latecomers, Burger King already has its own loyal customers. Then, if Burger King manages to conquer or hold the most percentage in franchising industry in Malaysia, Burger King can create a very strong barrier of entry to other foreign franchisees that want to enter the industry. High barrier of entry will resulted in other foreign franchisees are less likely to enter the market. Hence, Burger King is able to reduce the amount of its competitor.

2. Attractive profit is expected

There is relatively high purchasing power among Malaysian (Digital Media Network, Inc.). When there is a high purchasing power among Malaysian, when a business want to sell its products or services to Malaysian, Malaysian people are more likely to purchase the products or services offered. Hence, when Burger King want to sell its products to Malaysian, most or all Malaysian people are likely to buy Burger Kings products. This indicates that Burger King can gain profit by doing business in Malaysia. Besides that, it is anticipated that target segment for U.S. franchises will continue to grow as there will be a rise on disposable income among Malaysian (Digital Media Network, Inc.). When there is a rise on income among Malaysian, purchasing power among Malaysian will increase. This increases the amount of potential profit for any businesses in Malaysia too. Hence, if Burger 9

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

King is to operate its business in Malaysia, Burger King will be able to get a hold on the profit too.

3. Many individuals or local organizations are interested to be the franchisee

Many individuals or organizations in Malaysia are interested on the franchising industry in Malaysia. Although the non-Bumiputras does not receive much financial support from the government in regard to venturing into franchising industry, the non-Bumiputras still choose to enter the franchising industry in Malaysia. It is because of the non-Bumiputras identify franchising as an effective strategy for regional expansion (Digital Media Network, Inc.). Then, local manufacturers also enter the industry in order to increase their businesss profitability by diversifying their operation (Digital Media Network, Inc.). Hence, although Burger King does not want to establish its operation locally (in Malaysia), they can select one of the interested individuals or organizations to be the Master Franchisee and let the Master Franchisee to manage its business in Malaysia.

4. U.S. franchises has high popularity in Malaysia

According to the report written by Digital Media Network Inc., U.S. franchisees are very popular in Malaysia in which 70% of the franchises in the franchising industry are U.S. franchises. Since U.S. franchises are very popular and well-received among Malaysian, hence if Burger King wants to operate its business in Malaysia, there will not be much problem particularly on getting customer to like and buy its products. It is anticipated that Burger King will be widely-received by Malaysian since Burger King is one of U.S. franchises and Malaysian look highly on U.S. franchises. 10

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Malaysia: High Encouragement from Government

Starting from the year of 1992, Malaysia government began to promote franchising sector in Malaysia. Then, since longer time duration (minimum is two years) needed in order to create a successful home-grown franchises, Malaysias government highly encourage U.S. franchises particularly those with proven business systems and track records to establish their franchises in Malaysia (Digital Media Network, Inc.). Burger King is one of the U.S franchises and it has a proven business systems and track record. Hence, It is anticipated that Burger King will be well-received by Malaysias government if Burger King decided to operate its business in Malaysia.

Malaysia: Strong Financial Support

Malaysia government offer significant financial and training support to Bumiputera who want to venture into the sector. For instance, on the 8th Malaysian Plan which covered Malaysias plan for development from 2001 until 2005, government allocated RM100 million (US$26.3 million) to the Ministry of Entrepreneur Development (Digital Media Network, Inc.). The money allocated is to be used to promote, market, train and finance the Franchise Development Program (FDM). Besides that, there are many financial assistance programs and facilities created under the Ministry of Entrepreneur Development in order to promote franchising business in Malaysia. The programs are mostly on providing financial assistance to those who want to start a business on franchising. Moreover, foreign franchisors can get benefit from the programs too if the local partner or its franchisee is incorporated in Malaysia (Digital Media Network, Inc.). Burger King is going to receive the benefits from the program too if its local partner or franchisee is incorporated in Malaysia. For instance, Burger King is eligible to receive financial assistance from the selected organizations in Malaysia since its local partner or franchisee is Universiti Teknologi PETRONAS | International Business Project 11

Burger King May 11

incorporated in Malaysia. Hence, Burger King can be at ease as they can figure out from where they can get financial assistance if they get financial problem Other than that, not only Malaysias government is the one who can provide financial assistance to Burger King. Currently, Burger King Malaysia is being financially supported by CIMB, one of the top banks in Malaysia. Cosmo Restaurants Sdn Bhd (Cosmo) is one of the franchise holders for Burger King in Malaysia ( Burger King Corporation, 2010). One of the best opportunities received by Cosmo is by having CIMB Private Equity (CIMBPE) as its main shareholders. CIMBPE is one of the divisions under CIMB Group whereas CIMB Group is the second largest financial provider in Malaysia (CIMB Group, 2007). Basically, CIMBPE provides equity capital to companies that seek for expansion capital, restructuring purposes and funding buyouts (CIMB Group, 2007). On 2007, CIMBPE announced that they are going to provide more investment to Cosmo in order to help Cosmo to expand its business in Malaysia, to refurbish the existing restaurants as well as to optimize its capital structure (CIMB Group, 2007) (Kaur, 2008). On 2008, CIMBPE already hold a 60% equity stake in Cosmo (Mark, 2008). Director of CIMBPE, Darawati Hussin stated that CIMBPE decided to be the main investor for Burger King because CIMB has always been attracted to the growth of fast food sector in Malaysia (Musa, 2008) (CIMB Group, 2007). Besides that, CIMBPE find Burger King as attractive and think that Burger King has a strong brand (CIMB Group, 2007). She also added that they are hoping that the funding will facilitate Burger King to be one of the leading quick service restaurant chains in Malaysia (CIMB Group, 2007). As a result from the financial support provided by CIMBPE, Cosmo is able to open more outlets. On 2008, there are already five round-the-clock Burger King Restaurants in Malaysia with six are in petrol kiosks (Mark, 2008). Then, to date, Cosmo owned 20 Burger King Outlets in Malaysia and among the three franchise holders, Cosmo is the largest franchisee ( Burger King Corporation, 2010) (Kaur, 2008). 12

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

PRODUCTS AND BUSINESSES OF BK

In marketing, product and services is defined as the physical/ tangible entity or services that companies may offer to their customers, divided into three levels core, actual and augmented product. As for Burger King, meals served are the actual product. Their services are as the augmented product and the satisfaction of having the meal is the core product. Since Burger King has internationalized their business throughout the four region of the world, their products differ from one country to another. The services might be slightly different from one country to another as most of the giant fast-food chain did have their own Standard Operating Procedure. Below are the partial lists of Burger Kings product, differentiated by four regions. Country Unites States of America Triple Whopper Bacon Cheddar with Cheese Ranch TENDERCRISP Australia Steakhouse ST Burger Whopper Hamburgers

Bacon Deluxe United Kingdom

Angry Angus Single

Aussie Whopper

Whopper

Steakhouse Angus

Chilli Cheese Melt 'n Middle

XL Bacon Double Cheese Burger

WHOPPER 13

Table 3.1 BK Hamburgers

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Country Unites States of America Soft Drinks Australia Shake Milk & Juices Hot & Cold Coffee Drinks

Soft Drinks United Kingdom

Shake

Juices

Coffee and Tea

Soft Drinks

BK Shakes

Coffee

Tea

Table 3.2 BK Drinks

z Unites States of America Chini-Minis Australia

Snack/Side Dishes

French Toast Sticks Blueberry Biscuits with Maple Syrup Icing

Cheese Bacon BK Wrapper with

French Fries United Kingdom

Angry Onion

M&M Minis Storm

Flake Storm

Chilli Cheese Bites

Hash Browns

Mint Choc Swirl

6 Mini Pancakes with Maple Syrup

14

Table 3.3 BK Side Orders

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Product variety
Burgers are among the main line up in westerners daily menu. Unlike Asian, rice is their main food. Hence, choices of hamburgers in Unites States and United Kingdom are much more varies than in the Asia Pacific especially in Malaysia, Japan and Korea. While United States, Australia and United Kingdom outlet offers more than 20 different burgers, Malaysias Burger King offers are only limited to 13 types of hamburgers. United Kingdoms also offers eight of its side dishes and dessert compare to six offered by Malaysias. Westerners prefer sweeter food as their desserts hence the various ice cream and sundae offered. Compare to Malaysia, Burger King only offer four types of its very delicious desserts. Same goes to drinks and desserts. In order to internationalize business, one of the essential knowledge that Burger King possessed is the market preferences of the host country Westerners may prefer hamburgers and pancakes as their breakfast but not in Asia. United States, United Kingdom and Australia outlet did offer menus for breakfast but not in Malaysia and Japan outlet. In additional, fast food chain is originated from the United States of America a western country thus increasing the competition of fast food restaurant in the regions, resulting very competitive moves from other fast food franchisers by offering wide range food and beverages.

Product Promotion

Burger King around the world has their own way in promoting their product. . Burger King began airing its first television commercial in 1958 and their first product promotion, 'The Bigger the Burger, the Better the Burger,' debuted in 1968. In 1974 the memorable 'HAVE IT YOUR WAY' campaign was created. For decades Burger King had used the Have it Your Way slogan. The slogan was to convince customers that they can have their burgers as they wish. In fact in United States outlet, they even allow
Figure 3.1 BK Promotion Ad

15

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

customers to choose how many pickles, onion or even the patties stack that they wish to eat. However, nowadays not every outlet is implementing this marketing strategy such as in Malaysia, Australia and United Kingdom. In additional, not every Burger King Outlet is using the slogan today. In conclusion, Burger Kings burger are not really can be easily customized. Customers can have their way only in the United States branches. Burger King also claim their burger as a healthier burger as their patties were grilled instead of fried. Based on their previous experience and todays healthier food demand, Burger Kings products were aimed to serve the demand. Like most of the restaurant industry, Burger King is addressing health issuesaccommodating the low-carb diets and offering more salads. Besides the healthier food, they also provide nutritious facts for customers so that customers can chose which burgers satisfy them the best. They call this as honesty is the best policy since they will not hide the amount of calories contained in a single meal. The nutritious sheet was embedded in their website and also Attached is the nutritious fact sheet from few Burger Kings around the world. Burger King also positively participate in the Kids Live Well initiatives by the United States Non-Government Association (NGO) hence adding few more menu made uniquely for the kids into its product line. For example, they have included the Fresh Apple Fries (not fried) to be dipped with the caramel sauce. Burger King has recently reformulated their children's meals chicken nuggets by including less sodium inside the food.

Figure 3.2 BK Flame-Grilled Burger

Figure 3.3 BK Fresh Apple Fries

16

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Country Unites States of America Tendercrisp Garden Salad Australia Garden Salad United Kingdom

Salads

Tendergrill Garden Salad Chicken Salad

Garden Salad Veggie Patty Garden Salad

Garden Salad

Flame-Grilled Chicken Salad

Table 3.4 BK Salads

17

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

BURGER KING STRATEGIES

Since Burger King is a restaurant which originated from Miami, Florida, we would look into both the international strategy as well as its strategy to operate in Malaysia. A better way to look into the many strategies that Burger King is adopting is to look into the four elements of marketing, 4Ps product, place, price as well as promotion. Element Product Description Physical product or service offered to the customer. In the case of physical product, it also refers to any services or conveniences that are part of the offering. Place Placement decisions associated with channel of distribution that serves as the means for getting the product to the target customers. Promotion Related to communicating and selling to potential consumers. Since these costs can be large in proportion to the product price.

Table 4.1 Marketing Mix of BK

18

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

International Strategies
Place

Franchisee

Just like any fast food restaurants, Burger King is also expanding its market through franchising. It is even advertising its franchising interest on its official website, www.bk.com. Burger King is considered to be an interesting business to venture in. Burger King backs every franchisee with more than 56 years of innovation and achievements and a proven business model. They are the right brand with the right formula for success and are performing at the top of its industry. Burger King have more than 12, 200 restaurants in all 50 states and in 76 countries and U.S territories worldwide. They support every franchisee by offering world class support services, including training, operations and marketing. In 2008, Fortune Magazine ranked Burger King Corp, among Americas 1,000 largest corporations; Ad Week names it one of the three industry-changing advertisers within the last three decades, and it was recently recognized by Interbrand on its top 100 Best Global Brands list. More Burger King Branches in U.S. as well as all around the world would mean that more people would be able to buy a Burger King product. Thus increasing the market for Burger King Products. To increase the number of Burger King Outlets, Burger King Corporation is currently recruiting multi-unit franchisees. They are looking for candidates who can acquire multiple restaurants and subsequently grow their business by developing new restaurants (Burger King, 2011). Look of outlets

The Miami Herald reports that same-store sales in North America declined 6% in the first quarter, and 3.6% worldwide (The Malaysian Insider, 2011). Thus the chain plans to upgrade the 19

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

look of its restaurants with a sleek new aesthetic, anchored by a black tower that will give locations more street-front visibility and more varied sitting options.

Tower BKs famous crown

Figure 4.1 BK Outlet which stands out

Other Service

Besides that, certain international Burger King outlets provide other services to attract customers to its outlet. An example is an outlet in Philippines which provides a place for its customers to charge their mobile phones (Brian). At an era where mobile phone is one of those things people dont leave home without, this is definitely a good idea to attract customers to Burger King. Besides the good food, customers no longer need to fret when their mobile phones run out of juice.

20

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Figure 4.2 Charging booth - Burger King Philippines

Product

Updates Menu

Besides making Burger King available to more people through franchising, Burger King also has plans to launch a menu makeover. According to a report from the Miami Herald, the second largest fast food hamburger chain in the world is testing out more than a dozen new products across the US. They include items like mango and mixed-berry smoothies; low-fat vanilla parfait with granola, raspberries, blueberries and blackberries; and oatmeal with dried fruit and maple sugar. The story revealed that Burger King will also be making a foray into healthy fast-food options with a new chicken and apple salad with blue cheese and an Asian chicken salad with baby edamame, red cabbage and sesame lime vinaigrette. The chain is also experimenting with gourmet-styled sandwiches with a home-style burger on a brioche bun with thick-cut bacon, romaine lettuce, and spicy new pepper sauce.

21

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Teaming up with Starbucks

Great news for Burger King as well as Starbucks lovers when Burger King announced that Burger King Holdings Inc will sell Starbucks Corps Seattles Best Coffee at its U.S. restaurants (Baertlein, Burger King to sell Starbucks' Seattle's Best Brew, 2010). This initiative will start in autumn as Burger King revamps its morning menu as a respond to the successful launch of McCafe coffee by McDonalds Corp. The new coffee drinks come with optional flavourings and whipped topping will see for $1 to $2.79. Seattles Best will replace Burger Kings BK Joe Brew which was introduced back in 2005. When this joint venture was announced, Burger Kings shares rose 0.7 percent, while Starbucks gained 1 percent in the afternoon trading (Baertlein, Burger King to sell Starbucks' Seattle's Best Brew, 2010).

Figure 2.3 The different Seattle's Best coffee at Burger King

Besides in the U.S., the serving of Seattles Best at Burger King has extended to Burger King Outlets in Singapore (Kpat, 2011).

22

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Figure 4.4 Breakfast meal at Burger King Singapore

Malaysian Strategy

Place

Franchisee There are currently three Burger King franchise holders in Malaysia. The largest operating restaurant is managed by Cosmo Restaurants Sdn. Bhd. and outlets in KLIA are under the management of Dewina Hosts Sdn. Bhd. Meanwhile outlets in Sabah are operated by Living Bread Sdn. Bhd. Thus, Burger King in Malaysia is generally handled by these three franchisees. With this in mind, take note that not all strategies are being implemented by all outlets due to its different owners. Thus, individuals trying to open a Burger King outlet in Malaysia may not have an option to do so, unless one has the capabilities to operate multi-units at one go. 23

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Product

New Products To ensure that Burger King in Malaysia can keep up with competitions from other fast food outlets such as McDonalds and A&W, it also tries to update its offering by creating new menus. New available products at Burger King would ensure that regular customers will not be bored of the items, and it may also attract new customers to the outlet. The latest addition for the Burger King in Malaysia is the Spicy Tender Crisp Chicken Burger. Succulent chicken fillet, tangy mayonnaise, fresh lettuce and tomato slices sandwiched in between a corn dusted bun. This particular item was made available starting 22nd July 2011 in outlets located in Peninsular Malaysia excluding KLIA outlets. Besides that, Burger King fans can no enjoy Burger King meals at more affordable prices with the introduction of its new Burger King A4dables meals. These meals consists of the Spicy Chick N Crisp as well as the chick-a-licious Spicy Chick N Crisp with Smoked Chicken Roll. Prices for both items are ranged below RM10, which is considered cheap. And unlike rival fast food outlets, these meals are available throughout the day, seven days a week.
Figure 4.5 Spicy Tender Crisp Chicken Burger from Burger King

24

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Figure 4.6 Burger King's A4dables meals

Delivery Service Burger King has also joined the hype by introducing its own delivery service. Initial stages started earlier this year; covering areas around outlets in Masjid Jamek, IOI Mall and Klang Bukit Tinggi. Now after a few months, Burger King has expanded its delivery service to six different states and two federal territories (Burger King, 2011).

25

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Negri Sembilan 9 Avenue, Nilai Melaka Aeon Jusco Bandaraya Melaka Penang Promenade 28 Perak Jalan Gopeng Jalan Sultan Azlan Shah

Kuala Lumpur
Masjid Jamek KL Sentral Desa Sri Hartamas

Selangor
IOI Mall Mutiara Damansara Shah Alam, Seksyen 13 Bandar Bukit Tinggi Sunway Pyramid Setia Alam

Johor
Jln Tun Abdul Razak UTM Skudai, Pontian

Putrajaya Alamanda

Figure 4.7 Burger King Delivery service

Burger Kings delivery service is available within the vicinity of those outlets stated in Figure 3 from 11am to 11pm daily. With the exception of Majid Jamek, Alamanda, Sunway Pyramid and Aeon Jusco Bandaraya Melaka which ends its delivery service at 10pm. The service includes a variety of choice, namely Burger Kings Value Meals which comprises of 16 different burgers to choose from. If one is not up for a heavy meal, customers also have the the choice to order snack sized meals as well other side dishes. They also provide meals that can cater for a family or a group of friends to enjoy called the Buddy Meal 1 and Buddy Meal 2. Some of the menus available can be found in Figure 6 below.

26

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Figure 4.8 Parts of Burger King's delivery menu

27

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Promotion

Over the past few months, we see competition between fast-food restaurants in Malaysia to gain more sales in their particular outlet. Burger King is also adopting similar strategies. Introduction of New Product As can be seen in Figure 6, the promotion includes two pieces of Spicy Chicken Drummet for only RM1.99 with any Value Meals purchase of the newly introduced Spicy Tender Crisp Chicken Burger.

Figure 4.9 Burger King promotion to introduce Spicy Tender Crisp Chicken Burger

RM1 Whopper One of the most talked about promotions that was conducted by Burger King was the one day offer to sell a whopper for only RM1. The promotion was only made available on the 6th October 2010. It was promoted in major newspapers around Malaysia and news about the promotion was circulated through blogs as well. It got so much response from Burger King fans that they experience an insufficient stock of RM1 Whoppers on 6th October 2011 (Rizal & Paiz, 2010). 28
Figure 4.10 RM1 Whopper

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Beefy Monday Mondays at Burger King are dedicated to Beef. Its BBQ Beefacon Cheese Single is priced at only RM3.99 with every medium carbonated drink purchased. This enables customers who are a fan of this burger and those who aims to have stay within budget while still enjoying a hearty meal to purchase it. This also will increase its sales of this particular burger on Mondays. It would also create a sense of awareness regarding this particular burger in Burger King. Whopping Tuesday While Mondays are for beef lovers, Tuesday is dedicated to Whopper lovers all over Malaysia. Customers are able to enjoy double the taste of a whopper on Tuesdays when buying two medium carbonated drinks and 1 whopper. Besides that, customers can also save more than RM10 when purchasing the meal on Tuesdays.

Chick Wednesdays Wednesdays are also enjoyable at Burger King, especially for those who love chicken. Two pieces of Grilled Chicken are priced at RM9.99 with every purchase of two medium carbonated drinks. Thus ensure that customers would still have a chance of enjoying a discounted meal on Wednesdays at their favourite Burger King Outlets. 29

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Whopper Mania Besides having daily offers like the one stated above, Burger King also offers limited time offers like the one stated in Figure 8. With every purchase of Whopper Large Value Meal, one can get one Whopper Jr. for free. The offer was introduced in February 2011 and according to the caption stated below the poster which was uploaded unto the Burger Kings Malaysias page; it was available until the end of February. This strategy will enable customers to always be alert with any new Burger King offers to ensure that they do not miss out on any interesting promotions.
Figure 4.11 Whopper Mania!

Valentines Day Burger King also joins in celebrations such as Valentines Day. The

promotion done was in line with the celebration by providing free cheese with every burger value meal purchase. It was made available only on the day before Valentines as well as that day itself. This would not only spread the message of love, but also satisfy craves of cheese lovers by offering either American Cheese of Swiss Cheese.
Figure 4.12 Happy Cheesy Valentine's

30

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Ramadan 2011 This Ramadhan, Burger King also has promotions for

breaking of fast. As can be seen, the promotion is targeted at groups wanting to enjoy the break of fast together. It can be either the family or just a group of friends. To ensure customers at Burger King has a healthy break of fast, the meal includes burgers as the main course, fries and onion rings as side dishes
Figure 4.13 Ramadhan 2011 offer

and drinks. The meal is then

completed with Burger Kings famous Hersheys Pie. The promotion enables customers to enjoy Burger King during the break of fast at a cheaper price.

31

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

WORST CHALLENGES/OBSTACLES FACED BY BURGER KING

Since 1921, the dawn of fast food restaurants has been overwhelming and the change from contemporary dining to fast food has been an adventure for many and as all new things will have problems one time or another, Burger King (BK) has had its share of obstacles that it has faced since its beginnings. Addressing the most critical challenges, BK, putting in a nutshell, has had the most feared problem that any company could face; administrative issues. Since BK first opened in 1953, it has had 4 owners due to the incompetence of the prior owners; finally in 2002 it went public. Change of ownership many a time at this level is considered to be very unreliable and unstable in the corporate world. The reason of change being mismanagement, inappropriate marketing resulting in failure of sending out the actual message and finally disturbed franchisee relations. Apart from internal issues, the most major external challenge it faced was poised by fast growing competition from McDonalds. This was in the global marketplace, in Malaysia itself BK started out in 1997 and since then expansion has been slow as compared to other fast food chains, that itself is a major setback of BK.

Of Franchisees and Ownership

During the 1954-67 eras BK found itself on a rapid growth scale and by the time the company was sold to Pillsbury in 1967, BK had become the third largest fast food chain in the USA. That is when its problems first started out with its franchisees. Though the overall system of franchising was a success no doubt, BK had failed to maintain its image consistently throughout its franchising scheme, the main problems being the inconsistency in both food and service from franchise to franchise. This was a major error in its scheme and thus resulting in customer attrition. Franchisees had their own methods of conducting day-to-day operations and strategies which basically overrides the parent companys operations. One franchisee had in fact reached to such a level that they could go against the parent company and they did; in 1969 one franchisee Universiti Teknologi PETRONAS | International Business Project 32

Burger King May 11

in Louisiana had over a dozen BK in their control and went public under the name of Self Service Restaurant Inc. within a year they were also in control of the Chicago market before the parent company could even get their hands on it. They didnt stop there the franchisees went on to control 351 stores by 1971 and were ready to fully takeover from Pillsbury, they made an offer which was turned away and in retaliation they went on to capture more BK stores and put them under the name of Chart House. In the end Pillsbury sued the franchisees for a motive on contractual right of first refusal to any sale. This suit was indication that a new management style was necessary, one with more control over franchisees. It was reported in the Wall Street Journal in 2004 that over the past 15 years, BK has had 9 CEOs and that 3 of its largest franchisees had filed for bankruptcy. With all the franchising and multiple managements and styles, BK slowly lost its vigor and by 2002 it was merely known as a company, it became just an idea existing in the corporate world disguising itself as a major player in the fast food industry. It had become several stand alone units working on the sinews of franchisees and surviving with their larders.

Of Marketing and Advertisement Dilemmas

Burger King signed on with Crispin Porter & Bogusky (CP&B), an advertising agency, and started to see its sales increase with new marketing strategies. That was but a mere day dream for BK as in 2009 sales dropped anchor in the middle of the ocean. Till the 3rd quarter of 2010 sales were in negative numbers falling 2.5% to $8.7 billion. Many have put these as adverse effects of bad advertising and over-thetop marketing campaigns. For example one of their ads showed a Hindu goddess perched on a ham sandwich, very well for cultural respect, ghastly it is to find out their little understanding and appreciation for other religions. Another ad they made which was noted to be
Figure 5.1

33

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

disturbing to many people was aimed to appeal young men during the recession period as they claimed that cheap is chic for those suffering from recession, thus referring to the particular demographic group (Figure 5.1). One TV commercial, though this time targeted for kids to buy kids meals, featured a Nickelodeon cartoon character SpongeBob SquarePants, dancing with the King (BK mascot) to a 1990s hit Baby Got Back surrounded by scantily dressed women whom danced shaking their behinds, the song itself mentioning that the King likes square behinds. Parents were furious over the indecent commercial and thus BK was under pressure, ironically BK and Viacom (parent company of Nickelodeon) made claims that the commercial was for adult audiences. Many proclaimed that BK had lost its aim on delivering the message in a cohesive manner and rather did not deliver the message at all.

The Woes of Competition

While BK was suffering with internal issues of management and franchisees McDonalds on the other hand was running the marathons till the end producing a winning sheet. In the US, McDonalds has claimed the number 1 spot in the fast food industry with its sales and profits increasing year by year. Thus it is BKs main rival and the funny thing is BK is number 2 in US but is nowhere near the likes of McDonalds success. Currently McDonald has over thirty-six thousand outlets over the globe whereas BK has only around twelve thousand. In 2010 McDonalds revenue was a staggering US$ 24 billion and BKs was only a mere US$2.5 billion, a mountain of difference. The key factor behind McDonalds success was its consistency in managing the company and also its image. Its strategy on franchising was absolutely fabulous and it enabled McDonalds to have a hand in operations of the franchisee, thus wherever one goes the same service will be shown at any McDonalds outlet. The marketing strategy or McDonalds focused on Family Relations and that was a hit which even played through recession as compared to the young men target group of BK. 34

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

Close behind BK is the upcoming fast food chain, Wendys. With its increasing popularity and cohesive marketing and advertising, Wendys has a more stable and cohesive approach as compared to BK. Though at number 3 spot, Wendys is a major threat to BK in the US and as experts say, BK might soon just lose its number 2 spot to Wendys. Just these 2 companies in comparison to BK has led us to observe that BK has tough competition some which it cannot tackle in any way possible.

Of the Kings Reign in Malaysia

Burger King in Malaysia as mentioned earlier started out in 1997 and operates under a franchisee known as Cosmo Restaurants Sdn. Bhd. and today it has around 20 restaurants all over Malaysia. Burger King has faced problems in Malaysia too; firstly in 1999 there was a major boycott of BK by Malaysians due to BK building a restaurant in Israeli occupied Palestinian territory. This boycott itself ruined an image yet to build. BK has not caught the Malaysian audience as others like KFC and McDonalds has. The competition is now too strong to overcome, thus BK chose a more simple method by keeping the restaurants exclusive to certain areas. This though has worked well; success rate is not based on exclusiveness but profits. In 2008 BK announced it would open 50 additional restaurants within 5 years, it is now 2011, 3 years have passed and yet we barely see 20 new restaurants let alone reach 50. This slow growth indicates BKs lack of sales and perhaps even strategy. Overall it is noticed that BK has major issues to deal with and as some have dubbed it a problematic company. Since BK went public it has found new freedom to venture around the globe, yet BK is still lost in its own conscience. Sales and profits are on a verge of major decline since 2009 and even in 2011 shows no sign of it rising up. Perhaps BK should revisit its foundations and find the root of the problems so that they may be addressed in order to achieve more success in the future. As for BK in Malaysia, the only way would be to tackle KFC and McDonalds and that can only be done by using the Malaysian mentality to its advantage and create an aligned marketing strategy. It needs to increase in the number of outlets to increase in sales and BK should start mixing new ingredients to suit the tastes of the Malaysian nation. Universiti Teknologi PETRONAS | International Business Project 35

Burger King May 11

REFERENCES

[1]

Burger King Corporation. (19 October, 2010). 3G Capital Completes Acquisition of Burger King Holdingd Inc. Retrieved 25 July, 2011, from Investor Relations: http://investor.bk.com/phoenix.zhtml?c=87140&p=RssLanding&cat=news&id=1484487

[2]

Baertlein, L. (2 September, 2010). Burger King agrees to $3.3 billion sale to 3G Capital. Retrieved 25 July, 2011, from REUTERS: http://www.reuters.com/article/2010/09/02/us-burgerkingidUSTRE6801CB20100902

[3]

Brady, D. (8 September, 2010). The Challenges Facing Burger King Buyer 3G Capital. Retrieved 25 July, 2010, from Bloomberg.Com: http://www.businessweek.com/magazine/content/10_38/b4195018489726.htm

[4]

Burger King. (2011). menu_PDF2. Retrieved 22 July, 2011, from Burger King: http://www.burgerking.com.my/whats_hot/great_deals/default.php

[5]

Burger King. (2011). New Franchisee FAQ's. Retrieved 20 July, 2011, from Burger King: http://www.bk.com/cms/en/us/cms_out/digital_assets/files/pages/NewFranchiseeFaqs.pdf

[6]

CIMB Group. (26 November, 2007). CIMB Private Equity Invests in Burger King Malaysia. Retrieved 25 July, 2011, from Press Release/News: http://www.cimbpartners.com/index.php?ch=g2_mc&pg=g2_mc_news&ac=280&tpt=partner

[7]

DREA. (2 September, 2010). Brazilian-owned 3G Capital Buys Burger King. Retrieved 25 July, 2011, from Business Pundit: http://www.businesspundit.com/brazilian-owned-3g-capital-buysburger-king/

[8]

Heher, A. M., & Fredrix, E. (2 September, 2010). Burger King Sold to Equity Firm 3G Capital $3.26 Billion. Retrieved 25 July, 2011, from HUFFPOST FOOD: http://www.huffingtonpost.com/2010/09/02/burger-king-sold-326-billion-3g-capitalstock_n_703526.html

36

Universiti Teknologi PETRONAS | International Business Project

Burger King May 11

[9] Kaur, S. (20 October, 2008). CIMB Private Equity to provide more financing for Cosmo Restaurants. Retrieved 25 July, 2011, from The CBS Interactive Business Network: http://findarticles.com/p/news-articles/new-straits-times/mi_8016/is_20081020/cimb-privateequity-provide-financing/ai_n44418837/ [10] LinkedIn Corporation. (n.d.). 3G Capital. Retrieved 25 July, 2011, from LinkedIn: http://www.linkedin.com/company/3g-capital [11] Mark. (22 January, 2008). Malaysia to Open 50 More Burger King Outlets in 5 Years. Retrieved 25 July, 2011, from Franchise Business Opportunities: http://franchise.businessopportunities.biz/2008/01/22/malaysia-to-open-50-more-burger-king-outlets-in-5-years/ [12] QuickMBA.com. (2010). Retrieved 20 July, 2011, from QuickMBA.com: http://www.quickmba.com/marketing/mix/ [13] [14] Rizal, H. H., & Paiz, A. F. (2010). Insufficient stock of RM1 Whopper. Kuala Lumpur: Malay Mail. Stanford, D. D., & Helm, B. (3 September, 2010). Burger King Agrees to $3.3 Billion 3G Capital Offer. Retrieved 25 July, 2011, from Bloomberg: http://www.bloomberg.com/news/2010-0902/burger-king-to-be-bought-by-3g-capital-group-in-deal-valued-at-4-billion.html [15] The Malaysian Insider. (4 June, 2011). Burger King planning whopper of a makeover. Retrieved 20 July, 2011, from The Malaysian Insider: http://www.themalaysianinsider.com/business/article/burger-king-planning-whopper-of-amakeover/ [16] Wikimedia Foundation Inc. (22 July, 2011). Burger King. Retrieved 25 July, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Burger_King

37

Universiti Teknologi PETRONAS | International Business Project