Burger King Case Study

BURGER KING CORPORATION

CASE STUDY

INTRODUCTION

Burger King was founded in 1953 in Jacksonville, Florida as Insta-Burger King. The original founders and owners, Keith J. Kramer and his wife's uncle Matthew Burns, opened their first stores around a piece of equipment known as the Insta-Broiler. The Insta-Broiler oven was so successful at cooking burgers; they required all of their franchises to carry the device. After the original company began to falter in 1959, it was purchased by the Miami, Florida franchisees James McLamore and David R. Edgerton who renamed the company Burger King. The duo ran the company as an independent entity for eight years, eventually expanding to over 250 locations in the United States, when they sold it to the Pillsbury Company in 1967.

Under Pillsbury, the company underwent several attempts at reorganization or restructuring in the late 1970s and early 1980s. While these efforts were effective in the short term, many of them were eventually discarded resulting in Burger King falling into a fiscal slump that damaged financial performance of both Burger King and its parent. Poor operating performance and ineffectual leadership continued to bog the company down for many years, even after it was acquired in 1989 by the British entertainment conglomerate Grand Metropolitan and its successor Diageo. Eventually, the institutional neglect of the brand by Diageo damaged the company to the point where major franchises were driven out of business and its total value was significantly decreased. Diageo eventually decided to divest itself of the money-losing chain and put the company up for sale in 2000.

In 2002, a troika of private equity firms led by TPG Capital, L.P with associates Bain Capital and Goldman Sachs Capital Partners agreed to purchase BK from Diageo for $1.5 billion (USD), with the sale becoming complete in December of that year. The new owners, through several new CEOs, have since moved to revitalize and reorganize the company; the first major move was to re-name the BK parent as Burger King Brands. The investment group initially planned to take BK public within the two years of the acquisition; however this action was delayed until 2006 due to several reasons. On 1 February 2006, it was announced that TPG planned to take Burger King public by issuing an Initial Public Offering (IPO). Between March 2004 and March 2009, the company experienced a score of consecutive profitable quarters that were credited with successfully re-energizing the company, however with the slowing of the economy during the financial crisis of 2007-2010 the company's business has declined while its immediate competitions, McDonald's, has grown. On September 2, 2010, Burger King Holdings Inc. announced it will sell out to private equity company 3G Capital for $24 per share, or $3.26 billion.

3G Capital is a multi-billion dollar, global investment firm focused on long-term value creation, with a particular emphasis on maximizing the potential of brands and businesses. The firm and its partners have a strong history of generating value through operational excellence, board involvement, deep sector expertise and an extensive global network. 3G Capital works in close partnership with management teams at its portfolio companies and places a strong emphasis on recruiting, developing and retaining top-tier talent. 3G Capital's main office is in New York City.

KEY DATES

* 1954: James McLamore and David Edgerton establish Burger King Corporation.

* 1957: The Whopper is launched.

* 1958: BK releases its first TV advertisement.

* 1959: The Company begins to expand through franchising.

* 1967: Burger King is sold to Pillsbury.

* 1977: Donald N. Smith is hired to restructure the firm's franchise system.

* 1981: Norman E. Brinker is made head of Pillsbury's restaurant division, including Burger King.

* 1982: Burger King claims its burgers taste better than its competition's (McDonald's and Wendy's) fried burgers.

* 1989: Grand Metropolitan plc acquires Pillsbury.

* 1997: The firm launches a $70 million French fry advertising campaign; Grand Metropolitan merges with Guinness to form Diageo plc.

* 2000: Diageo investigates a possible IPO or sale of the company

* 2001: A North American franchise group seeks to purchase the company

* 2002: A group of investors led by Texas Pacific Group acquire Burger King

* 2006: BKC, with the same stock symbol, goes public in an IPO.

* 2008: Ranked among America's 1,000 largest corporations

* 2009: Company opens its 12,000th store, located in Beijing.

* 2010: 3G Capital Investment Firm agreed to purchase.

WHAT WE BELIEVE

We believe in working together with and listening to our employees, guests, business partners and the people in the communities in which we live and work. We share their concerns for our neighborhoods, educating children, preserving the environment, providing jobs and doing our part to help families eat and live better by offering more nutritious food options and promoting healthy life-style messages. We know we have a role to play in each of these areas. (Chidsey, 2009)

TOPICS OF DISCUSSION

INTERNAL STRATEGIES

When the first restaurant opened, the burgers were cooked on an Insta-Broiler oven. This oven cooked the burgers over an open flame, much like the effect of a grill. This method gave the burgers a home cooked taste and made them healthier than fried burgers. Burger King continues to use this flame-broiled method today.

Beginning in 1973, Burger King ran a series of successful and catchy television commercials in which its employees would sing: "Hold the pickles, hold the lettuce. Special orders don't upset us. All we ask is that you let us serve it