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Over the past few years, Burger King, one of the world's most famous burger companies, has struggled financially. Wendy's overtook it as America's second-largest burger franchise in 2020.
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Burger King's sales and traffic languished while other fast-food companies returned to pre-pandemic levels last year.
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Due to its $400 million investment drive to strengthen its brand and outlets, the burger behemoth has seen some financial recovery this year. In the first quarter of 2023, global same-store sales rose 12.3% and US sales rose 8.7%, beating analyst expectations.
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Burger King must improve to compete with McDonald's and Wendy's. Burger King's franchisees' health and profitability may be its biggest problem.
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Due to declining foot traffic and revenue, two major Burger King operators—TOMS King Holdings and Meridian Restaurants Unlimited—filed for bankruptcy in the first quarter of 2023.
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Since the start of the year, Burger King has closed 27 Meridian stores and 26 from another operator that Burger King sued for failing to pay royalties, ad fund payments, and other costs.
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In order to "improve the overall health of the system," Restaurant Brands International's CEO said in a May earnings call that the chain may close 400 "low volume" stores this year.
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Burger King is working with other franchisees to improve outcomes and encourage underperforming outlets to sell to stronger operators.
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"I do expect a bit more immediate noise as we transition some portfolios into the hands of top local managers, but think we are moving in an appropriate direction to improve our foundation for the long-term," he said.
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Traffic is another reason Burger King struggles. During that May earnings call, traffic was "modestly negative." However, traffic wasn't as bad as in the fourth quarter of 2022, which encouraged the company.
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RBI is promoting and strengthening operations to increase traffic and improve customer experiences through 2023. Burger King is counting on its ability to accomplish these lofty ambitions.
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