SWOT Analysis of fast food brand Burger King

Burger king SWOT Analysis

 

Parent CompanyRestaurants Brand International
IndustryFast food industry
HeadquartersMiami, Florida
Revenue 2018$21.6 billion
Store Count (global 2018)17,796
CEODaniel Schwartz

 


Burger King is a subsidiary brand of Restaurant Brands International and the leading brand in the portfolio of RBI, based upon revenue. In 2018, BK accounted for a little above 67% of the total RBI’s revenue. Burger King was founded in 1954. It is the second largest hamburger fast food brand in the world based upon the number of restaurants operational worldwide. Burger King restaurants are operational across more than 100 countries and the US territories. During recent years, Burger King has enjoyed consistent growth in revenue. BK serves a menu of flame grilled hamburgers, chicken sandwiches and other specialty sandwiches as well as french fries, soft drinks and other food items priced affordably. The popularity of BK can be attributed to its focus on food quality and customer satisfaction.  However, international presence and an affordably priced menu have also strengthened BK’s competitive position. The brand relies nearly completely on franchisees to manage operations globally. However, its business model is still successful and the company has managed to retain its leading position among QSR brands. Competition in the fast food industry has grown higher and apart from the market leading global brands, there are several local brands also competing with Burger King. The fast food industry is also seeing several new developments. It is full of opportunities but the number of challenges in the industry has also grown.

Burger King SWOT Analysis
Photo by matthew Feeney on Unsplash

 

This is a swot analysis of Burger King analysing how the company is positioned in the industry to battle the latest challenges and make the best of existing opportunities.


Strengths:


Leading position in the QSR industry :

 

One of the leading strengths of Burger king is its market leading position in the QSR industry. The company is among the top players in the fast food industry in the US market.  According to the BK website, it is the second largest fast food hamburger chain in the world. A leading rival of McDonald’s in the US and abroad, Burger King has achieved a leading position in the industry based upon quality and strong brand image. While the total number of BK restaurants around the world may be much lower compared to McDonald’s, its presence in the global markets poses a formidable threat to the market share of fast food king McDonald’s. The market leading position of the company is a result of its focus upon product quality and customer service.


High Popularity :


Burger King is a highly popular brand and not just in the US but also around the world. The popularity of the brand rests upon its product quality, marketing and customer service. The company focuses heavily on all these things. The brand serves more than 11 million guests at Burger King restaurants worldwide daily. Its sales are as high because the company serves high quality, good tasting and affordable food. The company was founded in 1954 and has grown into the second largest fast food hamburger in the world. Apart from its commitment to premium ingredients and signature recipes, the company offers family friendly dining experiences which makes it so popular among customers throughout the world.


International presence :


Burger King was founded in 1954 and since then it has grown into a leading global fast food hamburger chain with 17,796 BK restaurants as of 2018 across more than 100 countries throughout the world. Out of the total BK restaurants worldwide, 17,746 restaurants are run by franchisees. United States is the leading market of Burger King where more than half of all the BK restaurants are located.


Nice growth rate :


Over the past several years, the brand has maintained a nice revenue growth rate. In 2017, the revenue of BK grew by around 10.1% compared to the previous year and in 2018, 8.9% compared to the previous year. Net systemwide sales of BK grew to $21.6 billion in 2018 compared to $20 billion in 2017. The total number of restaurants in the BK system has also grown a lot over the previous three years. From 15,738 restaurants in 2016, the total number of restaurants in the BK system grew to 17,796 in 2018.


Use of technology for growth :


In recent years, Burger King has grown its focus upon use of technology for serving its customers better. The company is investing more in digital technology and its use in processes like ordering, instore service as well as marketing. While higher focus upon the use of technology helps the brand achieve higher sales, it also helps with better customer service. The company now depends more on real time data and analytics to serve its customers and meet their needs better as well as drive customer satisfaction higher. Apart from its website, BK also receives orders from its mobile app. Users can download the app and use it to place and manage orders. In terms of marketing also, the brand is using digital technology to reach more customers worldwide. In December 2018, the company ran a Whopper for One Cent promotion following which its app was downloaded more than 1.5 million times. The Burger King app was the most downloaded app in the Apple store for several days in a row in December.


Focus on customer satisfaction :


Burger King places heaviest focus on customer satisfaction.  To keep its customers happier than its competitors the brand focuses on food quality as well as customer service. Apart from using premium ingredients to prepare its dishes, the company also presents nutrition info related to all the items on its website. The focus of the company is to offer its customers premium dining experiences at affordable prices throughout the world where it operates. Not just good food but a great environment where families can enjoy their food inside the BK stores. It is also using several channels including physical and online to serve its customers and to offer them the best dining experience.


Weaknesses :


High Indebtedness :-

Over the past several years, the parent brand of Burger King, Restaurant Brand International has accumulated quite a bit of debt. By the end of 2017, its total debt stood over $11.8 billion which was 40% higher than the previous year. At the end of 2018, the aggregate indebtedness of RBI stands at a little above $12 billion. While acquiring Tim Hortons and Popeyes Louisiana Kitchen, the company has added a fair amount of leverage to its balance sheet. RBI’s substantial leverage leaves it vulnerable to adverse economic and industry conditions. 


Reliant mainly on franchisees :


The BK chain of restaurants in run nearly fully by franchisees. Except for a small number of company owned restaurants more than 99% of total are run by franchisees. While this system reduces the  burden on the shoulders of the company, it also limits the revenue potential of the company and in some areas can prove a hurdle to faster growth. The franchisee system is common in the fast food industry where most of the leading brands including McDonald’s use it to run their business. However, apart from quality control, implementing other strategic measures also remains somewhat difficult in the case of franchisee system.  



Opportunities : 


Asian markets :


Asian markets including China are among the fastest growing markets in the world. Even if Chinese economy has slowed down a bit in 2019, consumption remains strong there. However, Burger King’s main market is the United States. The company depends on the US and Canada markets for most of its revenue. Extending its presence in the Asian markets will help the company reduce its dependence on the US market and simultaneously find faster growth. It can also partner with local brands to grow its market presence and number of franchisees in China and India.


Digital technology:


Digital technology has brought several new opportunities of growth in the fast food industry. Apart from marketing, it helps drive sales and provide better customer service. Use of real time analytics and data helps design better sales and marketing programs. In case of the fast food brands, customer engagement has become essential in the light of growing competition. Loyalty programs based upon digital technology can boost sales and help maintain customer loyalty.


Focus upon customer service :


One of the main methods of maintaining customer loyalty in the fast food industry is to focus upon customer service. Superior customer service and a better dining experience helps drive customer satisfaction higher. In the fast food industry, it is important to focus upon customer satisfaction. Maintaining a good brand image is also essential for marketing and sales. Customer service also strengthens a brand’s image in the market. Burger King maintains is focus upon customer satisfaction. However, for a business run by franchisees solely, it is important to focus upon customer service to grow sales and revenue.




Threats :


Growing competition :


Fast food industry is marked by intense competition. Among  the leading competitors of Burger King are McDonald’s, KFC, Subway, Wendy’s and several more global brands. Apart from that, other local brands also compete with Burger King in the US as well as other regions of the world. Growing competition from McDonald’s and other brands has led to higher investment in marketing as well as product quality. Higher competition also results in higher operational costs. BK has grown its focus upon market expansion in recent years to beat the challenge from the market leading brand McDonald’s. Apart from marketing aggressively and investing in digital technology, the company has to focus upon customer service and customer satisfaction to retain its market share. Overall, competitive pressure is one of the leading barriers to market expansion and faster growth.


Increasing operational costs :


Operating expenses of BK and its parent brand RBI have kept growing year by year. In just two years, the operating expenses of RBI increased by around one billion. Total operating expenses of RBI stood at $2.48 billion in 2017 and increased to $3.44 billion in 2019. Year upon year, the prices of labor and raw material have kept growing and adding to the operational costs of BK. Moreover, for a leading brand to retain its market position in the fast food industry, it is important to invest in premium ingredients and good food quality.


Need for higher compliance :


Legal regulation and government oversight of international businesses has grown a lot in recent years. While companies are required to comply with a complex web of laws spanning product quality, labor and other areas. While compliance on the one hand leads to extra compliance related costs, on the other it also acts as a barrier to faster growth. Moreover, apart from the laws in its domestic market, there are local laws that the business is required to comply with in order to operate smoothly in various parts of the world.

 

Changing customer preferences :


Customers’ preferences related to food and dining have changed a lot. Companies need to follow how their needs and preferences are changing and accordingly update their menu. Moreover, there are regional variations in the tastes and preferences of people and companies need to make the right choices available to the customers. In recent years, a large number of customers have moved towards a healthier menu and the demand for vegetarian products has also grown. This shift towards vegetarian products is also a challenge to faster expansion of fast food brands like Burger King.