Maybe the pizza burger wasn't such a good idea. Struggling fast food giant Burger King is selling itself to 3G Capital for approximately $3.26 billion. The buyer is an investment firm that owns stakes in Anheuser-Busch InBev, a large retailer in Latin America and a sizable railroad company also in Latin America. According to Reuters, "The company is struggling with weak demand amid a sluggish economic recovery and persistently high unemployment." What happened to BK and where is it headed?
- Here's BK's Problem, writes The Economist: "Among other things, BK has always had a higher proportion of sales to young men, who have been hit especially hard by the recession. McDonald's, by contrast, has for several years wooed women and older people with relatively healthy salads and drinkable coffee. BK has struggled to follow suit. At the same time, it has had to contend with angry shareholders, as the rising cost of beef and other ingredients has clobbered its profits. BK may also have cannibalised its existing sales by offering value meals that were a bit too irresistible."
- They Paid to Much Attention to 'Super Fans,' writes The Wall Street Journal: "Franchisees and analysts blame the chain's problems on scant menu development, flawed pricing and an overworked strategy of focusing on so-called super fans, people aged 18 to 34 years old who account for half of all visits to Burger King outlets but have been disproportionately hurt by the economic slump." Catering to those fans resulted in the "creepy king" advertisements attempting to convey hipness, notes Frank James at NPR.
- Could Be a Big Opportunity, writes Jenara Nerenberg at Fast Company: "3G previously had a 6.7 percent stake in Wendy's, and 3G's principals (a trio of wealthy Brazilians) are also largely responsible for the merger of InBev and Anheuser-Busch. The buyout is viewed by Burger King as a 'turnaround opportunity, one that draws upon the operational expertise gained in its beer and retail investments.'" The Associated Press agrees: "Being acquired by an owner with deep pockets could give Burger King some financial breathing room to refresh its restaurants and expand internationally after years of playing follow-the-leader with McDonald's."
- BK Leadership Has Been Constantly Shifting, adds The Economist: "BK is used to changes in ownership. It went from being part of Pillsbury, a food company, to Grand Metropolitan, a British conglomerate, then to Diageo, a drinks giant. In 2002 it was sold to a group of private-equity investors: TPG, Bain Capital and Goldman Sachs. They did a fair job, improving sales with better marketing. They also helped turn around the most troubled of the franchisees who operate most BK restaurants. In 2006 BK floated its shares again. Its bosses may hope that going private once more will protect them from short-term stockmarket pressures while they ponder how to beat McDonald's."
This article is from the archive of our partner The Wire.