Burger King, one of the largest fast-food chains in the world, has been outperforming notable brands within the past few years. From a humble beginning in Florida to currently claiming over 18,000 outlets spread worldwide, you might wonder how Burger King is so successful.
Put another way, you might be asking, what’s Burger King’s business model? I was curious about the same thing and decided to research the matter. So, here’s what I discovered!
What Is Burger King’s Business Model In 2023?
Burger King uses the franchising business model integrated with a cost leadership strategy to remain competitive within the industry as of 2023. In this model, the parent company permits other outlets to operate under its trademark in exchange for royalties. Thus, Burger King has managed to run effective operations on an international scale.
If you need more information about how Burger King’s business model works, its strategies, why the company has been successful, and much more, keep reading!
How Does Burger King’s Business Model Work?
Burger King’s franchising business model has led to the opening of over 15,000 restaurants worldwide, making Burger King claim the title as one of the largest food chains in the world.
Having an already established brand name, several companies approach Burger King for a franchising agreement that allows the company to use its brand name and operation strategies.
Currently, 90% of Burger King stores operate as franchises, with approximately 44% of the restaurants serving in the US.
Further, here’s how the Burger King franchising agreement works:
The initial investment needed to set up a Burger King franchise is approximately $300,000, including an additional $50,000 franchising fee paid to the parent company.
With these figures, Burger King has been considered one of the most affordable franchising options in the fast-food industry.
Once someone establishes a franchise, Burger King earns 4.5% royalties on the sales made by the franchisee, a figure that’s below the standard 6% royalty fees in the food industry.
In addition to this, Burger King offers special incentive programs by participating in MinorityFran.
When opening a franchise under Burger King, the parent company has to approve proposed locations by the franchisee.
However, it’s important to note that the franchise agreement doesn’t grant or suggest any type of area or territory, protected or exclusive, or protected customer base.
In addition to this, approval by Burger King to operate in a specific location doesn’t guarantee successful operations.
Still, it only implies that the site meets the parent company’s requirements.
Among the main reasons Burger King has emerged as a successful business is the thorough and intensive training programs offered to franchisees.
With that, the training programs focus on a wide range of technical and managerial skills that enhance the franchisee’s organizational skills.
According to the company policy, Burger King franchisees have to attend a two-week orientation program alongside a 440-hour on-site training offered at an existing Burger King restaurant.
Also, Burger King provides periodic workshops and seminars for the restaurant managers, including management courses and refresher training on operational skills.
In some instances, Burger King might require a franchisee to pay a course or materials fee to the company or the third-party offering the training.
Monthly Advertising Fees
Burger King requires all franchisees to pay a monthly advertisement contribution amounting to 4% of the gross sales.
With these monthly advertising fees, Burger King’s parent company uses the contributions to cater to promotion and advertising activities expenses.
Further, Burger King incurs the advertising expenses through:
- Market research and development
- Production of advertisements
- Media costs
- Public relations
- Sales promotion
- Administrative fees
What Are The Key Strategies Of Burger King’s Business Model?
Despite the aggressive competition witnessed in the fast-food industry, Burger King has maintained a strong brand position due to growth strategies such as the franchising model.
However, other key strategies of Burger King’s business model include the following:
A Strong Franchising Model That Has Created A Global Presence
With over 18,000 outlets spread worldwide, Burger King has managed to claim a global presence resulting from a robust franchising model.
For example, the company provides franchisees with minimal investment rates, making it affordable to open and operate a franchise under Burger King’s trademark.
As a result of rapid growth in newer markets, the company has been considered the world’s sixth-largest fast-food chain.
A Wide Variety Of Menu Items
Burger King has become a favorite fast-food stop for many consumers due to the wide variety of local and international menu items.
From grilled burgers to bacon-studded buns, taro-filled pies, plant-based Whoppers, poutine-covered fries, Chicken items, beverages, and dessert, most customers prefer the joint due to its wide selection.
Burger King continues to rejuvenate and reinvent itself with new and highly innovative food items, attracting new customers and promoting customer retention.
For instance, the introduction of Impossible Whopper (plant-based sandwiches) led to new customers, which made the company beat its second-quarter profit expectation at the time of introduction.
The effective marketing strategies by the company make the customers always recognize the brand despite the location of the outlet.
What Makes Burger King So Successful?
Burger King is successful due to cost leadership and broad differentiation strategies.
First, Burger King always aims to reduce its operating costs by offering a wide variety of food items at lower prices through economies of scale.
Secondly, Burger King supplies unique characteristics through advertisements and brand representation that allows customers to know that it offers numerous flexible options.
Also, Burger King uses intensive growth strategies by opening franchises in new markets. In this case, the cost leadership strategy makes it easier for the company to conquer newer markets.
Is Burger King Profitable?
Yes, Burger King is a profitable company because the parent company has supported numerous franchises that have generated a revenue of “.6 billion during the last financial year.
But, while the $1.6 billion revenue is considered a 10% decrease over the previous year’s income, Burger King is working on new strategies to recover the decrease.
In conclusion, Burger King’s business model of operating in franchises has led to its penetration into global markets.
As a result, the company has expanded its territories internationally and gained authority as one of the largest fast-food chains in the world.