Burger King serious about foreign arena

June 30, 2007|By Doreen Hemlock | Doreen Hemlock,South Florida Sun-Sentinel

In Turkey, there's home delivery and in Mexico, valet parking. In China, Whoppers come with spicy "mala" sauce and in South Korea, with sweet and sour "bulgogi" topping.

Burger King is finally getting serious about building a worldwide empire.

After decades of ownership changes and management shake-ups, the Miami-based restaurant chain is stabilizing as a stand-alone company with its stock traded on Wall Street.

Now, its executive team feels steady enough to focus on lagging growth overseas, aiming to narrow the gap with McDonald's Corp. and other rivals who boast a huge head start outside the United States.

"If leadership keeps changing, it's hard to take a strategy deep," said James F. Hyatt, chief global operations officer.

"It takes this continuity component to go international," Hyatt said during an interview at his Miami office.

Analysts say Burger King's global expansion makes sense, since the U.S. market is so saturated with fast-food outlets.

But they warn that the company faces fierce competition abroad and will need to carefully adapt to local markets to prosper.

Rivals have stumbled by failing to recognize, for example, that the restaurant is more of a midprice, family gathering spot - rather than inexpensive drive-through - in China and many other developing countries.

"You have to be successful the first time around," said Darren Tristano, a restaurant industry analyst at Technomic consultants of Chicago. "If you lose your business, you won't get it back."

Heeding the warnings, Burger King executives say they aim to build slowly overseas, with a focus on regions where they have some presence and success - especially in Europe and Latin America. They figure it could take a decade or more to reach an even split between U.S. and foreign outlets.

That would still put the chain far behind larger McDonald's, which already has most of its restaurants abroad. Indeed, McDonald's rang up almost as much in Europe last year - $7.6 billion - as Burger King did in its core market in the United States. And McDonald's global advertising budget far outstrips Burger King's.

"We don't have this mantra that we need to be bigger than McDonald's," Hyatt said. "We don't have that chase. Right trumps fast. You want the brand that you have to be perceived as excellence."

Burger King's plan is to carefully research each overseas market and customize for it.

In Turkey, for example, almost 20 percent of business is home delivery, requiring a call center. And in Mexico City, where parking spaces are limited, at least one outlet turned to valets to accommodate clients.

Menus also differ widely by nation. Besides distinct sauces on Whoppers, Chinese customers can order bone-in chicken, Koreans shrimp burgers and Australians sandwiches with beet-root, for instance. "We're the `Have It Your Way' place," Hyatt said. "We're about empowerment."

Executing the plan might have been easier years back, when competition was less intense and America's image abroad less tarnished, analysts say.

But Burger King's former owners, Grand Metropolitan, through the 1990s used Burger King and its U.S. base "as a cash cow," milking it for money instead of reinvesting to go global, said Chris Muller, professor of hospitality management at the University of Central Florida and a former consultant to Burger King on pricing strategy.

That puts the world's No. 2 hamburger chain in a tougher position to project its brand overseas.

"In a time of rampant anti-Americanism, if they plan on growing as an American company, that's very limiting," Muller said. "It will be easier to operate with local faces and local partners."

McDonald's Japan might serve as a model: The Oak Brook, Ill.-based multinational has adapted so well in that rich Asian nation, serving rice burgers, fish meals and other local favorites for decades, that "the Japanese look at McDonald's as a Japanese company," said Muller.

Executives said they seek to mix the attraction of American-ness with the love of homegrown flavors. Hyatt finds no contradiction and said he's never felt hostility to the chain overseas. Global marketing chief Carlos Ribas said American politics is separate from its culture.

"What fast food represents is becoming more global. It's about a time-conscious society," Ribas said.

More families worldwide now have both parents working, with meals eaten more often outside the home and at odd hours. The image of the modern, mobile family is often "aspirational," Ribas said.

In all, plans call for opening more than 380 restaurants abroad this fiscal year, or about four times as the number to be opened in the United States and Canada.

Still, the global challenges facing the 53-year-old restaurant chain are whopping: finding the right partners and locations overseas, keeping standards, attracting children, serving quickly, and tweaking the marketing message, analysts say.

"Breakfast with the King is not going to fly in Dubai," Muller said.

Doreen Hemlock writes for the South Florida Sun-Sentinel.

Burger King By the numbers

Worldwide

Stores:

11,201

Sales:

$12.9 billion

U.S. and Canada

Stores:

7,483

Sales:

$8.6 billion

Africa, Asia-Pacific, Europe, Middle East

Stores:

2,823

Sales:

$3.4 billion

Latin America- Caribbean

Stores:

859

Sales:

$838 million

(Numbers for company- and franchise-owned restaurants are valid as of March 31 for worldwide and U.S.-Canada, and as of Dec. 31 for Europe, Asia and Latin regions. Sales are for the trailing 12-month period.)

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