Burger King, often abbreviated as BK, is a global chain of hamburgerfast food restaurants headquartered in unincorporatedMiami-Dade County, Florida, United States. The company began in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain. After Insta-Burger King ran into financial difficulties in 1955, its two Miami-based franchisees, David Edgerton and James McLamore, purchased the company and renamed it Burger King. Over the next half century, the company would change hands four times, with its third set of owners, a partnership of TPG Capital, Bain Capital, and Goldman Sachs Capital Partners, taking it public in 2002. In late 2010, 3G Capital of Brazil acquired a majority stake in BK in a deal valued at $3.26 billion (USD). The new owners promptly initiated a restructuring of the company to reverse its fortunes.

 

At the end of fiscal year 2011, Burger King reported it had more than 12,400 outlets in 73 countries; of these, 66 percent are in the United States and 90 percent are privately owned and operated. BK has historically used several variations of franchising to expand its operations. The manner in which the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licenses on the company's behalf. Burger King's relationship with its franchises has not always been harmonious. Occasional spats between the two have caused numerous issues, and in several instances the company's and its licensees' relations have degenerated into precedent-setting court cases.

 

The Burger King menu has evolved from a basic offering of burgers, french fries, sodas, and milkshakes in 1954, to a larger, more diverse set of product offerings. In 1957, the Whopper was the first major addition to the menu; it has since become Burger King's signature product. Conversely, BK has introduced many products which failed to catch hold in the marketplace. Some of these failures in the US have seen success in foreign markets, where BK has also tailored its menu for regional tastes. From 2002 to 2010, Burger King aggressively targeted the 18–34 male demographic with larger products that often carried correspondingly large amounts of unhealthy fats and trans-fats. This tactic would eventually come to hurt the company's financial underpinnings and cast a negative pall on its earnings. Beginning in 2011, the company began to move away from the previous male-oriented menu and introduce new menu items, product reformulations, and packaging as part of 3G Capital's restructuring plans of the company.

 

The 1970s were the "Golden Age" of Burger King advertising, but beginning in the early 1980s, the company's advertising began to lose focus; a series of less successful ad campaigns created by a procession of advertising agencies continued for the next two decades. In 2003, Burger King hired the Miami-based advertising agency of Crispin Porter + Bogusky (CP+B). CP+B completely reorganized Burger King's advertising with a series of new campaigns centered on a redesigned Burger King character accompanied with a new online presence. While highly successful, some of CP+B commercials were derided for perceived sexism or cultural insensitivity. New owner, 3G Capital, terminated the relationship with CP+B in 2011 and moved its advertising to McGarryBowen to begin a new product oriented campaign with expanded demographic targeting.

 

History

The predecessor to Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King. After visiting the McDonald brothers' original store location in San Bernardino, California, the founders and owners (Keith J. Kramer and his wife's uncle Matthew Burns) purchased the rights to two pieces of equipment called "Insta" machines and opened their first restaurants, based around a cooking device called an Insta-Broiler. The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to use the device. After the company faltered in 1959, it was purchased by its Miami, Florida franchisees, James McLamore and David R. Edgerton. They initiated a corporate restructuring of the chain, first renaming the company Burger King. They ran the company as an independent entity for eight years (eventually expanding to over 250 locations in the United States), before selling it to the Pillsbury Company in 1967.
 

Pillsbury management tried several times to restructure Burger King in the late 1970s and early 1980s. The most prominent change came in 1978, when Burger King hired McDonald's executive Donald N. Smith to help revamp the company. In a plan called Operation Phoenix,:118 Smith restructured corporate business practices at all levels of the company. Changes included updated franchise agreements, a broader menu,:119:66 and new, standardized restaurant designs. Smith left Burger King for PepsiCo in 1980, shortly before a system-wide decline in sales. Pillsbury Executive Vice President of Restaurant Operations Norman E. Brinker was tasked with turning the brand around and strengthening its position against its main rival, McDonald's. One of his initiatives was a new advertising campaign featuring a series of attack ads against its major competitors. This campaign started a competitive period between the top burger chains, known as the Burger Wars. Brinker left Burger King in 1984, to take over Dallas-based gourmet burger chain Chili's.

 

Smith and Brinker's efforts were initially effective,[9] but, after their respective departures, Pillsbury relaxed or discarded many of their changes and scaled back on construction of new locations. These actions stalled corporate growth and sales declined again, eventually resulting in a damaging fiscal slump for Burger King and Pillsbury.[12][13] Poor operation and ineffectual leadership continued to bog down the company for many years.[13][14] Pillsbury was acquired by the British entertainment conglomerate Grand Metropolitan in 1989.

 

Initially Grand Met attempted to bring the chain top profitability under newly minted CEO Barry Gibbons, the changes he initiated during his two-year tenure were hit or miss. Successful new product introductions and product tie-ins with the Walt Disney company were offset by continuing image problems and ineffectual advertising programs.[17] Additionally, Gibbons sold off several of the company's assets in attempt to profit from their sale and terminated many staff members. After Gibbon's departure, a series of CEO each tried to repair the brand by changing the menu, bringing in new ad agencies and other changes.

 

The parental disregard of the Burger King brand continued through Grand Metropolitan's merger with Guinness in 1997, when the two organizations formed the new holding company Diageo.Eventually, the ongoing, systematic institutional neglect of the brand through the string of owners damaged the company to the point where major franchises were driven out of business and its total value was significantly decreased.[25] Diageo eventually decided to divest itself of the money-losing chain and put the company up for sale in 2000.

 

The twenty-first century saw the company return to independence when it was purchased from Diageo by a group of investment firms led by TPG Capital for $1.5 billion (USD) in 2002. The new owners rapidly moved to revitalize and reorganize the company, culminating with the company being taken public in 2006 with a highly successful initial public offering. The firms' strategy for turning the chain around included a new advertising agency and new ad campaigns, a revamped menu strategy, a series of programs designed to revamp individual stores, a new restaurant concept called the BK Whopper Bar, and a new design format called 20/20. These changes successfully re-energized the company, leading to a score of profitable quarters. Yet, despite the successes of the new owners, the effects of the financial crisis of 2007–2010 weakened the company's financial outlooks while those of its immediate competitor McDonald's grew.

 

The falling value of Burger King eventually lead to TPG and its partners divesting their interest in the chain in a $3.26 billion (USD) sale to 3G Capital of Brazil.Analysts from financial firms UBS and Stifel Nicolaus agreed that 3G would have to invest heavily in the company to help reverse its fortunes. After the deal was completed, the company's stock was removed from the New York Stock Exchange, ending a four-year period as a public company. The delisting of its stock was designed to help the company repair its fundamental business structures and continue working to close the gap with McDonald's without having to worry about pleasing shareholders. In the United States domestic market, the chain has fallen to third place in terms of same store sales behind Ohio-based Wendy's. The decline is the result of 11 consecutive quarters of same store sales decline.

 

Structure and operations

Burger King Holdings is the parent company of Burger King, also known as Burger King Corporation and abbreviated BKC, and is a Delaware corporation formed on 23 July 2002.:4 A privately held company, it derives its income from several sources, including property rental and sales through company owned restaurants;:3 however a substantial portion of its revenue is dependent on franchise fees.:3 During the transitional period after the acquisition of the company by 3G Capital, Burger King's board of directors was co-chaired by John W. Chidsey, formerly CEO and chairman of the company, and Alexandre Behring, managing partner of 3G Capital. By April 2011 the new ownership completed the restructuring of Burger King's corporate management and Chidsey tendered his resignation, leaving Behring as current CEO and chair.

 

The company operates approximately 40 subsidiaries globally that oversee franchise operations, acquisitions and financial obligations such as pensions.:Exhibit 21.1 One example of a subsidiary is Burger King Brands, Inc. which is responsible for the management of Burger King's intellectual properties. A wholly owned subsidiary established in 1990, Burger King Brands owns and manages all trademarks, copyrights and domain names used by the restaurants in the United States and Canada. It also responsible for providing marketing and related services to the parent company.

 

The majority of Burger King restaurants, approximately 90%, are privately held franchises. In North America Burger King Corporation is responsible for licensing operators and administering of stores. Internationally the company often pairs with other parties to operate locations or it will outright sell the operational and administrative rights to a franchisee which is given the designation of master franchise for the territory. The master franchise will then be expected to sub-license new stores, provide training support and insure operational standards are maintained. In exchange for the oversight responsibilities, the master franchise will receive administrative and advertising support from Burger King Corporation to ensure a common marketing scheme. The 3G Capital ownership group announced in April 2011 that it would begin divesting itself of many corporate owned locations with the intent to increase the number of privately held restaurants to 95%.

 

As the franchisor for the brand, Burger King Holdings has several obligations and responsibilities; the company designs and deploys corporate training systems while overseeing brand standards such as building design and appearance. The company also develops new products and deploys them after presenting them to its franchises for approval per a 2010 agreement between itself and the franchise ownership groups.Burger King has limited approval over franchise operations such as minimum hours of operation and promotional pricing. Additionally Burger King designates approved vendors and distributors while ensuring safety standards at the productions facilities of its vendors.

 

Burger King is headquartered in a nine-story office tower by the Miami International Airport in unincorporated Miami-Dade County, Florida.[55] Elaine Walker of the Miami Herald stated that the headquarters has a "Burger King" sign that drivers on Florida State Road 836 "can't miss." In addition the chain planned to build a neon sign on the roof to advertise the brand to passengers landing at the airport. On Monday 8 July 2002, 130 employees began working at the Burger King headquarters with the remainder moving in phases in August 2002. Prior to the moving to its current headquarters in 2002, Burger King had considered moving away from the Miami area; Miami-Dade County politicians and leaders lobbied against this, and Burger King stayed.

 

The company's previous headquarters were in a southern Dade County campus described by Walker as "sprawling" and "virtually hidden away." The former headquarters were located on Old Cutler Blvd in the Cutlercensus-designated place.The former Burger King headquarters as of 2007 houses rental offices for several companies.

 

Franchises

When Burger King Corporation began franchising in 1959, it used a regional model where franchisees purchased the right to open stores within a geographic region.These franchise agreements granted BKC very little oversight control of its franchisees and resulted in issues of product quality control, store image and design, and operational procedures.

 

During the 1970s, structural deficiencies in Burger King's franchise system became increasingly problematic for Pillsbury. A major example was the relationship between Burger King and Louisiana-based franchisee Chart House, Burger King's largest franchisee group at the time with over 350 locations in the United States. The company's owners, William and James Trotter, made several moves to take over or acquire Burger King during the 1970s, all of which were spurned by Pillsbury. After the failed attempts to acquire the company, the relationship between Chart House and Burger King soured and eventually devolved into a lawsuit.[17] Chart House eventually spun off its Burger King operations in the early 1980s into a holding company called DiversiFoods, which in turn was acquired by Pillsbury in 1984 and absorbed into Burger King's operations

 

As part of the franchising reorganization segment of Operation Phoenix, Donald N. Smith initiated a restructuring of future franchising agreements in 1978. Under this new franchise agreement, new owners were disallowed from living more than one hour from their restaurants – restricting the to smaller individuals or ownership groups and preventing large, multi-state corporations from owning franchises. Franchisee were also now prohibited from operating other chains, preventing them from diverting funds away from their Burger King holdings. This new policy effectively limited the size of franchisees and prevented larger franchises from challenging Burger King Corporation as Chart House had.[8]:64 Smith also sought to have BKC be the primary owner of new locations and rent or lease the restaurants to its franchises. This policy would allow the company to take over the operations of failing stores or evict those owners who would not conform to the company guidelines and policies.[17] By 1988, parent company Pillsbury had relaxed many of Smith's changes, scaled back on the construction of new locations which resulted in stalled growth of the brand.[12] Neglect of Burger King by new owner Grand Met and its successor Diageo,[25] further hurt the standing of the brand, causing significant financial damage to BK franchises and straining relations between the parties. 

 

By 2001 and after nearly 18 years of stagnant growth, the state of its franchises was beginning to affect the value of the company. One of the franchises most heavily affected by the lack of growth was the nearly 400-store AmeriKing. By 2001, the franchise owner, which until this point had been struggling under a nearly $300 million (USD) debt load and been shedding stores across the US, was forced to enter Chapter 11 bankruptcy.[63] The failure of AmeriKing deeply affected the value of Burger King, and put negotiations between Diaego and the TPC Capital-lead group on hold. The developments eventually forced Diaego to lower the total selling price of the chain by almost $750 million dollars.[62] After the sale, newly appointed CEO Bradley (Brad) Blum initiated a program to help roughly 20 percent of its franchises, including its four largest, who were in financial distress, bankruptcy or had ceased operations altogether.[64] Partnering with California-based Trinity Capital, LLC, the company established the Franchisee Financial Restructuring Initiative, a program to address the financial issues facing BK's financially distressed franchisees. The initiative was designed to assist franchisees in restructuring their businesses to meet financial obligations, focus on restaurant operational excellence, reinvest in their operations, and return to profitability.
 

Individual franchisees took advantage of the AmeriKing failure; one of BK's regional owners, Miami-based Al Cabrera, purchased 130 stores located primarily in the Chicago and the upper mid-west region, from the failed company for a price of $16 million, approximately 88 percent of their original value. The new company, which started out as Core Value Partners and eventually became Heartland Foods, also purchased 120 additional stores from distressed owners and revamped them. The resulting purchases made Cabrera the largest minority franchisee of Burger King, and Heartland one of the company's top franchises.[66] By 2006, the company was valued at over $150 million, and was sold to New York–based GSO Capital Partners.[67] Other purchasers included a three way group of NFL athletes Kevin Faulk, Marcus Allen and Michael Strahan who collectively purchased 17 stores in the cities of Norfolk and Richmond, Virginia;[68] and Cincinnati-based franchisee Dave Devoy, who purchased 32 AmeriKing stores. After investing in new decor, equipment and staff retraining, many of the formerly failing stores have shown growth approaching 20 percent.
 

Charitable contributions and services

Burger King has two of its own in-house national charitable organizations and programs. One is the Have It Your Way Foundation, a US-based non-profit (501(c)(3)) corporation with multiple focuses on hunger alleviation, disease prevention and community education through scholarship programs at colleges in the US. The other charitable organization is the McLamore Foundation, also a non-profit, 501(c)(3) corporation that provides scholarships to students in the US and its territories.[115][116]

In various regions across the United States, Burger King and its franchises have aligned themselves with several charitable organizations that support research and treatment of juvenile cancer. Each year, these coalitions hold a fund raising drive called "A Chance for Kids", in which Burger King restaurants sell lottery-style scratch cards for $1. Each card produces a winning prize that is usually a food or beverage product, but includes (rarer) items such as shopping sprees or trips. In the Northeast, BK has affiliated itself with the Major League Baseball team the Boston Red Sox and its charitable foundation, the Jimmy Fund. The group runs the contest in Boston. In the New York City area, it operates the contest in association with the Burger King Children's Charities of Metro New York and the New York Yankees. Funds raised in these areas go to support the Dana-Farber Cancer Institute, located in Boston.[117][118] In Nebraska, the company is affiliated with the Liz's Legacy Cancer Fund "BK Beat Cancer for Kids" program at the UNMC Eppley Cancer Center at the University of Nebraska Medical Center in Omaha.[119] In the Pittsburgh region, it funded the establishment of the Burger King Cancer Caring Center, a support organization for the families and friends of cancer patients.
 

Products

When the predecessor of Burger King first opened in Jacksonville in 1953, its menu consisted predominantly of basic hamburgers, french fries, soft drinks, milkshakes and desserts. After being acquired by its Miami, Florida, franchisees and renamed to its current moniker in 1954, BK began expanding the breadth of its menu by adding the Whopper sandwich in 1957. This quarter-pound (4 oz (110 g)) hamburger was created by Burger King's new owners James McLamore and David Edgerton as a way to differentiate BK from other burger outlets at the time.[121]Since its inception, the Whopper has become synonymous with Burger King, and has become the focus of much of its advertising.[122]The company even named its new kiosk-style restaurants Whopper Bars.

 

The menu component of Donald Smith's Operation Phoenix was initiated in 1978 and lead to the addition of the Burger King Specialty Sandwich line in 1979. The new product line significantly expanded the breadth of the BK menu with many non-hamburger sandwiches, including new chicken and fish offerings. The new Specialty Sandwich line was one of the first attempts to target a specific demographic, in this case adults 18–34, members of which would be willing to spend more on a higher quality product.One of Smith's other significant contributions to the menu was the addition of a breakfast product line, which until this time was not a market Burger King had entered.Besides the addition of the Croissan'Wich in 1983, the breakfast menu remained almost identical to the McDonald's offerings until a menu revamp in 1985.[17] This expansion introduced BK's "Am Express" product line, which added new products such as French toast sticks and mini-muffins.
 

As the company expanded both inside and outside the US, it introduced localized versions of its products that conform to regional tastes and cultural or religious beliefs. International variations add ingredients such as teriyaki or beetroot and fried egg to the Whopper;[125] beer in Germany, Italy and Spain; and halal or kosher products in the Middle East and Israel.To generate additional sales, BK will occasionally introduce limited time offers (LTOs) that are versions of its core products, or new products intended for either long or short term sales. Items such as the Texas Double Whopper and various sandwiches made with mushrooms and Swiss cheese have been rotated in and out of its menu for several years,[129][130] while products such as its 1993 MeatloafSpecialty Sandwich offering and accompanying limited table service, along with special dinner platters, failed to generate interest and were discontinued.

 

In order to appeal to as many demographic groups as possible and better compete with its competitor Wendy's, Burger King added a multi-tiered value menu in 1993 with items priced at 99¢, $1.99 and $2.99 (USD).[17] The additions, part of then CEO James Adamson's back to basics program also called Operation Phoenix, were an attempt to add not only a value menu, but also a line of value meals.[133]The tiered menu was replaced with a more standard value menu in 1998, while the value meals were separated into their own menu segment.[134] This value menu featured seven products: Whopper Jr., five-piece Chicken Tenders, a bacon cheeseburger, medium sized french fries, medium soft drink, medium onion rings, and small shake. In 2002 and 2006, BK revamped its value menu, adding and removing several different products such as chili and itsRodeo Cheeseburger.[135]Many of these items have since been discontinued, modified or relegated to a regional menu option.To better appeal to a more adult palate and demographic, BK introduced several new products to its menu in 2003, including several new or revamped chicken products, a new salad line and its BK Joe brand of coffee. Some of the new products, including its Enormous Omelet Sandwich line and the BK Stacker line, brought negative attention due to the large portion size, and amounts of unhealthy fats and trans-fats. Many of these products feature higher quality ingredients like whole chicken breast, Angus beef, and natural cheeses such as cheddar and pepper jack.[140][141] Again, not all these products, such as the BK Baguette line, have met corporate sales expectations.
 

With the purchase of the company in 2010, 3G began a program to restructure its menu designed to move away from the male-oriented menu that had dominated under the previous ownership. The first major item to be introduced was a reformulation of its BK Chicken Tenders product in March 2011.[142] Over the next few months, approximately 20 new products were researched and developed while others were reformulated, including its new Chef's Choice Burger.[143]Eventually pruned down to 10 items, Burger King began deploying the items in the United States throughout 2011-2012 with the official roll out beginning April 2012. The changes included new ice cream products, smoothies, frappés and chicken strips. The Whopper was the most prominently reformulated product in this round of introductions with a new type of cheese and packaging.
 

Equipment

Like its menu, the equipment the company cooks its hamburgers with has also evolved as the company grew. The burgers have always been broiled mechanically; the original unit, called an Insta-Broiler, was one of two pieces of equipment the founders of Insta-Burger King purchased before opening their new restaurant. The Insta-Broiler worked by cooking 12 burger patties in a wire basket, allowing the patties to be cooked from both sides simultaneously.WhenMcLamore and Edgerton took over the company, besides dropping the "Insta-" prefix, they switched to an improved unit, which they called a "Flame Broiler". Designed by the two and featuring stationary burners that cooked the meat on a moving chain, the unit broke down less often, while maintaining a similar cooking rate.[121] The company would stay with that format for the next 40 years until Burger King began developing a variable speed broiler that could handle multiple items with different cooking rates and times.These new units began testing in 1999 and eventually evolved into the two models the company deployed system-wide in 2008–2009. Accompanying these new broilers was new food-holding equipment, accompanied with a computer-based product monitoring system for its cooked products.[147]The monitoring system allows for more concise tracking of product quality, while giving the company and its franchisees a method to streamline costs by more precisely projecting sales and product usage.

 

Advertising

Since its foundation in 1954, Burger King has employed varied advertising programs, both successful and unsuccessful. During the 1970s, output included its Hold the pickles, hold the lettuce... jingle, the inspiration for its current mascot the Burger King, and several well known and parodied slogans such as "Have it your way" and "It takes two hands to handle a Whopper". Burger King introduced the first attack ad in the fast food industry with a pre-teen Sarah Michelle Gellar in 1981. The television spot, which claimed BK burgers were larger and better tasting than competitor McDonald's,:66 so enraged executives at McDonald's parent company that they sued all parties involved.

 

 Starting in the early 1980s and running through approximately 2001, BK engaged a series of ad agencies that produced many unsuccessful slogans and programs, including its biggest advertising flop "Where's Herb?".

 

Burger King was a pioneer in the advertising practice known as "product tie-in", with a successful partnership with George Lucas' Lucasfilm, Ltd., to promote the 1977 film Star Wars in which BK sold a set of glasses featuring the main characters from the movie. This promotion was one of the first in the fast food industry and set the pattern that continues to the present. BK's early success in the field was overshadowed by a 1982 deal between McDonald's and the Walt Disney Company to promote Disney's animated films beginning in the mid 1980s and running through the early 1990s. In 1994, Disney switched from McDonald's to Burger King, signing a 10-movie promotional contract which would include such top 10 films as Aladdin (1992), Beauty and the Beast (1991), The Lion King (1994), and Toy Story (1995). A partnership in association with the Pokémon franchise at the height of its popularity in 1999 was tremendously successful for the company, with many locations rapidly selling out of the toys and the replacements.

 

Shortly after the acquisition of Burger King by TPG Capital, L.P. in 2002, its new CEO Brad Blum set about turning around the fortunes of the company by initiating an overhaul of its flailing advertising programs. One of the first moves by the company was to reinstate its famous "Have it your way" slogan as the corporate motto. BK handed the effort off to its new advertising agency, Miami-based Crispin Porter + Bogusky (abbreviated as CP+B). CP+B was known for having a hip, subversive tack when creating campaigns for its clients, exactly what BK was looking for. One of CP+B strategies was to revive the Burger King character used during BK's 1970s/1980s Burger King Kingdom children's advertising campaign as a caricatured variation, now simply called "the King". The farcical nature of "the Burger King" centered advertisements inspired an internet meme where the King is edited into unusual situations that are either comical or menacing, many times followed with the phrase "Where is your God now?"

 

Additionally, CP+B created a series of new characters like the Subservient Chicken and the faux nu metal band Coq Roq, featured in a series of viral web-based advertisements on sites such as MySpace and various BK corporate pages, to compliment various television and print promotional campaigns. One of the more successful promotions that CP+B devised was the creation of a series of three advergames for the Xbox 360.[165][166]Created by UK based Blitz Games and featuring company celebrity spokesmanBrooke Burke, the games sold more than 3.2 million copies, placing them as one of the top selling games along with another Xbox 360 hit, Gears of War. These ad campaigns, coupled with other new promotions and a series of new product introductions, drew positive and negative attention to BK, and helped TPG and its partners realize about $367 million (USD) in dividends.

 

With the late-2000s recession hitting the 18-35 demographic targeted by the CP+B created ads particularly hard, the company saw its market share decline and the company move into the red. After the completion of the sale of the company in late 2010, the new ownership group terminated Burger King's seven year relationship with CP+B and hired rival firm McGarryBowen to create a new campaign with an expanded market reach.As part of the new campaign, McGarryBowen terminated the use of the The Burger King in the company's advertising program in favor of a new program that focused on the food and ingredients in its new advertising campaigns.