Burger King is set to shutter nearly 400 US outlets by 2023, signaling a trend of Burger King closing stores due to intensified competition from rivals like McDonald's and Chipotle. Even though the brand has been experiencing growth in international sales, the scenario has been quite the opposite in the US. Two major franchisee bankruptcies have cast shadows over its operations domestically.
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Earlier this year, Burger King reported the closure of 124 stores in the US, constituting a 1.7% decrease. This brought their total US store count to just under 7,000, as per figures released by its parent entity, Restaurant Brands International.
CEO Joshua Kobza, during an investor call, shed light on the brand's strategy for the coming year. While they are actively scouting for franchisees with robust financial standing, there's an expectation to close an additional 300 to 400 locations. On an average year, the figure hovers around a couple hundred. Patrick Doyle, the Chairman, mentioned, "We always encounter a few franchisees who may not be as dedicated. Our focus is to work collaboratively with them to part ways.”
Amidst the backdrop of Burger King closing stores, there's a silver lining. Their $400 million "Reclaim the Flame" initiative, aimed at gaining lost market share, renovating dilapidated stores, simplifying menus, and attracting a younger audience, seems to be making an impact. A testament to this is the 8.7% rise in Burger King's US comparable sales.
Interestingly, despite the challenges faced by Burger King, Restaurant Brands International reported better-than-expected revenue and profit for the first quarter. This uptick was majorly influenced by increased footfall and pricing at Tim Hortons outlets in Canada.
As per Refinitiv IBES data, the company's global sales for the quarter ending March saw nearly a 10% rise, surpassing analyst predictions of 6.5%. While Tim Hortons in Canada witnessed a 16% sales surge, Burger King's international sales climbed by 12%. The shares of the company also saw a moderate increase, rising by 0.6% before noon Eastern time.
It's noteworthy that major restaurant chains have reported positive sales figures in the initial quarter, irrespective of potential concerns around consumer spending due to persistent inflation. Other market players like McDonald's and Chipotle have also exceeded sales and profit forecasts by innovating their menus and adjusting prices to offset increased costs of raw materials and labor.
