Burger King Harvard Case Solution & Analysis

Burger King: Fully Franchised Business Model Vs Hybrid

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Company Background

Burger King was founded by Matthew Burns and Keith Kramer in 1953, Which was formerly known as the “Insta-Burge King”. The company was then sold to David Edgerton and James McLamore in 1955, who were the Miami based franchisee of the company and was renamed to Burger King. It had introduced the first whopper sandwich in 1957. The company had once again changed its hands to Pillsbury Corporation, which had carried out an extensive expansion exercise to expand the company’s operations in 250 locations in the United States. In 1989, the holding company of Burger King, Pillsbury Corporation was sold to Grand Metropolitan, which was merged with Guinness to form Diageo, which was a British spirits company.  The new holding company paid very little attention to the Burger King operations and resultantly the company had lost its brand image and struck by the exhaustive poor performance. As a result, most of the major franchises had started to quit their relations with the company and the management of Diageo had decided to sell the supply chain to a private equity firm led by the TPG capital by the end of 2002. The company once again started struggling in the market and got an entry through a series of promotional campaigns. In 2006, the company went public through the issuance of an IPO (initial public offerings) and the investment group continued to own 31% of the ownership in the company. By the end of 2010, the company had a network of 12,174 restaurants in 76 countries and US territories and about 1,378 of them were company-owned by franchises.

Industry level: Porter’s five forces analysis

Industrial Background

The hamburger category of the fast food industry operated within the QSR (quick service restaurants) segment of the restaurant industry. The sales of the QSR segment were continuously growing at a rate of 3% and it was expected to further grow with the same rate from 2010- 2015. About 27% of the total QSR category were represented by the Fast Food Hamburger restaurant (FFHR). The industry sales were growing with a rate of 5%, whereas, Burger King was accounted for 14% of the total FFHR sales in the United States. The major competitors of the company were including McDonalds, Hardee’s, jack in the box, Carl’s jr, Sonic and Wendy’s restaurants. The company was also indirectly competing against the QSR restaurants Segments including KFC, Arby’s and Taco Bell. There was a high barrier to entry in the restaurant industry due to heavy capital investments requirements and heavy marketing campaigns, therefore threat of new entrants was low. The fast food industry was less affected by the recession in 2010, both the FFHR and QSR sales figures were decreased to 0.5% as compared to a decrease of 3% that was recorded in the family and casual dining chains. However, the overall US restraints industry shows a decline of 1% in their sales during the same time period. Beside all the above discussed figures of the industry the increasing health consciousness of the people of United States has changed the preferences of the customers and now the people demand for more healthy and economical food.

Threat of New Entrants - Moderate

There were a number of already well established giants in the QSR chains of the country i.e. McDonalds, Domino’s, KFC, Pizza Hutt and Burger King, etc… Burger King had a high brand image and being a global existence in the industry it was one of the most valuable brands of the country, which had a strong customer base and customer loyalty. The company had revised their marketing strategies to focus more upon the cultures and social norms of the locality where it was operating in order to strengthen the brand and avoid customer alienation. New players were unable to compete against the already well established brands of the industry because establishing a sophisticated supply and restaurants chains required huge capital investments and it was also difficult for them to compete against such high brand names. It was also difficult for the new entrants to compete against the low prices of the already existing players of the industry because of they lack the economies of large scale production. However, the social media made the marketing very easy and cost effective and allowed the firms to compete and market their products to a broader level of audiences.

Threat of Substitutions – Moderate

Substitutes are easily available because the typical food items can be easily substituted against the other food items. This had reduces the threats of substitutes and people could also easily cook food in their homes therefore made it easy for them to substitute the products or fast food restaurants industry.

Competitive Rivalry – Strong

Although, McDonalds and Burger king were the clear leader of the burger segment of the industry but there were a number of other players operating in the fast food restaurants industry. There was a stiff competition which was primarily......................

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