Burger_King

Burger King SITUATION ANALYSIS Over the past few years, Burger King, the Miami based fast food mega chain, has suffered from a decrease in sales, loss of share value, and a decrease in earnings. Burger King reported earnings of 36 cents per share for the fourth quarter of fiscal 2010, a decrease from 43 cents in the prior year. The company reported that revenue for the quarter was $623 million, which was 1% lower than in the fourth quarter of fiscal 2009.1 Burger King has also suffered from a 36% loss of share value over the last two years. During that same period, competitor McDonald's shares rose 14%.2 It appears that McDonald’s has continued to thrive, while Burger King has suffered. In 2010 an average McDonald’s store generated nearly twice the sales of an average Burger King, according to industry tracker Technomic Inc.3 Recently, Burger King was bought by 3G Capital for 4 million dollars.When rumors of the buyout began, Burger King’s Shares rose by 23%.4 However, some analysts believe that this rise will not last. Industry Analyst, Steve West of Stifel Nicolaus, is urging people to sell Burger King shares now, on the belief that Burger King’s stock is unlikely to go much higher.5 What was the cause of Burger King’s slow decline' Burger King’s executives have blamed the economy; however there are other factors involved. Executives have stated that Burger King’s demographic of young men, has been hit particularly hard by the economy due to a decline in construction and manufacturing jobs. Burger King has decided to ignore this, and continues to pursue this demographic. However, McDonald’s has expanded their demographic to young women and businessmen.6 Tom Forte, an industry analyst with Telsey Advisory Group, thinks that Burger King simply needs to allocate more time for the new products to create sales, as the economy bounces back. He believes that the success of BK’s rib launch this spring shows that customers will pay more money for the right products.7 Another factor in Burger King’s decline could be their failure to utilize social media to its full capacity. Burger King currently has 311, 527 facebook fans, whereas McDonalds’s has 3,052, 349 facebook fans. McDonald’s facebook page appears to be updated more frequently, and is more visually pleasing than Burger King’s page. In addition, Burger King’s menu items and overall food quality have been cause for customer complaints. A survey released by Consumer Reports, which polled 28,000 people, found that 1http://w w w . dailyf inance. com /story/com pany-new s/burger-king-reports-earnings-of -36-cents-per-share/19605734/ 2http://m oney. cnn. com /2010/09/03/new s/com panies/burger_king_buyout. f ortune/index. htm 3http://w w w . businessw eek. com /new s/2010-09-23/burger-king-may-f ace-3-billion-tab-to-fix-up-stores. htm l 4http://w w w . csm onitor. com /F rom -the-new s-w ires/2010/0902/B urger-King-buyout-by-3G -C apital-seen-at-24-shr-C NB C 5http://w w w . thestreet. com /story/10851600/sell-burger-king-shares-now -analyst. htm l 6http://m oney. cnn. com /2010/09/03/new s/com panies/burger_king_buyout. f ortune/index. htm 7http: / / w w w. mi ami he ral d. com/ 2 0 1 0 /0 9/ 0 2/ 18 0 59 17 / burge r-ki ng-se arche s-for-ne w -si zzl e . htm