Burger King, one of the largest fast food chains in the world, has outperformed notable brands over the past few years. From a humble beginning in Florida to more than 18,000 locations spanning the globe, you may be wondering how Burger King is so successful.
In other words, you may be wondering, what is Burger King’s business model? I was curious about the same and decided to do some research on the matter. So, here’s what I discovered!
What is Burger King’s business model in 2024?
Burger King uses the franchise business model integrated with a cost leadership strategy to remain competitive in the industry starting in 2024. In this model, the parent company allows other outlets to operate under its brand in exchange for Royalties. Thus, Burger King has managed to run efficient operations internationally.
If you need more information on how Burger King’s business model works, its strategies, why the company has been successful and much more, keep reading!
How does Burger King’s business model work?
Burger King’s franchise business model has led to the opening of more than 15,000 restaurants worldwide, making Burger King the title of one of the largest food chains in the world.
Having an already established brand name, several companies approach Burger King for a franchise agreement that allows the company to use its brand name and operating strategies.
Currently, 90% of Burger King stores operate as franchises, with approximately 44% of restaurants serving in the United States.
Additionally, here’s how the Burger King franchise agreement works:
Initial investment
The initial investment required to set up a Burger King franchise is approximately $300,000, including an additional $50,000 franchise fee paid to the parent company.
With these numbers, Burger King has been considered one of the most affordable franchise options in the fast food industry.
Once someone establishes a franchise, Burger King collects 4.5% royalties on sales made by the franchisee, lower than the standard 6% royalties in the food industry.
In addition to this, Burger King offers special incentive programs by participating in MinorityFran.
Site selection
When opening a franchise under Burger King, the parent company must approve the locations proposed by the franchisee.
However, it is important to note that the franchise agreement does not grant or suggest any type of area or territory, protected or exclusive, or protected customer base.
In addition to this, approval by Burger King to operate in a specific location does not guarantee successful operations.
Yet this only implies that the site meets the requirements of the parent company.
Training
Among the main reasons why Burger King has become a successful business is the extensive and intensive training programs offered to franchisees.
Thus, the training programs focus on a wide range of technical and managerial skills that strengthen the franchisee’s organizational skills.
Per company policy, Burger King franchisees must complete a two-week orientation program alongside 440 hours of on-site training offered at an existing Burger King restaurant.
Additionally, Burger King offers periodic workshops and seminars for restaurant managers, including management courses and operational skills refresher training.
In some cases, Burger King may require a franchisee to pay a course or materials fee to the company or third party providing the training.
Monthly advertising fees
Burger King requires all franchisees to pay a monthly advertising contribution amounting to 4% of gross sales.
With this monthly advertising fee, Burger King’s parent company uses the contributions to cover the expenses of promotion and advertising activities.
Additionally, Burger King incurs advertising expenses through:
- Market research and development
- Production of advertisements
- Media costs
- Public relations
- Sales promotion
- Administrative fees
What are the key strategies of Burger King’s business model?
Despite the aggressive competition seen in the fast food industry, Burger King has maintained a strong brand position through growth strategies such as the franchise model.
However, other key strategies of Burger King’s business model include:
A strong franchise model that has created a global presence
With over 18,000 outlets spread across the globe, Burger King has successfully claimed a global presence resulting from a robust franchise model.
For example, the company offers franchisees minimal investment rates, making it affordable to open and operate a franchise under the Burger King brand.
Due to rapid growth in new markets, the company has been considered the sixth largest fast food chain in the world.
A wide variety of menu items
Burger King has become a favorite fast food stop for many consumers due to the wide variety of local and international dishes.
From grilled burgers and bacon buns to taro-filled pies, plant-based Whoppers, poutine-covered fries, chicken dishes, drinks and desserts, most customers prefer the joint in because of its wide choice.
Continuous innovations
Burger King continues to rejuvenate and reinvent itself with highly innovative new food products, attracting new customers and promoting customer loyalty.
For example, the introduction of Impossible Whopper (plant-based sandwiches) attracted new customers, which allowed the company to exceed its second-quarter profit expectations at the time of the introduction.
Effective marketing
The company’s effective marketing strategies ensure that customers still recognize the brand despite the location of the outlet.
What makes Burger King successful?
Burger King succeeds due to its cost leadership and extensive differentiation strategies.
First, Burger King always aims to reduce its operating costs by offering a wide variety of food products at lower prices through economies of scale.
Second, Burger King provides unique features through advertisements and brand representation that let customers know it offers many flexible options.
Additionally, Burger King uses intensive growth strategies by opening franchises in new markets. In this case, the cost leadership strategy makes it easier for the company to conquer new markets.
Is Burger King profitable?
Yes, Burger King is a profitable company because the parent company has backed many franchises that generated $1.6 billion in revenue in the last fiscal year.
But, while the $1.6 billion in revenue is considered a 10% drop from the previous year’s revenue, Burger King is working on new strategies to recoup the drop.
To learn more, you can also read our articles on Burger King’s biggest competitors, why Burger King is so good, and McDonald’s vs. Burger King.
Conclusion
In conclusion, Burger King’s franchise business model has led to its penetration into global markets.
As a result, the company expanded its territories internationally and established itself as one of the largest fast food chains in the world.
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