Burger King Follows In McDonald’s Footsteps … Again


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Burger King Follows In McDonald’s Footsteps … Again


Nickey Friedman
December 1, 2013

Well, it’s about time. For decades, McDonald’s (NYSE: MCD) has been serving the Royale with cheese sandwich with little threat of Burger King Worldwide (NYSE: BKW) nibbling away at its market share. What took the “King” restaurant so long to bring some serious “Royale” competition? In any event, Burger King is finally moving into France as part of a series of moves that seems aimed at dethroning its larger competitor.

The deal
On Nov. 26, Burger King Worldwide announced a joint venture agreement with Groupe Olivier Bertrand. Both companies have two goals: develop the brand and expand the presence. Groupe Olivier Bertrand has a “franchise and development agreement” for all of France, one of the largest markets in Europe for fast food. The goal is to quickly take 20% of the market share and establish Burger King Worldwide as the “product leader.”

Naxicap Partners is financing the aggressive expansion and it is “well-funded.” This is all part of the plan from Burger King Worldwide with respect to its “aggressive international growth strategy which includes accelerating net restaurant growth and continuing to grow same store sales.”

Overdue move
The whole idea seems smart and long overdue. I’m quickly reminded of a scene from the nearly 20 year old movie Pulp Fiction:

Vincent: And in Paris, you can buy beer at McDonald’s. And you know what they call a Quarter Pounder with Cheese in Paris?

Jules: They don’t call it a Quarter Pounder with Cheese?

Vincent: No, they got the metric system there, they wouldn’t know what the #$%& a Quarter Pounder is.

Jules: What’d they call it?

Vincent: They call it Royale with Cheese.

Jules: Royale with Cheese. What’d they call a Big Mac?

Vincent: Big Mac’s a Big Mac, but they call it Le Big Mac.

Jules: Le big Mac! Ahhaha, what do they call a Whopper?

Vincent: I dunno, I didn’t go into a Burger King.

Soon, if Vincent were real, he could go into Burger King after all. Will Burger King in Paris serve beer too? That I don’t know, but it is interesting that that this announcement comes soon after Burger King Worldwide’s launch of the Big King sandwich. The Royale with cheese will be looking at more royal competition, at least marketing-wise.

Burger King Worldwide’s apparent offensive launch into France against McDonald’s follows not only the Big King (which looks and sounds just like the Big Mac), but also the launch of SATISFRIES and its own McRib-style sandwich.

Europe is flame-broiling
Burger King Worldwide last reported its earnings results on Oct. 28. While its systemwide same-store sales only improved by 0.9%, its European region showed a 2.4% gain. It was the 11th quarter in a row of such gains. Out of the 130 restaurants added in the third quarter, 80 of them were in the European region. Burger King succeeded in Europe by tailoring its marketing to each country. For example, in Spain it has seen success with the launch of the EUROKING. If Burger King shows similar success in France, it could create a serious dent in McDonald’s market share there.

For the third quarter, McDonald’s likewise saw a 0.9% increase in same-store sales systemwide. While McDonald’s only saw 0.2% growth in Europe, McDonald’s specifically noted “solid results in France.” This suggests that France may be the strongest market, at least for growth, for McDonald’s. Had Burger King Worldwide been in there sooner, it may have taken just enough market share away to push McDonald’s same-store sales for Europe into the negative.

Foolish final thoughts
As the Burger King French expansion progresses, look for comments about it from both Burger King and McDonald’s. With both companies showing such low overall growth numbers, a Burger King win in France could make a material difference for one or both companies. Burger King Worldwide and its partners aren’t planning a slow roll-out either. Burger King France plans to create 1,200 jobs in the first year alone. This implies that a lot of Burger Kings will be built and quickly.

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