Burger King franchises

Infobox Burger King
logo=The international fast-food restaurant chain Burger King has used several variations of franchising to expand its operations since it began growing in the late 1950s. In the United States, the company originally relied on a regional franchise model with owners having exclusive expansion rights in a defined geographic territory, it has since discarded that model and now utilizes a per store licensing model. Internationally the company still uses the territorial model with several large franchisees owning exclusive expansion rights for entire countries. The franchisers are often given the responsibilities of master franchise; they are allowed to open new stores, license new third party operators, and are required to perform standards oversight of the franchised locations in these countries.

At the end of its fiscal year 2007, Burger King reported that there are more than 11,300 outlets in 69 countries; 66% are in the United States and 90% are privately owned and operated. The company has more than 37,000 employees serving approximately 11.4 million customers daily.cite web |url=http://media.corporate-ir.net/media_files/irol/87/87140/2007_AR.pdf |format=PDF| title=BKC 2007 Annual Report |author=BKC publication |publisher=Burger King Holdings |date=October 2007 |accessdate=2008-02-08 |quote=11,283 Restaurants in 69 countries and territories] The company's two largest franchisees are Carrols Corporation with over 325 restaurants in United States, and Hungry Jack's, which exclusively owns, operates or sub-licenses over 300 restaurants in Australia.cite web |url=http://www.allbusiness.com/retail-trade/eating-drinking-places/4275422-1.html |title=Burger King Re-flags Australian Stores |author=Restaurant Business News |publisher=AllBusiness.com |date=2003-05-30 |accessdate=2007-09-29 ]

History

When Burger King Corporation began franchising in 1967, it relied on a regional franchising model where franchisees would purchase the right to open stores within a defined geographic region. These franchise agreements granted BKC very little oversight control over its franchisees and resulted in issues of product quality control, store image and design and operations procedures.cite web |url=http://www.answers.com/topic/burger-king |title=History of Burger King Corporation |author= [http://www.fundinguniverse.com FundingUniverse.com] |publisher=Answers.com |accessdate=2007-10-24] cite book |url=http://books.google.com/books?id=oBj-sPpJDQcC&pg=PA64&lpg=PA64&dq=donald+smith+burger+king&source=web&ots=FhXPdZvuKU&sig=Oc4o4BHLk8esIyTgcjWHuSzdXKA&hl=en |title=Making Fast Food: From the Frying Pan Into the Fryer, 2nd edition |author=Ester Reiter |publisher=McGill-Queen's University Press |date=March 1996 |page=64 |accessdate=2008-04-06 |isbn=0773513876 |quote=Burger King's early franchising arrangements proved to be troublesome]

This model remained in place until 1978 when the company hired McDonald's executive Donald N. Smith to help revamp the company. Mr. Smith initiated a restructuring of all future franchising agreements, disallowing new owners from living more than one hour from their restaurants, preventing corporations from owning franchises and prohibiting franchisees from operating other chains. This new policy effectively limited the size of franchisees and prevented larger franchises from challenging Burger King Corporation as Chart House had. Smith also sought to have BKC be the primary owner of new locations and rent or lease the restaurants to its franchises. This policy would allow the company to take over the operations of failing stores or evict those owners who would not conform to the company guidelines and policies. However, by 1988 BKC parent Pillsbury had relaxed many of Smith's changes, scaled back on construction of new locations and stalling growth.cite web |url=http://query.nytimes.com/gst/fullpage.html?res=940DE0DD1530F937A25752C1A96E948260&sec=&spon=&pagewanted=print |title=Burger King's Angry Franchises |author=Eric N. Berg |work=The New York Times |date=1988-11-04 |accessdate=2008-04-06 |quote=The franchisees complain that, in recent years, the chain's growth has come almost entirely from the franchisees, not from the corporation.] Neglect of Burger King by new owner Grand Metropolitan PLC, and its successor Diageo, further hurt the standing of the brand, causing yet more financial damage to BK franchises.cite web |url=http://www.boj.com/articles/franchise/burger_king_fixed.htm |title=It was broken, and new owner's fixing it |author=Shelly Reese |publisher=the Cincinnati Enquirer |date=2005-02-04 |accessdate=2008-04-12 |type=reprint]

By 2001 and nearly eighteen years of stagnant growth, many of its franchises were in some sort of financial distress. The lack of growth severely impacted BKC's largest franchise, the nearly 400 store AmeriKing; by 2001 the company, which until this point had been struggling under a nearly $300 million debt load and been shedding store across the US, was forced to enter Chapter 11 bankruptcy.cite web |url=http://query.nytimes.com/gst/fullpage.html?res=9C03E5D81E3DF931A15751C1A9649C8B63&sec=&spon=&pagewanted=all |title=A Fighter for Burgers and Fries |author=Jo Napolitano |work=The New York Times |date=2002-12-22 |accessdate=2008-04-06 |quote=The AmeriKing bankruptcy has added uncertainty to the prospects for Burger King, which relies heavily on franchise owners of its restaurants.] The failure of AmeriKing deeply affected the value of the BKC, and put negotiations between Diaego and the TPC Capital-lead group on hold. The developments eventually forced Diaego to lower the total selling price of BKC by almost three quarters of a billion dollars.cite web |url=http://www.forbes.com/2003/04/15/cz_pb_0415burger.html |title=Burger King's Flame-Broiled Future |author=Phyllis Berman |publisher=Forbes Magazine |date=2003-04-15 |accessdate=2006-04-06 |quote=The all-cash deal was originally pegged at $2.2 billion but got negotiated down to just $1.5 billion.] After the sale, newly appointed CEO Bradley Blum initiated a program to help the roughly 20% of its franchises, including its four largest, who were in financial distress, bankruptcy or had ceased operations altogether.cite web |url=http://www.highbeam.com/doc/1G1-81297863.html |title=Burger King bolstering its many weak franchisees. |author=Elaine Walker |publisher=Knight-Ridder |date=2002-01-03 |accessdate=2008-04-06] Partnering with the California-based Trinity Capital, LLC, the company established the Franchisee Financial Restructuring Initiative, a program to address the financial issues facing BK's financially distressed franchisees. The initiative was designed to assist franchisees in restructuring their businesses in order to meet financial obligations, focus on restaurant operational excellence, reinvest in their operations and return to profitability.cite web |url=http://www.bison.com/press/pr2-3-03bk.html |title=Burger King Launches Franchisee Financial Restructuring Initiative |author=BKH press release |publisher=Burger King Holdings on Bison.com |date=2003-02-03 |accessdate=2008-04-06 ]

Individual owners also took advantage of the AmeriKing failure; one of the BK regional owners, Miami-based Al Cabrera, purchased 130 stores located primarilyin the Chicago and the upper mid-west, from the failed company for a bargain basement price of $16 million, or approximately 88% of their original value. The new company, which started out as Core Value Partners and eventually became Heartland Foods, also purchased 120 additional stores from distressed owners and completely revamped them. The resulting purchases made Mr. Cabrerra BKB's largest minority franchisee and Heartland one of BKC's top franchises. [cite web |url=http://findarticles.com/p/articles/mi_m3190/is_50_37/ai_111507745 |title=BK franchisee-led group buys 131 AmeriKing units |publisher=Nations Restaurant News |date=accessdate=2008-04-12 ] By 2006, the company was valued at over $150 million, and was sold to New York-based GSO Capital Partners. [cite web |url=http://franchise.business-opportunities.biz/2006/12/29/major-burger-king-franchisee-to-sell-240-restaurants/ |title=Major Burger King Franchisee To Sell 240 Restaurants |publisher=the Miami Herald |date=2006-12-17 |accessdate=2008-04-12 ] Other purchasers included a three-way group of NFL athletes Kevin Faulk, Marcus Allen and Michael Strahan who collectively purchased 17 stores in the cities of Norfolk and Richmond, Virginia; [cite web |url=http://www.boston.com/business/globe/articles/2007/08/17/faulk_joins_other_black_athletes_to_buy_burger_king_franchises/ |title=Faulk joins other black athletes to buy Burger King franchises |author=Keith Reed |publisher=the Boston Globe |date=2007-08-17 |accessdate=2008-04-12 ] and Cincinnati-based franchisee Dave Devoy, who purchased 32 AmeriKing stores. After investing in new decor, equipment and staff retraining, many of the formerly failing stores have shown growth upwards of 20%.

Relations

In the United States, approximately 90% of Burger King's franchises have banded together to form the Burger King National Franchise Association (BKNFA or NFA). The 900 member group is based in Atlanta, Georgia, and is designed to provide what the group calls Franchisee Relations Advocacy: it acts as a corporate negotiator that mediates with corporate-franchise disputes; a government lobbying group to deal with issues that effect the fast-food industry as a whole; and it provides group health, property and casualty insurance. [cite web |url=http://www.nfabk.org/pdf_doc/NFA%20Top%20Ten.pdf |type=pdf |title=Top 10 Reasons to Belong to the NFA |author=NFA publication |publisher=Burger King National Franchise Association |date=2007-12-04 |accessdate=2008-03-16 ] In 2001, the group announced a plan to purchase Burger King Corporation from then-parent Diaego after the company put forth a plan to float approximately 20% of BKC on the NYSE. The NFA believed that any money raised from the issue would not be put into helping bolster the then flagging BK, but would instead end up being used to help Diaego bolster its liquor brands. The deal collapsed when the NFA was unable to put together an acceptable financing package. [cite web |url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2000/06/23/cndia23.xml |title=Burger King chief quits for UK post |author=Alistar Osborne |publisher=the Daily Telegraph |date=2001-03-21 |accessdate=2008-03-23 |quote=DENNIS MALAMATINAS abruptly quit yesterday as Burger King's chief executive as Diageo announced plans to float the fast-food business on the New York Stock Exchange, valuing it at £2 billion or more.] [cite web |url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2000/07/21/cnbur21.xml |title=Franchisees seek to buy Burger King |author=Andrew Cave |publisher=the Daily Telegraph |date=2001-03-21 |accessdate=2008-03-23 |quote=BURGER King's army of American franchisees want to buy the business in a bid to thwart the chain's planned flotation by its parent company, Diageo.]

In a 2005 dispute with its the NFA over issues including brand development and advertising, Burger King severed its relations with the group. Claiming that the NFA was resisting structural changes that BK was making in regards to pricing, hours and its new gift card program, CEO John Chindsey claimed "many instances of the NFA's non-cooperation and affirmative disruption of efforts to improve the Burger King system." were the reason for the break. The company also announced that it would be diverting a $1 million (USD) NFA advertising subsidy into the company's own advertising fund. In a response, the NFA chairman Daniel Fitzpatrick responded in a letter to BKH stating "to sever relations with the ... NFA is extremely regrettable" and based on "an erroneous set of facts, innuendo and rumor." and claimed that BKH owed the NFA $1.7 million in total subsidy funds. [cite web |url=http://www.qsrmagazine.com/articles/news/print.phtml?id=4744 |title=Burger King breaks with franchise group |publisher=QSR Magazine |date=2005-10-21 |accessdate=2008-03-17 ] The two sides settled their differences in April 2006 when Burger King Holdings agreed to pay the disputed subsidy funds to the group. Additionally, BKH announced that it would honor an October 2004 deal in regards to compensation for the operation of the annual Burger King/franchise convention. [cite web |url=http://franchise.business-opportunities.biz/2006/04/28/burger-king-to-pay-debt/ |title=Burger King To Pay Debt |publisher=the Miami Herald |date=2006-04-28 |accessdate=2008-03-23 |quote=The new CEO of Burger King agreed to pay its debts to its franchisee organization. ]

Franchisees of note

AAFES

In the United States, AAFES operates Burger Kings in many army posts and air force bases.

Carrols Corporation

Carrols Corporation is the largest global franchisee of Burger King. Its parent company is Carrols Restaurant Group, at publicly traded corporation (nasdaq|TAST).cite web |url=http://www.hoovers.com/carrols/--ID__57303--/free-co-profile.xhtml |title=Carrols Restaurant Group, Inc. |author=Joe Bramhall |publisher=Hoovers |accessdate=2008-03-09 ] It has held this position since 2002 with the bankruptcy of Chicago-based AmeriKing Inc, which had 367 US locations at its peak.

Carrols Corporation was founded in 1960 as a franchisee of the Tastee Freeze Company's Carrols Restaurants division by Herb Slotnick under the name Carrols Drive-In Restaurants of New York, and by 1968 the company had grown to the point where it purchased the chain from Tastee Freeze. By 1974 Carrols owned and operated over 150 Carrols Club restaurants in the Northeast United States and abroad. In 1975 the company entered into a franchise agreement with Burger King Corporation and converted its existing Carrols restaurants in the US into BK locations, closed those stores that were not able to be updated and sold off its international operations. [cite web |url=http://www.carrols.com/html/History.htm# |title=Carrols Corp. History |author=Carrols publication |publisher=Carrols Restaurant Group |date=2001 |accessdate=2008-03-09 ] [cite web |url=http://burgerjoints.blogspot.com/2007/11/club-burger-at-carrols-helsinki-finland.html |title=Club Burger at Carrols, Helsinki, Finland |author=Roadside Burger Blog |date=2007-11-22 |accessdate=2008-03-09 ]

Carrols owns and operates 328 Burger King restaurants in New York, Ohio, and ten other states as well as operates 212 other restaurants under the Pollo Tropical and Taco Cabana names in the Southeastern United States.

Hana International

Hana International, is a wholly owned subsidiary of the Saudi Arabia-based Olayan Group along and its partner Kuwait-based MH Alshaya Group, is the exclusive master franchisee for the Middle East and North Africa, excluding Israel and Turkey. Hana also operates two holding companies, the Olayan Food Services Company in Saudi Arabia and First Food Services Company in the UAE as well as an operations support/training center in Riyadh.cite web |url=http://bi-me.com/main.php?id=8769&t=1&c=34&cg= |title=Burger King to expand in North African markets |author=BI- Middle East |publisher=Business Intelligence |date=2007-04-01 |accessdate=2008-04-11 |quote=The agreement gives Hana the exclusive right to develop the Burger King brand in Egypt and other North African countries.] cite web |url=http://www.olayan.com/group.asp?groupid=11 |title=Burger King in the Middle East |author=Olayan publication |publisher=Olayan Group |accessdate=2008-03-10 |quote=The Olayan Group and the Burger King Corporation have been partners in Saudi Arabia and the Arab Middle East since the early 1990s.]

Hana first began operating Burger King restaurants in the region after its parent company Olayan completed its franchise agreement in 1991. Its first location opened in Riyadh in December, 1992, and expanded across the Middle East opening stores in the neighboring countries of Kuwait, Qatar, Bahrain, and Lebanon in 2001. By 2007, the company had grown to over 180 locations in a half dozen countries, all located in Southwest Asia, when it signed an additional franchise agreement to open locations in North Africa, with the first location in Cairo, Egypt.

Hana currently owns and operates or sub-licenses over 200 restaurants on the Arabian peninsula, Jordan, Lebanon and Egypt. To accommodate the tenets of the majority Islamic population's faith in its markets, all of the locations operated and overseen by Hana feature halal meats and do not feature pork based products, additionally hamburgers are called "beefburgers", avoiding the term "ham" and its association with pork.cite web |url=http://www.halaljournal.com/artman/publish_php/article_894.php |title=Prima-Agri to Produce Halal Beef for Regional Fast Food Chains |publisher=The Halal Journal |date=200-10-10 |accessdate=2007-10-01] [cite web |url=http://www.zawya.com/story.cfm/sidZAWYA20040802080316 |title=Burger King® UAE launches the king of all burgers across the UAE |author=Press release |publisher=Zawya.com |date=2004-05-02 |accessdate=2007-10-01]

Hungry Jack's

Hungry Jack's, sometimes colloquially abbreviated to HJ's, is the exclusive Australian master franchisee of Burger King Corporation. Its parent company is Hungry Jack's Pty Ltd which is a wholly owned subsidiary of Competitive Foods Australia, a privately held company owned by Jack Cowin. With over 300 locations in that country, HJ's is the second largest franchisee of Burger King in the world.

When Burger King decided to expand its operations into Australia, it found that its business name was already trademarked by a man running a small takeaway food shop in Queensland. Thus, BK was forced to change the name when it decided to open stores in the country - the only time this has happened in its corporate history. Burger King provided the Australian franchisee, Jack Cowin, with a list of possible alternative names that the Australian Burger King restaurants could be branded as. The names were derived from pre-existing trademarks already registered by Burger King and its then corporate parent Pillsbury. Cowin selected the Hungry Jack brand name, one of Pillsbury's US pancake mixture products, and slightly changing the name to the possessive form, "Hungry Jack's". Accordingly, the first Australian franchise of the Burger King Corporation, established in Perth in 1971, was branded as Hungry Jack's.cite web |url=http://www.allbusiness.com/retail-trade/eating-drinking-places/4275422-1.html |title=Burger King Re-flags Australian Stores |author=Restaurant Business News |publisher=AllBusiness.com |date=2003-05-30 |accessdate=2007-09-29 ]

Hungry Jack's currently owns and operates or sub-licenses all of the Hungry Jack's and Burger King restaurants in Australia. As the master franchise for the continent, the company is responsible for licensing new operators, opening its own stores and performing standards oversight of franchised locations in Australia.

American Restaurants

In 2001 AmRest tookover International Fast Food Polska, the operator of the Burger King chain in Poland but all restaurants were soon converted into KFC. However, in 2007 after six years of absence on Polish market first Burger King restaurant was opened in Warsaw followed by another one in Wrocław. Today there are only five and one drive-through locations in Poland but at least next 10 are being planned and going to be opened by the end of this year. AmRest have also opened Burger King in Bulgaria in 2008. On July 4, 2008 the company announced that it wants to open in Czech Republic, Slovakia and Slovenia.

ee also

References

External links

* [http://www.carrols.com/ Carrols Corporation]
* [http://www.heartlandfoodscorp.com/ Heartland Foods]
* [http://www.hungryjacks.co.au/ Hungry Jack's]
* [http://www.nfabk.org/ Burger King National Franchise Association]
* [http://www.nfabk.org/mfa_pub.html Burger King Minority Franchise Association] (African-American)
* [http://www.nfabk.org/nhfa_pub.html International Hispanic Franchisee Association]
* [http://www.olayan.com/ Olayan]