The Soul of the King
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Burger King (NYSE: BKW) is back in the public eye after its recent reverse IPO. The new scrutiny will mean they will be held up in comparison to companies like McDonald's (NYSE: MCD) and Wendy's (NASDAQ: WEN), number one and number 2 in the US by sales, respectively. Both also don't carry the stigma of a "company in flux." One of the hallmarks of the QSR industry (let's just call it fast food) is consistency; McDonald's and Wendy's have a pretty tight lock on the consistency game. People like consistency, especially when it comes to their food, and Burger King, in both brand image and corporate parenthood, is anything but consistent.
Here's a short history of Burger King thus far:
1954 -- Founded as Insta Burger King in Miami.
1954 -- Burger King of Miami Inc. formed.
1963 -- South Florida Restaurants Inc. changes its name to Burger King Corp.
1967 -- The Pillsbury Co. acquires Burger King Corp. for $18 million.
1988 -- Grand Metropolitan PLC acquires The Pillsbury Co. for $5.79 billion.
1997 -- Grand Metropolitan merges with Guinness to create a new company, Diageo PLC.
2002 -- Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners buys Burger King from Diageo for $1.5 billion.
2006 -- Burger King goes public.
2010 -- Burger King is acquired by 3G Capital and taken private.
2012 -- Burger King returns to the New York Stock Exchange through a reverse merger.
Now, Burger King is embarking on proving to their customers that this time it's different, as depicted by recent ads, "exciting things are happening at Burger King." Their challenge will really be to not only prove that they are a solid company, but to also demonstrate what exactly it is they offer and what value they provide.
Let's put it into Seinfeld terms, as I am so fond of doing. Don't think of it as fast food, think of it as "good food quickly." In the current market, Wendy's is "good food" and McDonald's is "food quickly." In other words, Wendy's has worked hard to foster the image that their food is never frozen, always fresh, and they use natural ingredients when possible. McDonald's, on the other hand, focuses on value and convenience. Sure they tried that whole "this is what we're made of" campaign showing that their burgers actually contain beef, but really what is that saying in terms of being natural? What else would you expect? We know it's beef.
So what does Burger King stand for? After the most recent round of ads, dubbed "taste is king," it seems Burger King is really playing catch up to both of their main competitors. I had always differentiated Burger King in my mind by the fact that their burgers taste grilled (apparently they actually use a device called a chain broiler that exposes the burger to actual flame. Who knew? I always thought they just used some type of smoke flavoring). Both Wendy's and McDonald's use flat tops to cook their food, providing automatic differentiation. Burger King seems to be capitalizing on this through their recent release of barbecue type items and the "let's have a barbecue slogan." Either way, the grill is a serious asset, and certainly something to build a brand message off of. Burger King will not survive as a McDonald's/Wendy's rip-off and without a coherent direction, let's brace for more M&A engineering.
TheLaowai has no positions in the stocks mentioned above. The Motley Fool owns shares of McDonald's. Motley Fool newsletter services recommend Burger King Worldwide and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
