A change in the franchise structure of Burger King UK has given the fast food chain fresh impetus and a focus on expansion again. FEJ was at the Commercial Kitchen show to hear CEO Alasdair Murdoch give a candid account of his plans to correct some of the “missteps” that have held the business back and give the likes of McDonald’s a proper run for its money.
Alasdair Murdoch is a man who knows what a good burger tastes like, but more importantly he has a precise understanding of what it takes to prevail in a quick-service restaurant sector that is having to adapt to the unique needs of the modern consumer.
Over the years he has worked for the likes of Pizza Hut and KFC in a senior operational capacity, while more recently he spearheaded Gourmet Burger Kitchen’s ascent in a casual dining market that has served as fertile hunting ground for a new generation of contemporary burger chains.
His current assignment involves restoring Burger King’s presence in the UK market and leading a star-studded industry team that successfully gained the rights to the brand in the UK last year. Plans are afoot to launch 25 new outlets this year, and between 30 and 50 a year over the next few years, as part of an effort to regain scale having dropped from a peak of 700 stores to 500 now.
Backed by private equity firm Bridgepoint, which has just sold Pret, Murdoch’s management team includes Casual Dining Group chairman Martin Robinson and its former CFO Tim Doubleday.
They secured the master franchise agreement for Burger King UK and acquired Caspian, one of the UK’s largest Burger King franchisees with 70 restaurants, in simultaneous deals last year.
Getting both agreements over the line concurrently was “quite difficult”, admitted Murdoch during his keynote session at Commercial Kitchen, but ultimately it was fundamental to the entire strategy as it could not risk being in the position of owning the master franchise rights but not having any restaurants under its jurisdiction.
The Caspian takeover gives it a platform to build a portfolio of restaurants that it controls, with further acquisitions likely. Having now had a few months to get his feet under the table, Murdoch insists the chain is firmly geared up to growing its footprint.
“We think there is a very significant opportunity with Burger King; I suppose we’d liken it a little bit to having a start-up with a global brand — there was literally no-one in the organisation and it has been great fun in the sense of pulling together a whole team from different backgrounds.
“Ultimately, despite perhaps a series of missteps that the organisation has taken over the last five, six, seven, eight years — and that is no disrespect to the franchisees at all — and despite some big issues we have had, the restaurants take quite a bit of money, they are still profitable and there is a significant opportunity out there.
“There are 500 Burger Kings and 1,700 McDonald’s; each McDonald’s does significantly more volume than Burger King, so there is some very obvious opportunity without just necessarily chasing McDonald’s. You can see the size of the market and we think the market is pretty open.”
Murdoch acknowledges that the growth potential of the business has suffered from successive years of ownership changes in the UK, which led to a lack of consistency.
“Every time Burger King was poised to go on another sort of growth cycle, they’d perhaps change the management again, and I think for the most recent part there has perhaps been a lack of reinvestment into the brand itself. If you go into a lot of our restaurants they are perhaps more tired than we would want — not all of them — so I think there are some fairly obvious opportunities around those sorts of areas,” he says.
We have a number of restaurants as well whose coffee machines don’t work, there are those sorts of issues, which are really quite gritty but those are the realities and we just have to work out the order to do them all in”
Murdoch concedes that Burger King has had a “history of closing restaurants, not opening them” but he insists the current management team intends to “reverse” that process.
“A lot of time is being spent on finding the right pipeline. I think one of the opportunities that we are benefitting from is that the slowdown in the market that other people are struggling with means that landlords are much more realistic about rent, and secondly there are many more sites available. We are not finding it difficult, at all, to find opportunities. Those opportunities might be two years away but we see a lot of opportunities from a real estate point of view in a way that people perhaps weren’t seeing a year ago.”
The master franchisor is making a “big investment” to grow its estate, with between 20 and 25 openings planned in 2018 and between 30 and a 50 a year over the next couple of years. Of the 500 sites it currently runs, 170 are in “captive” locations, such as train stations, airports and motorway service stations. Such destinations will continue to be a central feature of the strategy moving forward.
Murdoch has already alluded to the difference in scale between Burger King and McDonald’s, but it is inevitable that the two will always be the subject of comparisons. What is his view on how the two chains stack up in the UK?
“I think McDonald’s executed extremely well and will carry on doing that, but there are obvious opportunities that we see around the edge. Being a smaller, more agile, more challenger brand gives us opportunities, but McDonald’s is a very well-run business and has been for a long time.”
He acknowledges the success McDonald’s has had with coffee and breakfasts especially, while the breadth of beverages it now offers has not gone unnoticed. “They are very good at that and they probably have a bigger marketing budget than almost any other company within the UK. That is not why they are successful, but one begets the other thing.”
He admits that he holds a “different view” on their product, but then as boss of Burger King you wouldn’t expect him to say anything else.
“One of the great things about Burger King is, of course, customers still talk to us about the quality of the Whopper, the quality of the burger and the flame-grilled experience, which gives an aspect to that taste. The quality of the Burger King burger we would see as being significantly better than what McDonald’s has to offer, and I don’t think I am speaking out of turn there. I am sure they would disagree, that’s their right, but I think there is some real mileage potentially in that kind of approach,” he says.
If Burger King is going to make up ground on its rival, it’s going to have to increase its investment in technology. Its current ePOS system is at least 12 versions behind the original, there is an abscence of wide area networks in its restaurants and the company’s digital presence is nowhere near as sophisticated as its rivals. Murdoch is confident that having access to self-owned stores will soon change that.
One of the great things is that customers still talk to us about the quality of the Whopper, the quality of the burger and the flame-grilled experience, which gives an aspect to that taste”
“One of the big opportunities, or growth levers, for us as a business is to build our own restaurants and to run them because then we can put in the latest look and feel, the latest technology, and we can really drive those operations,” he comments.
It’s fair to say that one of the biggest changes since Murdoch first entered the industry is the rise of delivery. Even QSRs need to think carefully about where delivery fits into their model. What is his take on that?
“I think there is a very big opportunity with delivery, which we haven’t got right yet, but I don’t think any of the QSR players necessarily have got it. I think it takes a bit too long and the margins are quite difficult because the burger product that might be selling is relatively low-priced. You need a high average spend to get delivery to work, but there is significant latent demand and you know that because of the drive-thrus — people are driving there for convenience and taking it home. It is finding a way to do it so the customers get great service and everyone can take a little bit of money out of it, too.”
It also comes back to that issue of technology again. Until it has the ability to fully integrate its delivery platform with its ePOS system and reduce the potential for error, it’s unlikely that all of its estate will be tuned into third party delivery. It is certainly on Murdoch’s to-do list, but it’s not the only thing.
Building stronger relationships and improving the company’s menu offering are also firm priorities. Breakfast is one area where the brand could be doing more.
“We have a number of restaurants that theoretically open for breakfast but don’t open until 9 o’clock in the morning, which would seem a little bit late to me. We have a number of restaurants as well whose coffee machines don’t work, there are those sorts of issues, which are really quite gritty but those are the realities and we just have to work out the order to do them all in.
“We will work on breakfast and later in the year we’ll probably trial a remodelled breakfast offer with one of our captive partners, so maybe a motorway services operator, before pushing that out to our restaurants. Alongside that, I think we have a very complicated menu. If you are not a regular Burger King user, you go in and it is slightly daunting and difficult to understand, so we’ll need to simplify and reduce.”
There is no denying that an awful lot of transformation lies ahead, but Burger King UK certainly knows what it needs to do to reign supreme.
Burger King says kitchen suppliers need to excel to make its approved buying list
Burger King’s ethos for buying kitchen equipment is less about price and more about service, its UK CEO has claimed.
Alasdair Murdoch, who runs the business that holds the master franchise for Burger King in the UK, says the overall value and after-sales service that an equipment supplier can add will ultimately make the difference when it comes to future purchasing decisions.
One of the challenges for the UK arm is that it must abide by a list of globally-approved suppliers that it can buy from. And while it can apply for new suppliers to join this list, the complexity involved in securing approval means it has to be absolutely worth it.
He said: “In order for us to make the effort to say that we would like to approve this new supplier selling us this bit of kit they have really got to be offering us value. And it’s not really about price — I think price is obviously an important factor but we need more added value.
“What we are particularly interested in is after-service and after-sales at a decent price, not a ridiculous price where you can’t make any money, but we don’t want stuff that when it goes out of warranty the price for it to be serviced goes through the roof.”
Murdoch added: “Clearly we need to be seeing efficiencies and savings — that could be in oil though fryers as an example, that could be in heat, that could be in reduced amounts of power — that’s what everyone is coming to us with but you need to be trying to create a long-term relationship.”
Burger King UK is embarking on an expansion drive that is likely to see it open between 20 and 50 new stores a year over the coming years. That will see a fresh injection of investment aimed at helping it bridge the gap between rivals such as McDonald’s and KFC.
Murdoch, who was speaking at the recent Commercial Kitchen show, described the chain’s kitchen operations as “incredibly unmechanised” and suggested there was a big opportunity for this to change in the future.
“There are lots of fantastic [suppliers] but I don’t quite see the technology there as yet. What we are beginning to see is a lot of efficiency, so we see a lot of people driving much better uses of power and much better uses of oil. They are obviously very interesting, but I also think we must be able to mechanise some of the other stuff that we do as well, which we don’t see being done successfully or properly anywhere in the world at the moment.”