Food

BURGER KING®

Profile

BURGER KING® is a global quick-service restaurant (QSR) brand with stores across 86 countries, which prides itself on making great burgers according to the key principles of quality, freshness and taste. In May 2013, BURGER KING® SA signed a long-term master franchise and development agreement with Burger King Europe GmbH, thereby obtaining the exclusive rights to expand the BURGER KING® brand in the country.

ownership structure

logo

91.1%
effective ownership (as at 30 June 2015)
(R55.1 million)
contribution to GPI headline earnings for the period

“BURGER KING® continues to make waves in the local QSR industry by serving high-quality, value-for-money products in modern, friendly environments.”

factsheet

managing executive

Jaye Sinclair

GPI directors at Burger King® board level

Hassen Adams, Alan Keet

BBBEE rating

Level 2 (measured as part of GPI consolidated scorecard)

Employees

Total employee complement of 1 766 employees of which 66 are at head office

Historically disadvantaged individuals (HDIs) represent 96% of the total employee complement

Females represent 66% of the total employee complement

Previously unemployed individuals represent 53% of the total employee complement

First-time employment individuals represent 33% of the total employee complement

Head office

Cape Town

Operational footprint

5.9 million customers served in the past financial year via a footprint of 44 restaurants across five provinces:

  • Western Cape: 14
  • Gauteng: 21
  • KwaZulu-Natal: Seven
  • Mpumalanga: One
  • North West: One

Key financial performance indicators (R’000s)

2015 2014 2013
Revenue 303 883 124 862 5 026
4-wall EBITDA* 3 198 (31 969) (5 941)
EBITDA  (72 301) (66 665)  (17 754)
Net profit after tax (72 085) (52 790) (18 120)
Shareholder loan 231 893 0 0
Total debt excluding shareholder loans 1 132 944 0
 
*   4-wall EBITDA is operating EBITDA achieved by the restaurants and excluding head office costs.

Operating context and performance

The QSR industry in South Africa grew by 17% during the year to June 2015, with total sales of R31 billion. This substantial growth can largely be attributed to shrinking disposable household incomes, as a result of the sluggish economic environment, driving increased consumer demand for convenience and value-for-money offerings. Within the local QSR market, the burger category registered the strongest growth in value of 49%, which was mainly due to the introduction of BURGER KING® SA, with stellar prospects for continued growth in the short to medium term.

As the market grows, BURGER KING® will continue to deliver high-quality food options at affordable prices, while aggressively promoting its regular specials offerings and introducing new, innovative products that differentiate the brand.

Year-on-year revenue increased by over 100% as a result of a further 26 restaurants opening during the year, bringing the total to 44. The focused roll-out will continue into the new year, with a total of between 80 and 85 restaurants expected to be operational and trading by end-June 2016. Achieving this stated target will fulfil and even exceed the Company’s obligations in terms of the BURGER KING® master franchise and development agreement.

A highlight for the year was the successful localisation of the supply chain which, combined with substantial volume increases, had a significant impact on gross food margins. The most significant local supply approvals were that of Rainbow Chickens and Heinz SA. As a result, only seven of the 193 stock keeping units (SKUs) are still imported. Management is focused on improving the sales mix and cost controls going forward to maintain sustainable margins in line with the growth of operations.

The introduction of a tiered labour system, which stipulates ideal labour costs and headcount relevant to the revenue range and format specification of each unique store, allows restaurants to better manage this key cost driver without compromising on quality and speed of service. As a result, labour cost as a percentage of revenue was reduced from 25% in 2014 to 20% in 2015, with further gains still to be realised.

Head office costs as a function of revenue are declining with each year and remain on course to reach BURGER KING® worldwide best practice. The Company conducted a focussed review of restaurant capital expenditure requirements and has successfully reduced spend per restaurant over the year, including drive-through formats which carry a sizeable expenditure premium to standard formats.

The depth and reach of the brand with customers is BURGER KING® SA’s most valuable intangible asset and it focuses considerable attention on mitigating reputational risk through rigorous employee training and food quality control. This is critical to ensuring consistency across the restaurant footprint in line with meticulous BURGER KING® international standards.

Prospects

The primary objective of BURGER KING® SA this forthcoming financial year will be to achieve the targeted store roll-out on time and inside budget.

To this end, the Company will ramp up its marketing strategy, focusing on driving foot traffic into all stores as well as engineering menu offerings to appeal to the specific demographic profile of each restaurant’s customer base. In addition, the company will continue to invest in its workforce by offering extensive, regular training and career advancement opportunities, including the introduction of an accredited learnership programme.

The Company continues to build on its exclusive franchise agreement with Sasol and expects to open a further nine forecourt stores in the coming year. Going forward, the primary focus at head office level remains on the corporate-owned stores, which comprise the bulk of the footprint, as well as initiatives to streamline the operating model and deliver enhanced returns.

Source: Analytix Fast Food Consumer Trends 2010-2014, Euromonitor Passport reports April and June 2015.