New Burger King Restaurant Design Continues Competitive Differentiation

Article Headline / Source Burger King's New Restaurant Design (http://adage.com/globalnews/article/?article_id=139526)
Question With Burger King's (BKC) current sales trend weak and high stakes earnings call coming up at month's end, is the newly announced Burger King restaurant design viable? Is it likely to attain investment payback? Can the franchisees fund it with the tight credit conditions now underway?

This was originally done for Gerson Lehrman Group's News

1) Burger King isn't a big "Value Menu" player

2) Tries to differentiate itself through flavor and selection

3) Unit allows for more upscale uses that QSR's are taking on in recession

The new Burger King restaurant design makes sense and addresses the fact that the fast food “niche” is growing and handling more tasks for differing groups of consumers.

BK hasn’t really played hard in value price arena, so a “weak” sales trend may actually bode well for the bottom line. If they are selling more “standard price” menu items as a percentage than their competitors, is that really weakness?

The new 2020 design is a more upscale look, also showing a commitment to full price items and a different marketing sensibility. The “Whopper Bar” concept and the hi-tech Coca-Cola fountain introduction, if only for tests, shows burger King is looking at other places than a .99 price point to grow sales volumes moving forward. They have always competed on flavor as a prime driver to their marketing campaigns, this is a variant on quality differentiation.

Whether the franchisees can fund the new design build out in times of tight credit is probably the same answer it would be in good times: the strong franchisees can, the marginal ones can’t. You have to think that investment payback may be marginally longer to due to the increased cost of the unit’s build-out, but will the design alone increase sales? Probably not.

In terms of how QSR’s/fast food are being used differently by the consumer during the economic turndown, this could be a winner. Having a nicer, more pleasing looking unit to host fast business lunches or take the family out, instead of an Applebee’s or a TGI Fridays, since budgets are bit tight, cannot be bad.