Burger King estimates it will face an all-time high number of closures this year.
In an effort to keep up with its fast food rivals, CEO Joshua Kobza announced that the chain will close between 300 and 400 underperforming restaurants by 2023.
Burger King axed 124 locations in the year to March, according to its earnings release, leaving 6,964 spots nationwide.
A bankrupt franchisee has already announced it will close 27 locations in seven states this year.
Burger King is now the third largest fast food restaurant in the US, having lost its second place to Wendy’s. McDonald’s remains top dog. Burger King is also under pressure from higher end chains, including Five Guys and Shake Shack.
But why are so many stores closing – and will the drastic cuts to its real estate portfolio help the chain catch up with its rivals and keep the crown from slipping away?
The chain is closing between 300 and 400 underperforming restaurants this year
Why is Burger King closing restaurants?
Chairman Patrick Doyle said the company is cracking down on underperforming franchisees.
Sales performance can vary widely between Burger King locations, and the company said it is looking for franchisees with stronger finances.
“There will always be a minority [of franchisees] who are not dedicated, enthusiastic operators. We will work with them to get out of the system and do something else,” Doyle said.
“There’s just no room for franchisees who don’t want or can’t work hard to operate restaurants that are better than the system average over the long run.”
The closures will target the least profitable stores so the company can focus on its turnaround plan to boost sales and compete.
Josh Kobza, CEO of Restaurant Brands International, Burger King’s parent company, has said he feels “really good” about where the company is going
Burger King announced a $400 million revamp last September to make its products more “premium,” giving its marketing and menu a much-needed overhaul
What is the chain’s turnaround plan?
Burger King set out in late 2022 with renewed vigor to ride the tide of the tumultuous fast food market.
It suffered from sluggish sales and fell behind Wendy’s and its Goliathan rival, McDonald’s.
An analyst told DailyMail.com that the chain risked entering a “death spiral” if it failed to catch up with its rivals.
In September 2022, it unveiled its $400 million “Reclaim the Flame” rebranding plan – focusing on advertising, revamping dilapidated restaurants and targeting a younger, more diverse market.
Bosses said the campaign would make the brand more “premium.”
The plan involved spending $150 million on advertising, and after years of “Have it Your Way,” the brand officially changed its slogan to “You Rule,” and even released its “Whopper Whopper” jingle on TikTok and Spotify.
The ad was a runaway success and has been streamed over three million times on the music platform.
The brand also strives to streamline overly complicated menus and operations.
The Whopper was taken off the value menu and given new flavor extensions.
The Ch’King sandwich was replaced by the new Royal line of chicken sandwiches. The Ch’King sandwich took 21 steps to prepare, but The Royal Crispy Chicken only takes five.
And it looks like the chain’s shiny new image is starting to pay off.
In its Q1 2023 results, the company reported that — despite store closures — comparable store sales were up 8.7 percent.
Kobza said earlier this year that he had “a really good feeling” about where the company is going.
The brand plans to modernize and refresh thousands of restaurants as part of the revamp
How will restaurants change?
The chain is also investing $50 million over the next two years to renovate and refresh nearly 3,000 restaurants.
The modernization consists of new restaurant technology, kitchen appliances and building improvements – with the aim of making the dining experience easier and more enjoyable for burger fans.
$200 million will be spent over the next two years on restaurant renovation projects for approximately 800 stores.
This includes futuristic features like three-lane drive-thru’s and conveyor belt food delivery.
At some innovative eateries, customers can place their order under solar-powered canopies, where they can continue to eat.
There is also a curbside pick-up area for customers ordering ahead through the app. After purchase, customers can stop at a pick-up point and notify the restaurant via the app that they have arrived, and employees will deliver the food to the car.
An alternative to curbside pickup is Burger King’s new takeout lockers, where diners can grab food straight from the kitchen after ordering through the app.
The Impossible Burger launched in 2016 to much fanfare, with bosses claiming they beat McDonald’s to produce a meat-free alternative
Why did Burger King struggle?
The company was poorly positioned as the pandemic hit compared to its rivals.
The digital platform was lagging behind, so the brand struggled to keep up with demand for delivery when people couldn’t visit restaurants in person.
The chain also suffered a series of ill-fated menu revamps, including the Impossible Burger.
Launched in 2016, bosses said it was a meat-free alternative, sending McDonald’s to the post. But they were forced into the mother of all descents when they admitted it would be cooked on the same equipment used for beef and chicken.
In early 2019, it again tried to compete with McDonald’s, this time challenging their rival’s Happy Meals range.
Burger King’s Real Meals include options such as the Blue Meal and the DGAF (Don’t Give a F***) Meal, which are designed in partnership with Mental Health America for Mental Health Awareness Month.
But bosses were accused of using mental health to make a profit, with critics pointing out that the chain provided no resources for people with mental illness, and that its products were simply gimmicks.
Two Burger King franchisees have announced a slew of closures across the country this year
Which stores are closing?
Not all of the 300 to 400 locations closing their doors this year have been revealed, as boss Kobza admitted there is “a fair amount of uncertainty” surrounding the plans.
But there are confirmed closures of two Burger King franchisees that went out of business this year.
Meridian Restaurants Unlimited, with more than 100 locations, is closing 27 restaurants in seven states, including Minnesota, Montana and Utah.
The franchisee filed for bankruptcy in March after reportedly running up $14 million in debt.
The franchisee said it was “possible, if not likely” that they would be pressured to close more stores as they negotiated rents and operational improvements with landlords, and struggled with rising food costs and poor sales.
Another franchisee, EYM King of Michigan, also announced it would close 26 restaurants across the state and lay off more than 400 employees after the chain missed out on a deal with the Department of Labor.
In a letter to the State Department of Labor and Economic Opportunity, EYM King of Michigan LLC said they had not reached an agreement with Burger King Corp.
Some struggling spots are expected to be bought out.
Karali Group will reportedly pay more than $7 million for 27 locations in Ohio and Pittsburgh, Pennsylvania, while 37 stores in Virginia are expected to be purchased for $22 million by DC Burger, according to Restaurant business.
Some locations are on the slope. Franchise owner Toms King, which operates 90 units, had to be bought out of bankruptcy in January for $33 million.