The world’s number three largest hamburger chain has re-joined the ranks of publicly-traded fast food restaurants on the New York Stock Exchange after its owners spent the past two years cutting costs, refreshing stores and updating the menu. Burger King (NYSE:BKW) opened at $14.50 per share and traded as high $16.11 a share before closing at $15.01 for the first day of trading. The company has suffered several setbacks in recent years as its main rivals McDonalds (NYSE:MCD) and Wendys (NASDAQ:WEN) have made improvements to their menu and store designs that have attracted far more customers than Burger King. McDonalds has led the pack of hamburger chains for many years and courtesy of it more than 33,000 locations worldwide, sponsorship of the Olympics and co-branding of movie merchandise for nearly every popular feature that is released, has maintained that lead by a very healthy margin. The road to trading publicly for Burger King has not been an easy one. In 2010 the company was taken private by equity firm 3G Capital in an effort to take cost out of the business and to revamp operations in order to return it to profitability.
Cheeseburgers For Everyone
The often rocky path has resulted in lawsuits filed against the company by its own franchisees over a $1 cheeseburger promotion in 2009 that strained relations across the fast food chain. USA Today reported that overcoming these challenges were critical to the ability to return to the public eye of providing financial and operations information to its competitors and investors alike. The transaction that brought BKW public has made only 16 percent of the shares freely tradable to the public. The complex deal provided $1.4 billion to 3G Capital in exchange for 29 percent of the company of which 13 percent will remain in the hands of a private investor for at least one year. Not all analysts think that the stock is worthy of investing in, especially as nearly 80 percent of BKW’s growth has been generated outside of the U.S. in recent years. The company expects 2012 net income to be twice the figure from 2010 when it last traded on the NYSE. Part of the reorganization involved closing unprofitable locations and selling many more to franchisees who would run them more efficiently that corporate headquarters had.
Where It’s Good To Be King
The company recently announced that it was expanding into Russia and China in a big push to reach more customers who were not already familiar with the brand. The company plans to open 1,000 new locations in China over the next five to seven years in an aggressive joint venture with Cartesian Capital Group. The brand is not nearly as well established in China as is Wendy’s or McDonalds and stands to gain significant momentum as the number of stores increases in the region. Consumers are eager to experience western food options as the country emerges from an agricultural society to a full-fledged economy that has developed a taste for more brand-sensitive products.
Can They Get It Done
The company has 12.500 stores in 82 countries that serve 11 million customers every day. The vast majority of stores are owned and operated by franchisees who very often have several stores that they manage. The company that got its start in 1954 in Miami has gone through many changes over the years, having been owned by Pillsbury Foods at one point and then a slew of firms that tried to turn around the brand and operations only to fail to attract enough customers from McDonalds and Wendy’s to make the investment worthwhile. Analysts say that the key to making it work this time will be to leverage the new menu items and refurbished stores by increasing customer traffic. Raising the average sales ticket will also help to amortize the cost of doing business in what has often been called the most competitive business in the world.
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