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Q&A | CEO John Chidsey

How Burger King mustered a rebound

Burger King CEO John Chidsey, 45, goes after the upscale and $1 menu market segments.

Associated Press

Burger King CEO John Chidsey, 45, goes after the upscale and $1 menu market segments.

MIAMI — At a time when many large restaurant chains are struggling, Burger King Holdings Inc. chief executive John Chidsey has managed to sustain the once-foundering fast-food company's turnaround.

The world's No. 2 hamburger chain, by locations, behind McDonald's Corp. is using what it calls a "barbell" menu strategy that pushes upscale products, like its new Steakhouse Burger with Angus beef, alongside $1 sandwiches to appeal to cash-strapped customers. This year the company plans to introduce a smaller, hipper restaurant, called the Whopper Bar, that specializes in the chain's flagship burger.

Chidsey, a 45-year-old certified public accountant and member of the Georgia Bar Association, recently sat down with the Wall Street Journal:

Six years ago, people were writing the obituary for fast food as "fast-casual" restaurants like Panera Bread were on the rise. Now fast-food companies are among the few restaurant chains doing well. How did that happen?

I think that fast-casual really did a great job of scaring quick-service restaurants into getting their act back together. You look at the new products that have come out of McDonald's and Carl's Jr., Taco Bell, ourselves, I think the whole industry has done a much better job over the last four or five years in terms of improving the quality of the products, improving the breadth of the offering.

If you look in the fast-food hamburger space, it is unfortunate for the greater economy as a whole, but we benefit from the pressure people feel from a disposable-income standpoint.

What were the keys to your company's turnaround?

Most importantly, I'd say it was finding who our target customer was, figuring out who was the superfan and not wasting our time trying to be all things to all people.

Much of your growth will come from overseas during the next few years. Why do you think the company can expand internationally and what markets are you most interested in?

We're in (almost) 70 countries around the world. It's not like we need to go into 30 new countries. Really what we need to do is drill down in the countries we're in. We need to be a lot bigger in Germany. We need to be a lot bigger in the U.K. We need to be a lot bigger in Japan.

Other Burger King executives have said the company has no plans to do a new coffee program in the United States that would require franchisees to buy expensive new equipment, even though your most direct competitor, McDonald's, is doing that so it can sell lattes and cappuccinos.

In the U.S., the reason's pretty simple. Our breakfast business, compared to McDonald's, is underdeveloped. We make a lot more money putting our ad dollars and our product behind just breakfast in general than homing in on coffee.

Do you think there's also more risk in trying to place a big bet on coffee for a fast-food chain?

Our customer is not somebody that's going to pay $3 or $4 for a cup of coffee. So, on the Dunkin' Donuts model, if you're really more in the $1 to $2 range, do you get enough traffic to get a good return on that investment?

You added salads to the menu, but other executives say they're not big sellers. Why keep them?

If your brand promises "Have it your way," you can't have a mom or a dad who pulls up to Burger King with the kids and says, "I'm not going to go here, I'm going to go to McDonald's or Wendy's because I can get a salad." Why do you have Apple Fries and this new Kraft macaroni and cheese and applesauce and fun drinks for kids? I've got to tell you, the vast majority of parents do not substitute (those items into kids' meals). I think you want to have it there so people who say, "I'd rather my son or daughter have carrots or Apple Fries," it's there.

How do you think fast food will look in 50 years?

I think there's a lot more room for us to elevate quality. Like this new batch broiler (cooking equipment) that we launched. If we so chose, we could put a pork chop on there. We could do steaks.

MIAMI — At a time when many large restaurant chains are struggling, Burger King Holdings Inc. CEO John Chidsey has managed to sustain the once-foundering fast-food company's turnaround. • The world's No. 2 hamburger chain, by locations, behind McDonald's Corp. is using what it calls a "barbell" menu strategy that pushes upscale products, like its new Steakhouse Burger with Angus beef, alongside $1 sandwiches to appeal to cash-strapped customers. This year the company plans to introduce a smaller, hipper restaurant, called the Whopper Bar, that specializes in the chain's flagship burger.

Six years ago, people were writing the obituary for fast food as "fast-casual" restaurants like Panera Bread were on the rise. Now fast-food companies are among the few restaurant chains doing well. How did that happen?

I think that fast-casual really did a great job of scaring quick-service restaurants into getting their act back together. You look at the new products that have come out of McDonald's and Carl's Jr., Taco Bell, ourselves, I think the whole industry has done a much better job over the last four or five years in terms of improving the quality of the products, improving the breadth of the offering.

If you look in the fast-food hamburger space, it is unfortunate for the greater economy as a whole, but we benefit from the pressure people feel from a disposable-income standpoint.

What were the keys to your company's turnaround?

Most importantly, I'd say it was finding who our target customer was, figuring out who was the superfan and not wasting our time trying to be all things to all people.

Much of your growth will come from overseas during the next few years. Why do you think the company can expand internationally and what markets are you most interested in?

We're in (almost) 70 countries around the world. It's not like we need to go into 30 new countries. Really what we need to do is drill down in the countries we're in. We need to be a lot bigger in Germany. We need to be a lot bigger in the U.K. We need to be a lot bigger in Japan.

Other Burger King executives have said the company has no plans to do a new coffee program in the United States that would require franchisees to buy expensive new equipment, even though your most direct competitor, McDonald's, is doing that so it can sell lattes and cappuccinos.

In the U.S., the reason's pretty simple. Our breakfast business, compared to McDonald's, is underdeveloped. We make a lot more money putting our ad dollars and our product behind just breakfast in general than homing in on coffee.

Do you think there's also more risk in trying to place a big bet on coffee for a fast-food chain?

Our customer is not somebody that's going to pay $3 or $4 for a cup of coffee. So, on the Dunkin' Donuts model, if you're really more in the $1 to $2 range, do you get enough traffic to get a good return on that investment?

You added salads to the menu, but other executives say they're not big sellers. Why keep them?

If your brand promises "Have it your way," you can't have a mom or a dad who pulls up to Burger King with the kids and says, "I'm not going to go here, I'm going to go to McDonald's or Wendy's because I can get a salad." Why do you have Apple Fries and this new Kraft macaroni and cheese and applesauce and fun drinks for kids? I've got to tell you, the vast majority of parents do not substitute (those items into kids' meals). I think you want to have it there so people who say, "I'd rather my son or daughter have carrots or Apple Fries," it's there.

How do you think fast food will look in 50 years?

I think there's a lot more room for us to elevate quality. Like this new batch broiler (cooking equipment) that we launched. If we so chose, we could put a pork chop on there. We could do steaks.

How Burger King mustered a rebound 04/06/08 [Last modified: Wednesday, November 3, 2010 11:51am]

    

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