Burger King has just finalized the terms of a deal to sell itself to an investment firm that previously had most of its focus on Latin America. The firm, 3G Capital, will buy out the company for a total of $3.26 billion.
Burger King CEO John Chidsey believes the sale, which computes at a generous $24-per-share, will allow Burger King the flexibility it needs to refine its menu and expand globally in the face of increased competition and waning consumer interest. Chidsey will become co-chairman of the corporation after the deal is complete.
Burger King has suffered declining profits for five straight quarters, and has been clashing with its franchisees – which own most Burger King stores – over forced adherence to promotions that cut heavily into profits. The promotions have been meant to compete with McDonalds and other low cost options that have been siphoning Burger King’s young male focus demographic.
In addition to revising its menu and advertising to attempt to diversify their consumer base, Burger King intends to continue to expand internationally. Over one third of stores currently stand in countries outside the United States, but over ninety percent of new store openings last year were beyond the borders. While Burger King’s headquarters will remain in Miami, 3G Capital has said it intends to focus on the Asian and Latin American markets.
Part of Burger King’s trouble is increased cost competition from perpetual big brother McDonalds on one end, and a new trend of higher cost, gourmet burgers such as Five Guys at the other. This leaves Burger King’s offerings with a much less well-defined niche as other burgers compete on the same or higher level. They had success with their new Flame Broiled Ribs earlier in this summer despite the high cost, and it is that type of success they hope to find in a revised menu.
