Burger King® Announces "Reclaim the Flame" Plan to Accelerate Growth in the U.S.

Burger King® Company ("Burger King," "BK," "Company," "Brand") today shared the details of its "Reclaim the Flame" plan to accelerate sales growth and drive Franchisee profitability. The plan was built in collaboration with Franchisee leaders from across the country and was shared with all U.S. Franchisees at its annual convention this week by Tom Curtis, President of Burger King North America.

The plan includes Burger King investing $400M over the next two years, comprised of $150M in advertising and digital investments to "Fuel the Flame" and $250M for a "Royal Reset" involving restaurant technology, kitchen equipment, building enhancements and high-quality remodels and relocations. This investment will work to enhance ongoing Franchisee investments to modernize the Burger King restaurant portfolio, and when combined with our brand re-positioning plan, menu enhancements and focus on operational excellence, will help drive our overarching goal of improving the Guest experience and attracting more traffic back to the brand over time.  

Burger King Franchisees representing more than 93% of all U.S. restaurants have endorsed the plan and have agreed to co-invest in increased advertising firepower over the coming years. These corporate investments are in addition to Burger King recently expanding its field team to provide increased support to Franchisees as they continue improving restaurant-level profitability and execution.

Jose Cil, CEO of Restaurant Brands International ("RBI"), commented on the announcement:
"Over the past year, Tom has built a talented leadership team that has worked collaboratively with Burger King Franchisees to develop a multi-year plan to drive the performance of the system. We believe now is the time to make a significant investment to accelerate the work given the quality of the team, focus of the plan, commitment of our Franchisees and the opportunity that clearly exists for our iconic brand to Reclaim the Flame and be the first choice for a high-quality meal, an exceptional experience, and a great value."

Tom Curtis, President of Burger King North America, added:
"We are relentlessly pursuing a better experience for our Guests. This is the driving force behind all the initiatives that we are executing collaboratively with our Franchisees. Our plan is focused on a few important priorities — operational excellence, refreshed image, and enhanced marketing — that when put together, provide a superior experience for our Guests."

"I'm very proud and thankful that our Franchisees have stepped up once again to invest in our performance together, reflecting the genuine partnership and mutual respect we have built between the Franchisor and Franchisees. Ultimately, the success of this Reclaim the Flame plan comes down to execution at the restaurant level and we are so fortunate to have Franchisees who love this brand and are working closely with us to focus on the right priorities. I believe in this team, this plan, and a bright future as we evolve and enhance our Guest experience and drive profitable growth for the business."

Matt Dunnigan, Chief Financial Officer of RBI, commented:
"Our $400M investment into the Burger King U.S. system represents a substantial deployment of capital toward important marketing and image investments aimed at accelerating our sales growth and modernizing our iconic brand across the U.S. In 2023 and 2024, these investments are expected to have an average annual impact to adjusted EPS of approximately ($0.10) to ($0.12), before considering benefits from any potential sales improvements. In 2025 and beyond, we expect the impact to be accretive to adjusted EPS as our advertising investments conclude and we realize the long-term sales benefits of our Reclaim the Flame initiatives and increased advertising contributions from our system."

Major Components of the "Reclaim the Flame" Plan:

The Reclaim the Flame plan is designed with targeted initiatives that will work in concert with one another to improve all the fundamental aspects of Guest experience: perception of the brand; high-quality menu offerings at everyday value; engaging and relevant advertising; high quality modernization of our restaurants; and an all-around improved service and execution.  

Brand Positioning:

Burger King is refreshing and modernizing its brand, adding meaning and relevance to historical brand anchors like 'Flame Grilling' and 'Have it Your Way', while also introducing new brand elements to broaden its attraction for a younger and more diverse base of Guests.

Menu Priorities:

Burger King has built a multi-year menu roadmap that is Guest-led and brand focused. Burger King will invest in premium branding to reaffirm the elevated position of its flame-grilled Whopper® and is developing new flavor extensions, while also focusing on Team Member training and rolling out kitchen enhancements to ensure exceptional execution at the restaurant.

The brand is also building a destination worthy Chicken Sandwich portfolio and has launched the Royal Crispy Chicken — a premium chicken sandwich with unique flavor variations built around a simplified menu and improved operations — resulting in a better Guest experience. This menu addition complements the long-standing and loved Original Chicken Sandwich — allowing the brand to strongly compete in the growing chicken sandwich market while still maintaining its focus on growing its core burger category.

Burger King is currently developing innovative products to accelerate industry leadership in burgers, breakfast, beverages, snacking, and plant-based products.  In addition, the brand will continue to provide a strong everyday value offering in its menu, especially as the cost of food at home continues to face inflationary pressures.

" Fuel the Flame" Advertising Investment:

Given our recent momentum and confidence in our multi-year plan, we believe now is the right time to significantly enhance our advertising firepower. In a historic agreement with its Franchisees, Burger King will invest $120M in its U.S. advertising fund over the next two years to grow traffic, accelerate sales growth and amplify the fundamental advancements we are making to the Guest experience. The Burger King advertising investment represents an annual increase of approximately 30% to the brand's media purchasing firepower, inclusive of advertising efficiencies we expect to achieve through our ongoing partnership with our new media agency. Following the investment period in 2023 and 2024, participating Franchisees have agreed to increase their advertising fund contributions by 50 basis points through 2028 if certain profitability thresholds are met, which we plan to share an update on annually. This plan has received the endorsement of Franchisees representing more than 93% of the system, all of whom have agreed to the new Fuel the Flame co-investment program over the past two months.

In addition, Burger King will invest $30M through 2024, in excess of the digital fees collected from Franchisees, to support our Guests ease of ordering on the Burger King app which includes integrated payment processing, enhancing the Royal Perks loyalty program, the addition of digital personalized offers, and improving the overall convenience of delivery and pick up options. This investment will continue to strengthen the brand's digital channels that now generate ~$900M of annual system-wide sales in the U.S.  

"Royal Reset" Modernization Investment:

The Burger King $250M investment plan will include two important components. The first involves investing $50M of capital over the next two years alongside a comparable co-investment from Franchisees in a restaurant refresh program touching ~3,000 restaurants across restaurant technology, kitchen equipment, and building enhancements. These investments are designed to ensure our restaurants are ready to deliver an exceptional Guest experience as we work to drive traffic back to the system aided by our menu enhancements and Fuel the Flame advertising investment.

In addition, Burger King is launching a Royal Reset remodel program that provides access to $200M of funding for ~800 restaurant remodel projects over the next two years. As part of this program, the company is changing its incentive structure, which has historically focused on advertising and royalty rate discounts for up to seven years. The Royal Reset remodel program is designed to improve returns on capital for our Franchisees by providing more substantial baseline incentives, access to additional contributions in exchange for a higher royalty rate election, and funding of these incentives in upfront cash at the time of remodel completion. The program will also offer greater financial support to better operators, adding further incentive for Franchisees to improve operations across the system.

The Royal Reset remodel program represents a shift toward higher quality remodels and creates a viable path toward modernizing the system. Through a more thoughtful approach and increased funding, we are establishing support for our Franchisees to address their most important investments and lay the foundation for sales and profitability growth in the years to come. This will be the first step toward a more consistent, long-term cadence of portfolio reimaging that is focused on smarter investments and executing with quality to drive sales growth and attractive returns on capital for both Burger King and its Franchisees.

We have historically maintained a reimaging program which has generated average year one sales uplifts of approximately +12% with sustained outperformance in comparable sales relative to non-remodeled restaurants of approximately 2% (1). While the historical sales uplift performance from prior reimaging programs is encouraging, we are focused on enhancing these results through improved project selection and more targeted scope management. We believe this new approach over the next two years will generate the momentum needed to transition into a sustainable reimaging program that reverts to more normalized capital contributions from Burger King in 2025 and beyond.

The Burger King contributions from the Royal Reset remodel program will be accounted for as royalty credits and recognized through our income statement over the life of the new Franchise Agreements, which will be up to 20-years. Given the long duration of the royalty credit amortization in our income statement versus the near-term benefits of royalty rate increases and sales uplifts from modernization, we do not expect any materially negative impact to the income statement from this program. If we are successful in generating sales uplifts consistent with historical experience or better, we expect the program will generate a positive return on our capital and be accretive over time.

Operational Excellence:

The Burger King U.S. brand has substantially expanded its operations team and is intensely focused on creating a culture of "Repeatable Precision" at each restaurant, and improving the brand's employee value proposition to assist Franchisees to attract and retain valuable Team Members. Over the past year, the brand has worked closely with Franchisees to simplify menu items and restaurant operations, resulting in four consecutive quarters of improvements in key operating metrics and Guest satisfaction surveys. In early 2023, Burger King will host dozens of "Royal Roundtables" with restaurant managers and Franchisees across the U.S. to educate and energize restaurant teams as they implement meaningful operational changes within their restaurants.