Until very recently, many corporations followed 3G Capital’s views on how to turn around an ailing company, principally because it involved cost-cutting which is a language that most CEOs understand.
We talked yesterday about the adverse effects of this approach in the Kraft Heinz example. And, we mentioned that most companies, by this time, have determined that cost-cutting without brand redevelopment isn’t the solution and, consequently, have stopped using the approach. But, the Burger King turnaround has been one of those instances where the approach did work. I would speculate, however, that the success at Burger King had more to do with the energy and temerity of its CEO Daniel Swartz, who was 32 when appointed to the position and given the turnaround challenge. Burger King is also owned by 3G, who bought the company six years ago when Burger King was a “tired outfit, with a confusing menu and sales going sideways,” (ref Forbes). At that time, Burger King restaurants were averaging half the revenue of McDonald’s. Swartz seized on the opportunity and slashed overhead at the company’s Miami headquarters, and cut payroll and the capital budget by selling company-owned stores to franchisees, Once his contingent of middle managers was set, he arranged for them to receive company stock as rewards for good performance. He also focused on the restaurant performance by ensuring that food preparation was streamlined and, since that time, Swartz has engaged in a number of promotional opportunities including the “Whopper Detour” promotion where Whoppers were sold for 1 cent if the order was placed on the BK app within 600 feet of a McDonald’s location. And then there was the Super Bowl ad showing Andy Warhol unwrapping and eating a Whopper. The BK app topped the charts during the campaign. In the years since Swartz began his challenge, Burger King has opened 1,000 restaurants around the globe, compared to 600 for McDonald’s. And, Burger King increased revenue volume per outlet by 30%, to $1.4 million, compared to McDonald’s 20% increase. Of course, Burger King had a ways to go up; McDonald’s had consistently logged increases. Now, Swartz is attempting to make his hamburger attractive to those who choose other than beef; the plant protein patty will soon be tried. So, Swartz has prevailed with a different version of the 3G approach – using not only cost-cutting measures but predominantly doing the realignment that all of our clients do when they set out to engage in strategy systems building. Another of those companies to be watched for further progress, as well as their dynamic CEO.