Burger King - History

History

The predecessor to Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King. After visiting the McDonald brothers' original store location in San Bernardino, California, the founders and owners (Keith J. Kramer and his wife's uncle Matthew Burns) purchased the rights to two pieces of equipment called "Insta" machines and opened their first restaurants, based around a cooking device called an Insta-Broiler. The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to use the device. After the company faltered in 1959, it was purchased by its Miami, Florida franchisees, James McLamore and David R. Edgerton. They initiated a corporate restructuring of the chain, first renaming the company Burger King. They ran the company as an independent entity for eight years (eventually expanding to over 250 locations in the United States), before selling it to the Pillsbury Company in 1967.

Pillsbury management tried several times to restructure Burger King in the late 1970s and early 1980s. The most prominent change came in 1978, when Burger King hired McDonald's executive Donald N. Smith to help revamp the company. In a plan called Operation Phoenix, Smith restructured corporate business practices at all levels of the company. Changes included updated franchise agreements, a broader menu, and new, standardized restaurant designs. Smith left Burger King for PepsiCo in 1980, shortly before a system-wide decline in sales. Pillsbury Executive Vice President of Restaurant Operations Norman E. Brinker was tasked with turning the brand around and strengthening its position against its main rival, McDonald's. One of his initiatives was a new advertising campaign featuring a series of attack ads against its major competitors. This campaign started a competitive period between the top burger chains, known as the Burger Wars. Brinker left Burger King in 1984, to take over Dallas-based gourmet burger chain Chili's.

Smith and Brinker's efforts were initially effective, but, after their respective departures, Pillsbury relaxed or discarded many of their changes and scaled back on construction of new locations. These actions stalled corporate growth and sales declined again, eventually resulting in a damaging fiscal slump for Burger King and Pillsbury. Poor operation and ineffectual leadership continued to bog down the company for many years. Pillsbury was acquired by the British entertainment conglomerate Grand Metropolitan in 1989.

Initially Grand Met attempted to bring the chain top profitability under newly minted CEO Barry Gibbons, the changes he initiated during his two-year tenure were hit or miss. Successful new product introductions and product tie-ins with the Walt Disney company were offset by continuing image problems and ineffectual advertising programs. Additionally, Gibbons sold off several of the company's assets in attempt to profit from their sale and terminated many staff members. After Gibbon's departure, a series of CEO each tried to repair the brand by changing the menu, bringing in new ad agencies and other changes.

The parental disregard of the Burger King brand continued through Grand Metropolitan's merger with Guinness in 1997, when the two organizations formed the new holding company Diageo. Eventually, the ongoing, systematic institutional neglect of the brand through the string of owners damaged the company to the point where major franchises were driven out of business and its total value was significantly decreased. Diageo eventually decided to divest itself of the money-losing chain and put the company up for sale in 2000.

The twenty-first century saw the company return to independence when it was purchased from Diageo by a group of investment firms led by TPG Capital for $1.5 billion (USD) in 2002. The new owners rapidly moved to revitalize and reorganize the company, culminating with the company being taken public in 2006 with a highly successful initial public offering. The firms' strategy for turning the chain around included a new advertising agency and new ad campaigns, a revamped menu strategy, a series of programs designed to revamp individual stores, a new restaurant concept called the BK Whopper Bar, and a new design format called 20/20. These changes successfully re-energized the company, leading to a score of profitable quarters. Yet, despite the successes of the new owners, the effects of the financial crisis of 2007–2010 weakened the company's financial outlooks while those of its immediate competitor McDonald's grew. The falling value of Burger King eventually lead to TPG and its partners divesting their interest in the chain in a $3.26 billion (USD) sale to 3G Capital of Brazil. Analysts from financial firms UBS and Stifel Nicolaus agreed that 3G would have to invest heavily in the company to help reverse its fortunes. After the deal was completed, the company's stock was removed from the New York Stock Exchange, ending a four-year period as a public company. The delisting of its stock was designed to help the company repair its fundamental business structures and continue working to close the gap with McDonald's without having to worry about pleasing shareholders. In the United States domestic market, the chain has fallen to third place in terms of same store sales behind Ohio-based Wendy's. The decline is the result of 11 consecutive quarters of same store sales decline.