History of Burger King

The predecessor to what is now the international fast food restaurant chain Burger King was founded in 1953 in Jacksonville, Florida, as Insta - Burger King. The original founders and owners, Keith J. Kramer and his wife's uncle Matthew Burns, opened their first stores around a piece of equipment known as the Insta-Broiler. The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to carry the device.

After the original company began to falter in 1959, it was purchased by its Miami, Florida franchisees James McLamore and David R. Edgerton. The two began a restructure of the chain, the first step was to renamed the company Burger King. The duo ran the company as an independent entity for eight years, eventually expanding to over 250 locations in the United States, when they sold it to the Pillsbury Company in 1967.

Early in Pillsbury's tenure, structural deficiencies in its franchise structure came to the fore. A prime example of this was the relationship between Burger King and Louisiana-based franchisee Chart House. Chart House started out its history as Self Service Restaurants Inc. when two businessmen brothers, Billy and Jimmy Trotter, opened their own BK franchise group in that state in 1963. By 1970 the company had grown to over 350 store across the country, with its own purchasing system, training program and inspection system. In 1973 Chart House attempted to purchase the chain from Pillsbury for $100 million, an offer which Pillsbury declined.


After Chart House's bid failed, its owners Billy and Jimmy Trotter put forth a second plan that would have Pillsbury and Chart House spin off their respective holdings and merge the two entities into a separate company; again Pillsbury declined the proposed divestiture. After the failed attempts to acquire the company, the relationship between Chart House and the Trotters soured; when Chart House purchased several restaurants in Boston and Houston in 1979, Burger King sued the selling franchisees for failing to comply with the right of first refusal clause in their contracts. Burger King won the case, successfully preventing the sale. The two parties did eventually reach a settlement where Chart House kept the Houston locations in their portfolio.

In the early 1980s Chart House spun off its Burger King holdings and re-focused on its higher end chains; its Burger King holding company, DiversiFoods, was eventually acquired by Pillsbury $390 million in 1984 and folded into Burger King's operations.

During this time, Pillsbury's management made several attempts at reorganization or restructuring of the restaurant chain in the late 1970s and early 1980s. The most prominent change came in 1978; with the ongoing conflict with Chart House on the mind of the company's board Burger King hired McDonald's executive Donald N. Smith to help revamp the company. Smith initiated a restructuring of all future franchising agreements, effectively preventing other franchises from taking on the company as Chart House had.

While these efforts were effective in the short term, many of them were eventually discarded resulting in Burger King falling into a fiscal slump that damaged financial performance of both Burger King and its parent. Poor operating performance and ineffectual leadership continued to bog the company down for many years, even after it was acquired in 1989 by the British entertainment conglomerate Grand Metropolitan and its successor Diageo. Eventually, the institutional neglect of the brand by Diageo 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.

In 2002, a troika of private equity firms led by TPG Capital, L.P with associates Bain Capital and Goldman Sachs Capital Partners agreed to purchase BK from Diageo for $1.5 billion (USD), with the sale becoming complete in December of that year.

The new owners, through several new CEOs, have since moved to revitalize and reorganize the company, the first major move was to re-name the BK parent as Burger King Brands.

The investment group initially planned to take BK public within the two years of the acquisition, however this action was delayed until 2006 due to several reasons. On 1 February 2006, it was announced that TPG planned to take Burger King public by issuing an Initial Public Offering (IPO).

Some of the structural changes Burger King underwent under the ownership group's watch were new advertising agency that created a series of new ad campaigns, a revamped menu strategy that focused on male consumers, a series of programs designed to revamp individual stores, and a new restaurant concept called the BK Whopper Bar.

These changes led to the company experiencing a score of consecutive profitable quarters between March 2004 and March 2009 that successfully re-energizing the company. Despite this, the slowing of the economy during the financial crisis of 2007-2010 caused the chain's business to decline while its immediate competitors McDonald's grew.

The latest chapter in the company's ownership history began on September 2, 2010 when TPG and its partners announced it would sell their 31% stake in Burger King to another private equity company, 3G Capital, for $24 per share, or $3.26 billion. The offer, representing a 46% premium over the stocks selling price at the time, came as a surprise to Burger King CEO John Chidsey. The proposed sale is expected to help the company repair its fundamental business structures and continue working to close the gap with McDonald's. Analysts commenting on the transaction stated that 3G will have to invest heavily in the company to help reverse its fortunes. David Palmer from UBS stated the company will need to work with its large group of franchise owners to brighten its locations and stabilize sales which could take several years and require significant reinvestment, while Steve West of Stifel Nicolaus stated that Burger King will need at least a year to right its fundamentals.

Sources : wikipedia


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