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Thursday, October 8, 2009

Burger King to Encourage 'Intimate' Dining With New Restaurant Design

'Contemporary Industrial' Look Unveiled in Amsterdam

Burger King interior

Burger King's Schiphol restaurant is the chain's highest grossing, at about $12.5 million in sales per year. Mr. Chidsey said the location posted even higher sales after completing the redesign. The precise lift wasn't quantified, but the brand maintains that each restaurant should expect a 15% to 20% sales lift, according to Burger King.

Higher sales come at a price -- between $300,000 to $600,000 per restaurant, according to an AP report. The capital investment would represent several times the $75,000 McDonald's franchisees contributed as part of its McCafe rollout. To complete the program, McDonald's assumed a portion of the expense for each restaurant, which tend to gross at least twice that of an average Burger King. The chain also agreed to raise the price on its signature double cheeseburger to account for rising cheese costs.

Burger King will be rolling out this design across its 12,000-unit system. While franchisees aren't obligated to conduct remodeling immediately, they are contractually obligated to do so every ten years.

Burger King CEO John Chidsey (left), and new Europe, Middle East and Africa president Kevin Higgins (right) pose alongside the King.
Burger King CEO John Chidsey (left), and new Europe, Middle East and Africa president Kevin Higgins (right) pose alongside the King.
For Burger King, the redesign is one of its "top-tier global brand initiatives," along with building value offerings and adding more premium products designed to compete with casual dining chains, such as the premium Steakhouse XT burger, which will rolls out in February. It seems clear that the brand needs to make changes in the U.S., where Burger King posted a 4.5% decrease in second-quarter same-store sales, well behind McDonald's and once-lagging Wendy's.

Despite the Amsterdam sendoff, Burger King still does the bulk of its business in the U.S., where relations with franchisees are nearing an all-time low. Franchisees as a group are suing Burger King for using soda rebates, which they have traditionally used for repairs, to fund an increase in advertising investment expected to boost impressions by 25%. Burger King has also wrestled with franchisees over a proposed dollar-double cheeseburger promotion, which was defeated in a series of system-wide votes.

The chain has since announced that it will conduct the dollar-double cheeseburger promotion anyway, starting Oct. 19.

Amidst the fracas, CMO Russ Klein has taken a personal leave of absence from the company. He told Ad Age not to worry, he is "just sharpening the sword."