PC: CNBC

In a larger effort to boost sagging U.S. sales, Burger King announced on Friday that it will invest $400 million over the next two years on advertising and restaurant renovations.

At its annual franchisee convention in Las Vegas, the Restaurant Brands International company presented a recovery strategy for its U.S. business. The investments are anticipated to reduce its adjusted profits per share by 10 to 12 cents annually in 2022 and 2023. By 2025, the corporation anticipates that the investments will begin to pay off.

Earnings per share of $3.24 are projected by Wall Street analysts surveyed by Refinitiv for 2023.

Burger King reported flat same-store sales growth in the United States for the second quarter, lagging behind competitors McDonald’s and Wendy’s. Over the past year, the burger business has reported weak U.S. sales, which worries Restaurant Brands CEO Jose Cil. As CEO, Cil has also led initiatives to boost Canadian demand for Tim Hortons, the sibling company of Burger King.

Tom Curtis, a former Domino’s Pizza executive, was chosen by Cil a year ago to lead Burger King stores in the United States and Canada. In the beginning, Burger King streamlined its menu to shorten wait times at drive-thrus and reduced the number of paper coupons it offered to encourage customers to use its mobile app.

Cleaning up
Burger King is now getting ready to make even more radical adjustments. It intends to invest $200 million to pay for renovations at about 800 locations. About 3,000 eateries will receive an additional $50 million in upgrades to their buildings, culinary equipment, and technology. In the United States, the firm operates more than 7,000 Burger King outlets.

According to Burger King, restaurants that have undergone renovations typically experience a 12% rise in sales within their first year and eventually outperform more established establishments. Even while it might take longer, the company anticipates that being more smart and selective with its projects would result in even better sales growth.

The market for remodels may begin to emerge in the middle of 2023 and moving forward. According to Cil, the business should actually grow up gradually over the next couple of years.

Additionally, Burger King will invest $120 million over the following two years, increasing the budget of its American advertising fund by 30%. The fourth quarter will see the beginning of those investments.

According to Cil, “we anticipate that to begin having an effect on sales during the coming quarter.”

Upgrading its mobile app will cost an additional $30 million through 2024, above the digital fees that franchisees pay to the corporation for the technology.

The menu at Burger King will also be updated. The business claimed to have created a multi-year roadmap for menu enhancements, which includes focusing on its Royal Chicken Crispy sandwich, creating new Whopper varieties, and spending more money on employee training.

Having an impact
According to Burger King, the 93% of its franchisee-operated locations in the United States endorse the policy. Operators will contribute their personal funds along with those of the business to renovations and advertising.

Over the past three to six months, Curtis and his team assembled a collection of franchisees, spanning a variety of geographies and experience.

Curtis recalled, “There were many sleepless nights and long flights.”

Franchisees who are upgrading their restaurants are required to make comparable investments in addition to the funding they receive from Burger King.

In order to incentivize operators to carry out more substantial remodels, which can be expensive and frequently call for a site to be temporarily closed, the company is also altering its incentive system. In the past, Burger King owners who renovated their eateries got breaks on their royalties and advertising costs for up to seven years.

After the project is finished, the new scheme will pay franchisees cash and allow them to decide how much of a discount they receive on the royalties they must pay the business.

However, Burger King franchise owners will be required to contribute more money to the advertising fund if profitability goals are met.