1. CASE BACKGROUND:

Burger King is the world´s second largest fast food hamburger restaurant (FFHR) company. The BKW system includes over 12,600 restaurants in the U.S. and more than 80 other countries worldwide, with 95% of the system currently operated under a franchised business model. Burger King Corporation was founded in 1954 in Miami, Florida, by James McLamore and David Edgerton.

McLamore and Edgerton, both of whom had extensive experience in the restaurant business before starting their joint venture, believed in the simple concept of providing the customer with reasonably priced quality food served quickly in attractive, clean surroundings.

The success and size of Burger King Corporation is the result of a tradition of leadership within the fast-food industry in such areas as product development, restaurant operation, decor, service, and advertising.

At the end of its fiscal year 2007, Burger King reported that there are more than 11,300 outlets in 69 countries, 66% are in the United States and 90% are privately owned and operated. The company has more than 37,000 employees serving approximately 11.4 million customers daily. The company's two largest franchisees are Carrols Corporation with over 325 restaurants in United States, and Hungry Jack's, which exclusively owns, operates or sub-licenses over 300 restaurants in Australia.

In 2010, 3G Capital, a global multi-million dollar investment firm focused on long term value creation, purchased Burger King Corporation, making it a privately-held company.

The buyout marks the largest leveraged acquisition of a fast-food chain ever, and the second for Burger King in the last eight years. The whopper-maker’s possible new owner, 3G Capital, is backed by a number of wealthy Brazilians, including billionaire and a sport celebrity (tennis player). 3G plans to expand Burger King’s foothold internationally, especially in Latin America and Asia. Burger King Holdings Ltd. is based in Florida. It operates and franchises fast food hamburger restaurants through its subsidiary, Burger King Corporation. In Philippines, it operates through PERF restaurants and has 23 locations. It has been in Philippines since last 11 years and its major offerings are Burgers, Fries and Dessert. Its unique selling propositions are its range of Whoppers. Its main differentiation point is its American flavor.

Current Performance:

 Burger King was the second largest fast-food hamburger restaurant chain in the world as measured by the total number of restaurants and system wide sales. As of June 30, 2010, the company owned or franchised 12,174 restaurants in 76 countries and U.S. territories, of which 1,387 were company-owned and 10,787 were owned by franchisees. Of Burger King’s restaurant total, 7,258 or 60% were located in the United States.  Approximately 90% of Burger King restaurants were franchised, a higher percentage than other competitors in the fast-food hamburger category.  Franchisees in the United States and Canada paid an average of 3.9% of sales to the company in 2010. In addition, these franchisees contributed 4% of gross sales per month to the advertising fund.  Management touted its business strategy as growing the brand, running great restaurants, investing wisely, and focusing on its people. Specifically, management planned to accelerate growth between 2010 and 2015 so that international restaurants would comprise 50% of the total number.  Management was also working to update the restaurants by implementing its new 20/20 design and complementary Whopper Bar design introduced in 2008. By 2010, more than 200 Burger King restaurants had adopted the new 20/20 design that evoked the industrial look of corrugated metal, brick, wood, and concrete. The new design was to be introduced in 95 company-owned restaurants during fiscal 2011.  Management continued to look for ways to reduce costs and boost efficiency. By June 30, 2010, point-of-sale cash register systems had been installed in all company-owned, and 57% of franchise-owned, restaurants. It had also installed a flexible batch broiler to maximize cooking flexibility and facilitate a broader menu selection while reducing energy costs. By June 30, 2010, the flexible broiler was in 89% of company-owned restaurants and 68% of franchise restaurants. 2. ENVIRONMENTAL ANALYSIS

A. General Environment:

OPPURTUNITIES:

SOCIO-CULTURAL ENVIRONMENT Spending Trends  As of the end of 2008 the economic downturn, leads to lower consumer spending.  Fast food restaurants become alternatives to full service restaurants because they are cheaper Lifestyle Trends  Home cooked meals are becoming less prevalent  Changes in lifestyle such as homes with two working parents, an aging population, increased hours spent working, and an increase in commuting time are driving more consumers into the restaurants. Demographic Trends  Demographic changes have been pushing consumers towards fewer meals, a preference for less meal preparation time, and more frequent snacking in lieu of sit-down meals.  Low income neighborhoods have a higher density of fast-food restaurants. ECONOMIC ENVIRONMENT Market Volume Forecast In 2011, the global fast food market is forecast to have a volume of 86.4 billion transactions, an increase of 7.6% since 2006. (Datamonitor) Market Value Forecast In 2011, the global fast food market is forecast to have a value of $125.4 billion, an increase of 22.2% since 2006. (Datamonitor)

POLITICAL/LEGAL ENVIRONMENT

 The Government was proposing a policy that was business and investor friendly by opening Philippine economy

 Allowing 100% foreign ownership in all the sectors of the economy

 Investor-Friendly Policies In recent years, business prospects in the Philippines have improved at an encouraging pace. The nation has opened its markets by allowing 100% foreign ownership in almost all sectors of the economy. It has braced its capital markets and deregulated the banking, insurance, as well as the shipping and telecommunication sectors, removing most, if not all, the monopoly structures. Attractive incentive packages are on hand to qualified business enterprises in the country’s numerous Special Economic Zones and Industrial Estates. The Special Economic Zones are being fostered to develop into balanced agricultural, industrial, commercial and recreational centers of activity.

 This would entail more investment in the retail food sector like the increase in the number of franchises

TECHNOLOGICAL Environment

 People are getting more on social media in communications and more reliable on technology like WIFI and surfing the world wide website.

Treats:

1. Increase in Health consciousness

2. Competition in Fast Food chain has been increased

B.INDUSTRY ENVIRONMENT:

Five Forces Analysis

Competition within the Existing Players: Jollibee, Wendy’s, and McDonalds are the main competitors of this fast food industry. McDonald's is their largest competitor in fast food hamburger restaurants in terms of number of locations. BK is the second largest competitor in fast food restaurants. Wendy's is the third largest competitor in fast food hamburger restaurants in terms of number of locations. Jollibee is the leading fast food chain in the Philippines. Potential New Entrants: The threat of new entrants is low. There are high capital requirements for doing business in fast food industry since franchises are high fixed cost investments that require economies of scale in order to be profitable. These existing competitors are also more likely to have stronger supplier relations, which allow them to enjoy cost advantages that new entrants cannot. Additionally the entrants are unlikely to have the same access to financial intermediaries.

Substitutes: The substitute in this sector is high. It is because of innovation of foods today and variation of food available in the market like hotdogs, pizza, and/or pasta. And in the Philippines where rice as the country’s traditional staple.

Buyer’s power: Brand choice is typically a no compensatory process, which means that consumers focus on whether a brand has one or more attributes that are important to them, rather than a compensatory process where all attributes are traded off against each other. Here customers are the buyers and the business depends on their evaluation of taste and price.

Suppliers: As a global brand Burger King Corporation is committed to maintaining a diverse portfolio of suppliers. Restaurant Services, Inc. (RSI), is the exclusive purchasing agent for the vast majority of products and services used by Burger King restaurant owners in the United States and is manager of the system's supply chain. Founded in 1991, as an independent, member-owned cooperative, RSI acts on behalf of BK to achieve the best commercial terms for food, packaging, premiums, promotion products, supplies, equipment, distribution, and related services on behalf of its members. RSI works closely with restaurant owners, Burger King Corporation, food and packaging suppliers, marketing agencies, equipment vendors, distributors, and information systems providers to streamline and improve the supply-chain efficiency of the system, ensuring a continuous and reliable supply of products and services to restaurants at the best cost and at established performance standards.

C. INTERNAL ENVIRONMENT ANALYSIS

Strengths:

a. BRAND NAME. Burger King is known for its strong brand. Throughout the years it has survived in the industry and has built a strong brand in the US and worldwide. b. GOOD QULAITY PRODUCTS. It has its authentic American taste and Innovative side orders, giving high quality product. c. EXCELLENT SUPPLY CHAIN d. EXCELLENT AMBIANCE and Tech-savvy outlets e. Burger King’s new owner, 3G Capital, is backed by a number of wealthy Brazilians, including billionaire and a sport celebrity (tennis player). 3G plans to expand Burger King’s foothold internationally, especially in Latin America and Asia.

Weakness:

a. LOW BRAND AWARENESS. Jollibee had the highest brand recall amongst fast food brands and McDonald’s as the second, with other smaller niche fast food chains like KFC, Chowking and Greenwich. b. HIGH PRICE. Larger variety and cheaper prices where what people wanted from Burger King. c. PLACE. It has lesser visibility and limited outlets. It only has 23 franchises mostly in metro manila. These franchises are seen frequently at malls.

3. PROBLEM STATEMENT

The major problem identified for Burger King is communicating Burger King's value proposition to its target market. The company's current communication efforts have not been able to increase its brand awareness. It is also facing tough competition from the leading player Jollibee and McDonald's. In fact, in light of this competition, the management is contemplating the retention of its main differentiation point i.e. its American flavor.

Burger King lacks a clear brand image and has fallen short in giving consumers a valid brand experience. Consumers aren't loyal to Burger King and they fail to see positive differentiation between Burger King and other competitors. Despite having strengths as superior product, higher quality, great ambiance, etc., burger king brand awareness was pretty low.

OBJECTIVE: The basic premise of the suggested solution is to increase Burger King's brand value and the proposition it offers to the consumers. These suggested recommendations are targeted with a premise to increase the brand recall of Burger King.

4. ALTERNATIVE COURSES OF ACTION

For potential solutions, we went back to marketing basics. We looked at the 4 P's of Burger King and analyzed potential upsides of them. Some of our recommendations are as follows -

ACA1: Introduce new low price menu items.

This is because Burger King is perceived as being more expensive than its competitors. An average price of a meal at Burger King was 175 PHP. As per the Market research findings, consumers are clamoring for larger variety and cheaper prices from Burger King. In a price sensitive place like Philippines, only a particular section of society would be able to splurge on Burger King. Even the market research finding has indicated that Price is one of the primary factors taken into consideration before choosing a restaurant.

ADVANTAGE:  Number of customers will increase at their sales/profit may be increase due to the volume wise buying.

DISADVANTAGE:  Reducing the price or introduction of low priced items may lower the brand equity of Burger King.  The low end burgers may be considered as 'Not worth it' by consumers.  This is partly hard to the management because this is new to them. And it will have a fear attach.

ACA2: Place Burger King is suffering from a constraint of having just 23 locations which are positioned in malls with high footfalls. This makes sense as these malls attract the richest consumers. However, if the financials and operations allow it, Burger King can look at expanding its current place from malls to strategic places near colleges or offices. This mandates that these demographic section of society may be willing to experience Burger King but is unable to do so because of location and time constraints.

ADVANTAGE:  Consumers are very satisfied with Burger King's quality, ambience and additional service. Hence, this positive feature can be extended to more locations and more segments of the society like large families.  More number of outlets help in brand building, creating loyalty and improved the access.

DISADVANTAGE:  More locations would mean more human and financial resources. Human resources would need to be trained. Location acquiring may take time as in the South East Asia region.

ACA3: Increase promotion and advertisement

Burger King has limited promotion and advertisement compared to its competitors. For a brand to be remembered it needs to be visible to the public. Burger King should highlight its product in order to position it on the minds of the customers using mass media. The whopper sub brand is a unique sub brand associated with Burger King and is its most sold product. Our recommendation is to project the Burger King product as a great taste that the consumer can afford rather than a quick getaway food. Burger King does not make you sacrifice taste for value and satisfaction. Whenever consumers think of Burger King, they think of big, satisfying and juicy burgers.

ADVANTAGE:

 It will build brand awareness and recognition of the product  It will have differentiation to its other competitors

DISADVANTAGE:  It will take deep research and several time of brainstorming if the promotion that they will introduce will be a big boom to the customers/public.  It will be costly and it will need some time to be perfect before it will appear to the media.

5. RECOMMENDED ALTERNATIVE AND ACTION PLAN

The researcher recommends that ACA 3 will be the best strategy in solving the problem of increasing brand recall of Burger King. Although ACA 1 will increase the volume of customers buying, it will also lower the brand equity of Burger King and the low end burgers may be considered as 'Not worth it' by consumers. ACA 2, consumers are very satisfied with Burger King's quality, ambience and additional service like free wifi. Hence, this positive feature can be extended to more locations and more segments of the society like large families. More number of outlets help in brand building, creating loyalty and improved the access. Burger King is suffering from a constraint of having just 23 locations which are positioned in malls with high footfalls. The disadvantage of more locations would mean more human and financial resources. Human resources would need to be trained. Location acquiring may take time as in the South East Asia region and will be very costly. Furthermore, Jollibee and McDonald’s have already increased outlets around the Philippines. Burger King having less brand recall will end up having lesser visits. ACA 3 is the best strategy for it has the higher chances of making or building brand recall of burger king. Highlighting its product through intense advertisement. Mass Media is the best way to access wide audience. Using advertisement will help build its brand awareness and recall to the Filipino public. Burger King should also use promotional scheme.

Action Plan:

FUNCTIONAL OBJECTIVES STRATEGIES TIME BUDGET AREA FRAME

MARKETING 1)Increase 1) ADVERTISEMENT: We brand will promote our brand awareness and through different medium brand recall which will include:

2)Increase sales A) Television and profit. 9 MONTHS ABS-CBN 1,112,904,900.00 GMA 938,250,000.00 TV5 599,400,000.00

B) Billboard 1 YEAR

EDSA(50FT X 70FT) 200,000.00 389,000.00 SLEX/NLEX( 30FT X 80FT)

C) NEWSPAPER 9 MONTHS

BROADSHEET 8,100,000.00 (COLORED)

TABLOID 3,200,000.00

2)PROMOTIONAL SCHEME:

A) PREMIUM ITEMS: Every kid meal will include a 3 MONTHS 10,000,000.00 toy. After the collection of total six toys you will receive a free happy meal.

B) COUPONS 3 MONTHS 500,000.00

C) CONSUMER 2 MONTHS CONTEST: The contest will consist of putting up a picture on facebook on how a king eats a burger in their own creative way. The contestant with the most like in facebook shall win. The price will be a free party treat in burger king of the franchise you bought your burger king. (3 winners)

Commercial of Contest (3 NETWORKS) 100,000,000.00

Prize 600,000.00 3) PUBLICITY: We will 100,000,000.00 perform social services to gain the wide consumer acceptance. Social services will include planting of trees, building benches with shades in parks and on bus stands and build recycle bins all around the city to keep it clean. ***ABS-CBN --- 824,374 PER 30 SECONDS; GMA --- 695,000 PER 30 SECONDS; TV5 --- 444,000 PER 30 SECONDS (PRIMETIME) BILLBOARD

COUPON SAMPLE Cash Flow Statement for Burger King Worldwide Inc (BKW) December 31, 2011 to September 30, 2014

All numbers in Thousands 09-2014 (Q3) 06-2014 (Q2) 03-2014 (Q1) 12-2013 (Q4) Cash at Beginning of Period 786,900 786,900 786,900 546,700

Cash Flow From Operations 375,600 213,100 125,300 325,200

Net Income or Loss 112,000 135,500 60,400 233,700

Depreciation & Amortization Adjustments 92,000 60,700 30,500 120,000

Depreciation 48,700 32,200 16,400 65,800

Amortization 43,300 28,500 14,100 54,200 Amortization of Intangibles - - - - Adjustments for Deferred Income Taxes -59,100 5,000 9,100 32,100

Change in Accruals 88,400 2,400 18,200 -62,000

Change in Receivabes 10,000 11,400 12,600 -7,600 Change in Inventories - - - - Change in Prepaid Expenses 10,800 7,700 6,000 -7,800 Change in Other Current Assets - - - - Change in Payables 1,800 -8,400 9,900 -30,600

Change in Other Current Liabilities 65,800 -8,300 -10,300 -16,000

Change in Other Working Capital - - - -30,600

Change in Other Non-Cash Items -7,800 -5,900 -1,200 16,800 Change in Income Taxes - - - - Realized Investment Gains - - - - Investment Securities Gain - - - - Provision for Loan Losses - - - - Net Policy Acquisition Costs - - - - Other Non Cash Items -7,800 -5,900 -1,200 16,800 Net Cash from Discontinued Operations - - - - Other Operating Changes 150,100 15,400 8,300 15,200

Cash Flow from Investing Activities -9,800 -6,600 -4,200 43,000

Purchase of Fixed Assets -5,900 -6,600 -4,200 54,900 Sale of Fixed Assets - - - - Fixed Assets from Acquisitions -3,900 - - -11,900

Purchase of Investments 0 0 0 0 Purchase of Short Term Investments - - - - Purchase of Long Term Investments - - - -

Sale of Investments 11,600 7,700 3,900 0 Sale of Short Term Investments - - - - Sale of Long Term Investments 11,600 7,700 3,900 -

Other Investment Changes -11,600 -7,700 -3,900 0 Cash from Discontinued Investing Activities - - - -

Cash Flow from Financing - - 134,4 -87,600 -43,700 132,700 00 Change of Short Term Debt - - - - Issuance of Long-Term Debt - - - - Repayment of Long-Term Debt -57,300 -38,300 -19,100 -57,200

Issuance of Stock 100 - - 6,000

Payment of Cash Dividends -77,400 -49,300 -24,600 -84,300

Other Financing Changes 200 0 0 2,800 Cash from Discontinued Financing Activities - - - - Other Changes in Cash -4,600 -1,100 -1,200 4,700

Net Change in Cash 226,800 117,800 76,200 240,200

Cash at End of Period 1,013,700 904,700 863,100 786,900

Burger King Worldwide Inc is a public company that operates in the full-service restaurants industry. Burger King Worldwide Inc's net change in cash flows in the quarter ending September 30, 2014 was $227 Million. This positive cash flow indicates that Burger King Worldwide Inc is generating enough cash to fund all of its operations.

Cash Flow from Operating Activities

In the quarter ending September 30, 2014, Burger King Worldwide Inc generated $376 Million in cash from its core business operations. Investors tend to prefer companies with positive cash flow from operations (though not always: some high growth companies may show negative cash flow from operations when they are first starting out).

Cash Flow from Investing Activities

In the quarter ending September 30, 2014, Burger King Worldwide Inc used $9.8 Million in cash for investing activities. This indicates that Burger King Worldwide Inc is investing in new assets, which is fairly typical for a growing, stable company.

Cash Flow from Financing Activities

In the quarter ending September 30, 2014, Burger King Worldwide Inc used $134.4 Million in cash for financing activities. This negative financing cash flow indicates that Burger King Worldwide Inc is using its cash flow from operations to pay dividends and/or pay off external financing.

Income Statement for Burger King Worldwide (BKW) December 31, 2011 to September 30, 2014

All numbers in Thousands

09-2014 (Q3) 06-2014 (Q2) 03-2014 (Q1) 12-2013 (Q4)

Total Revenue 278,900 261,200 240,900 265,200

Cost of Revenue 57,900 51,400 52,900 56,600

Gross Profit 221,000 209,800 188,000 208,600

Operating Expenses 220,100 58,300 56,700 67,500

Operating Income 900 151,500 131,300 141,100

Interest Expense 51,300 51,700 50,900 41,200

Other Income/Loss 0 1,100 900 -9,500 Pre-Tax Income -50,400 100,900 81,300 90,400

Income Tax Expense -26,900 25,800 20,900 23,600

Net Income from Continuing Operations -23,500 75,100 60,400 66,800

Non-Recurring Gains or Losses 0 0 0 0 Minority Interest - - - - Total Net Income -23,500 75,100 60,400 66,800 Preferred Dividends - - - - Net Income Available to Common -23,500 75,100 60,400 66,800

Burger King Worldwide is a publicly traded company on the NYSE market. The company's operations are primarily focused in the Full-Service Restaurants industry. In the quarter ending September 30, 2014, Burger King Worldwide reported net income of -$23.5 Million. Net income represents the profit after all expenses (including taxes and interest) have been paid.

Operating Profit

In the quarter ending September 30, 2014, Burger King Worldwide reported an operating profit of $900,000. Operating profit is calculated by subtracting cost of goods sold and selling, general & administrative expenses from revenue. It is the profit that takes into account the cost of operations, including marketing, utility, and technology expenses, in addition to the cost of goods sold. Burger King Worldwide's positive operating profit indicates that it has money left over from operations to pay taxes and other indiret costs.

Analyzing Burger King Worldwide Using the Income Statement

When analyzing Burger King Worldwide's profits, it is important to put them into context: use the graphs below to compare current margins with margins from previous years and be sure to check out the margins of competitors. Typical margins vary by industry. A company with low profit margins can do well if it has high inventory turnover. Fiscal year is Jan - Dec. 2014-Q3 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 Cash 1.01B 904.7M 863.1M 786.9M 764.3M 654.1M Marketable Securities ------Receivables 167.6M 170.4M 168.5M 179.7M 164.6M 171.7M Inventory ------Raw Materials ------Work In Progress ------Finished Goods ------Notes Receivable ------Other Current Assets 181.3M 102.4M 115.4M 107.8M 137.6M 141.4M Burger King Total Current Assets 1.36B 1.18B 1.15B 1.07B 1.07B 967.2M Property Plant & Equipment 991.2M 995.8M 991.1M 989.4M 978.2M 980.6M Accumulated Depreciation 216.9M 209.7M 199M 187.9M 173.6M 162.5M Burger King Net Property Plant & Equipment 774.3M 786.1M 792.1M 801.5M 804.6M 818.1M Investment & Advances 145.1M 151.4M 156.4M 163.1M 167.4M 171.4M Other Non-Current Assets ------Deferred Charges ------Intangibles 3.31B 3.4B 3.42B 3.43B 3.43B 3.39B Deposits & Other Assets 215.1M 236.4M 297.2M 363.5M 306.9M 313M Burger King Total Assets 5.8B 5.75B 5.81B 5.83B 5.77B 5.66B Notes Payable ------Accounts Payable 34M 24.1M 41.7M 31.1M 25.8M 41.5M Current Portion Long-Term Debt 100.2M 94.1M 87.6M 81.4M 75M 68.5M Current Portion Capital Leases ------Accrued Expenses 470.9M 229.2M 243.9M 233.5M 283.2M 257.3M Income Taxes Payable ------Other Current Liabilities ------Burger King Total Current Liabilities 605.1M 347.4M 373.2M 346M 384M 367.3M Mortgages ------Deferred Taxes/Income 630.7M 638.4M 662.8M 692.8M 664.5M 661.3M Convertible Debt ------Long-Term Debt 2.85B 2.86B 2.87B 2.88B 2.89B 2.9B Non-Current Capital Leases 66.5M 70M 72.1M 75.4M 78.5M 80.8M Other Long-Term Liabilities 269.4M 300.8M 308.9M 317.9M 354.8M 343.2M Burger King Total Liabilities 4.42B 4.22B 4.29B 4.31B 4.37B 4.35B Minority Interest ------Preferred Stock ------Common Stock Net 3.5M 3.5M 3.5M 3.5M 3.5M 3.5M Capital Surplus 1.25B 1.25B 1.25B 1.24B 1.22B 1.22B Retained Earnings 260.1M 311.7M 261.3M 225.5M 183.3M 136.2M Treasury Stock 7.3M 7.3M 7.3M 7.3M - - Other Liabilities -128M -19.4M 20.3M 54.6M -11.2M -43.9M Burger King Shareholders Equity 1.38B 1.54B 1.52B 1.52B 1.4B 1.32B Burger King Total Liabilities & Shareholders Equity 5.8B 5.75B 5.81B 5.83B 5.77B 5.66B

Burger King historical stock prices and Burger King stock price can tell how the stock price has moved, whereas Burger King PE ratio chart shows if its shares are overpriced in comparison to industry. The important things to look for in a balance sheet are:

 Assets: An asset is a resource that a corporation like Burger King owns and has monetary significance. BKW assets grew from 5.75B in 2014-Q2 to 5.8B in 2014-Q3 . Assets can be of two types: fixed assets like real estate, plant and machinery; and current assets which includes cash, accounts receivable etc. Tech stocks typically don't have too many assets.  Liabilities: This item on the balance sheet implies the firm's, in this case Burger King's, legal obligations including loans, accounts payable, deferred revenue, accrued expenses and mortgages. The total liabilities for BKW stock is 4.42B.

PHILIPPINE CHRISTIAN UNIVERSITY GRADUATE SCHOOL MASTER IN MANAGEMENT – MAJOR IN PUBLIC ADMINISTRATION

THEORY AND PRACTICE IN PUBLIC ADMINISTRATION

CASE STUDY

“BURGER KING” SUBMITTED BY: JACKIE LOU G. DIMATULAC

SUBMITTED TO: DR. ENRIQUE D. RODRIGO