Burger King is preparing to make bold changes. The fast food giant is planning to spend $200 million to fund remodels of roughly 800 locations. Another $50 million will go toward upgrading about 3,000 restaurants with technology, kitchen equipment and building enhancements.
Historically, remodelled restaurants see an average sales increase of 12% in their first year and outperform older locations over time, according to Burger King. The company is hoping that being more selective and strategic with its projects will produce even stronger sales growth, although it could take longer to see results.
“We might see remodels start to hit the market mid-2023 and going forward. It should really be a gradual ramp of the business over the course of the couple of years,” Cil told CNBC.
Burger King will also increase its U.S. advertising fund’s budget by 30% by investing $120 million over the next two years. Those investments will start in the fourth quarter.
“We expect that to start having an impact on sales over the next quarter,” Cil said.
An additional $30 million will be spent through 2024 on improving its mobile app, exceeding the digital fees that franchisees pay to the company for the technology.
Burger King’s menu will also get a facelift. The company said it’s built a multi-year blueprint for menu improvements, which include developing new Whopper flavours, betting on its Royal Chicken Crispy sandwich and investing in more employee training.
The strategy has received support from franchisees operating 93% of its U.S. restaurants, according to Burger King. Operators will be chipping in their own money alongside the company for remodels and advertising.
The company is also changing its incentive structure to encourage operators to make more extensive remodels, which can be costly and typically require a location to be temporarily shuttered. In the past, Burger King operators who remodelled their restaurants received discounts on their advertising and royalty fees for up to seven years.
The new program will give franchisees cash once the project is completed, and let them choose how much of a discount they get on the royalties they pay to the company.