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In Pursuing Growth, Burger King Has 20/20 Vision

It’s not always easy to stand out in the fast-food business, particularly under the shadow of the Golden Arches of industry leader McDonald’s Corp. But that hasn’t stopped burger joints from trying to grab consumers' attention, especially in a down economy when shoppers are more likely to trade down.

Miami-based Burger King Corp., the No. 2 burger chain in the world, is looking to grab a few new customers and keep the loyalty of the ones it as through a massive redesign of its stores—what it calls its 20/20 concept. The redesign features LCD TV menu screens, red flame chandeliers and corrugated metal inside and outside the restaurants for a more industrial, modern look. In the kitchen, new broilers will help franchises cut energy costs. Gas consumption and related costs are reduced by 52 percent with the new broiler compared to previous broilers, while the consumption and cost of electricity will be reduced by 90 percent.

The costs for the new look fall mainly on the shoulders of the franchisees, who operate close to 90 percent of Burger King’s locations. So far, about 60 restaurants have adopted the 20/20 design.

Hector Munoz, senior director of retail image and engagement at Burger King, says, so far, franchisees have been enthusiastic about the new look and are seeing good returns on the strategy.

Site Optimizer: When did Burger King first decide to redesign the 12,000 locations with this new look?

Munoz: The redesign has been in development for well over two years now. The first site officially opened last year in November in Bogota, Colombia. [The goal is] not to redesign all 12,000 locations throughout the world overnight but as remodels occur and as new restaurants are being built to move forward with the redesign.

SO: How long will it take to complete all the 12,000 locations?

Munoz: It’s going to take some time.… We do have an additional 74—both new restaurants and remodels—that are scheduled to be up and running by end of fiscal 2010. We don’t have a set timeframe. We obviously need to take the appropriate business realities into consideration and take those into consideration region to region.

SO: How much will the redesign cost each individual franchisee? Reports are putting the number between $300,000 and $600,000 per restaurant.

Munoz: One of the number one priorities behind this initiative is to allow our franchisees to continue to preserve cash-on-cash returns. [We have] three levels for our operators to choose from so that the investment we ask them to make is well within the levels they’re comfortable with. The range is not even worth sharing. There are just a lot of unknowns at this point. There could be minor remodels that take place for as low as $25,000 to $50,000. Or it could be a new restaurant building which could range significantly as well.

SO: What kind of customers are you trying to attract with this redesign?

Munoz: The design has universal appeal across a number of consumer segments… including the heavy fast-food user and parents with kids. We toured roughly 10 different regions throughout the world to get a good perspective on Burger King's consumers.… We’re looking to ensure that the Burger King brand remains relevant.… The goal of the redesigns is to propel the business forward. One of the things around the design is it is adaptable. It has that flexibility to be culturally relevant no matter where it is throughout the world.

SO: What are the challenges in trying to change the image of a brand and attract new customers to that image? Is a redesign enough to change people's perception?

Munoz: We’re looking to … [deliver a] … superior guest experience that rivals casual dining through the design work. We made a lot of great progress to date with the restaurants that have opened. We’re excited to continue to reinforce the commitment to global restaurant growth. Based on the consumer work that’s been conducted so far, consumers are extremely receptive to this new look.

SO: In your experience, has the economy made it more difficult to convince franchisees of the need to do something to enhance the company's image? Or have they been supportive of ideas like the new redesign, despite the fact that they have to spend to get it?

Munoz: Overall, the company system has been extremely supportive of the redesign. A number of franchisees around the world have been really receptive. Those restaurants that have done the redesign are pleased with the cash-on-cash return. It’s been about 12 to 18 percent and that’s only with a handful of restaurants.… We anticipate those numbers to be even higher. Franchisees are investors and if it makes good business sense, they will invest.

SO: Will this design be the new standard for any new Burger King locations?

Munoz: That’s the goal. [Franchisees are] contractually required to update their restaurants after a set period of time. The goal is to make it the primary option for those future upgrades and new restaurants moving forward.

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