Last week Burger King said its EPS results were negatively impacted by significant traffic declines in the month of March, resulting in lower than expected margins. Importantly, Germany (BKC's second largest company-owned market) and Mexico (the only company-owned market in Latin America) experienced the largest declines in traffic. The same trends hold true in the US and Canada, where same-store sales were 1.6%. With 3%+ pricing, the decline in traffic is significant.
In the mature QSR market, a successful advertising strategy is critical to driving incremental customers into the stores. Rarely, will a QSR company or stock do well without a successful advertising campaign. Over the past few years the resurgence of the "King" as a marketing icon was critical to Burger King's success.
From an advertising standpoint, Burger King has recently made two critical missteps with its edgy advertising tactics. First, critics are up in arms about the suggestive new SpongeBob "square butt'' commercial that juxtaposes a beloved children's character with sexy women dancing suggestively. Why would the company take a children's cartoon character, SpongeBob, and combine it with the backs of well-toned female dancers, wearing SpongeBob's brown pants with phone books in them to make them "square butts"; all set to the tune of Sir Mix-a-Lot's 90's hit, "Baby Got Back"?
Today, I learned that Burger King had to apologize to Mexico after Mexico's ambassador to Spain alleged that the company's new Texican Whopper advertisement released in Europe demeans his country's national flag.
Burger King's advertising issues are nothing compared to poor Domino's. I think it will be very difficult for anybody to order a sandwich or a pizza from Domino's without imagining a curl of cheese being stuck first in the cook's nose, or worse thinking about an employee hawking a loogie into your Cheesy Bread! At Burger King, the judgment of some of those in the marketing department needs to be questioned.