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BKW remains a short in the Hedgeye Restaurants Position monitory.

Two areas continue to concern us within the Burger King business:

  1. Same-restaurant sales trends
  2. The remodel program

Same-Restaurant Sales

The bullish thesis hinges on 2012 same-restaurant sales demonstrating that the strategies BKW has been pursuing are effective.  We disagree.   A slowdown in early 2013, that we believe is underway at BKW, will shake the prevalent belief that the Burger King turnaround is a done deal.


  • Challenging competitive environment, esp with MCD spending on marketing
  • Weather comparisons
  • Payroll tax hike
  • Gas prices
  • Tough comparisons
  • Brand association with horsemeat scandal

Carrols Restaurant Group (TAST), a franchisee of Burger King and is seeing February SRS tracking -4% to -5%, including average check of 3-4%, implying traffic down between 7% and 9%.  TAST management is still guiding to a 2-4% comp for FY13.  We do not expect this guidance to be achieved.

Remodel Program

Longer-term, we are skeptical that management’s goal of having 40% of the system remodeled over the next three years will be met.  The current sales lift from remodeled stores within the Carrols system is running at 8-10%, below what BKW has guided to: 10-20%. This disappointing sales lift should increase skepticism in the long-term viability of the remodel program.

Don’t take our word for it, Carrols management said the following:  “We would hope to remodel at an aggressive pace, but recognize that we may need to temper this, based on how the year progresses.”

Howard Penney

Managing Director

Rory Green

Senior Analyst