Across the industry from MCD to MSSR chains are having to give up margin to mitigate the pressure on guest traffic. In two decades as a restaurant analyst this trend has never been good news. Today, things are different and it appears that traffic matters more than margin. That is a difficult statement to make but for now getting people in the door matters most.
Below are comments on Burger King from the TAST conf call…
“Promotional tactics are centering around the consumer’s need for extreme affordability with very aggressive promotional activities as the QSR industries and its conventional customers have come under increasing pressure.”
“We are hopeful that Burger King adjust its discounting strategy and launches new products in 2010 these efforts will provide more balance to the brand barbell [ph] strategy.”
“This promotion [dollar double cheeseburger] which continues is certainly an aggressive discounting tactic intended to drive both top line and customer traffic. Although we're still selling a lot of doubles burgers, we have experienced a gradual tapering off from the initial levels.”
Relative to trends prior to the promotional activity from Burger King, there was some improvement in both sales and traffic. However, these have been at the expense of some margin degradation given the inherent discount.
Comparable sales for our Burger Kings in the fourth quarter were down 3%. Our average check decreased 5.8% while customer traffic increased 2.1% for the quarter.
"BKC coined the term 'extreme affordability' but unfortunately, that has turned their Burger King core customers into 'extreme bargain seekers'"
- Comparable stores sales for 1Q10 to-date are down more than 8% (although this is versus a tough +5% compare, they said trends remain soft, continuing trends from December)
- TAST is closing 7 Burger King restaurants in 2010
- Commodity costs expected to increase 3 or 4% for Burger King segment in 2010