What Next For Burger King (NYSE:BKW)?
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In the first week of November Burger King (NYSE:BKW) Worldwide will announce its third quarter earnings. Burger King (NYSE:BKW) to date has been producing outstanding financial figures regardless of the existing competition and at this point has a competitive edge in the breakfast segment by introducing coffee. Whereas looking at the market trend there is price inflation and decline in restaurant customer bases.
But the Burger King (NYSE:BKW)’s franchise model has proven fruitful for the company as it’s helped with expansions. One other factor that will contribute to its success is its merger with Tim Hortons (NYSE:THI), the Canadian multinational restaurant chain. The second quarter produced positive store sales in all regions. The net income figure rounded up to $75.1 million with a 19.4% increase from last year’s figures.
Whereas the total revenues fell by 6% to $261.2 million after a fall of 65% in company operated restaurant revenues. At this stage the price estimate stands at $28, which is a 12% fall in comparison to the existing market price. In recent news, the announcement of Burger King (NYSE:BKW) and Tim Hortons (NYSE:THI) entering into an agreement of partnership to be the world’s third largest restaurant known for its quick services was met with criticism of tax aversion.
The new company aims at starting 18000 restaurants in over 100 locations worldwide. The headquarter will be in Canada, where they can have lower taxes then in the US. Tim Hortons (NYSE:THI) is a Canadian brand of fast food, famous for its coffee and doughnuts, with over 4,546 outlets throughout Canada and the US. In its previous quarter the company figures revealed a 9% increase in its revenues and a 2.6% sales growth in Canada and 5.9% in the US.
This partnership between Tim Hortons (NYSE:THI) and Burger King (NYSE:BKW) doesn’t only help save taxes but it will give Burger King (NYSE:BKW) a chance to expand in newer profitable regions. This deal won’t necessarily put Burger King (NYSE:BKW) ahead of its competition but it will surely help reduce the gap. This merger doesn’t just cater to revenue growth but also helps expand its customer base.
According to research conducted by NPD, customer traffic has been stagnant for quick service restaurants whereas fine dining restaurants showed a 3% increase in customer traffic. Burger King (NYSE:BKW) has tried its hand in innovative menus designed to appeal to health conscious customers and it’s remodeled its outlets for a more attractive ambiance. But consumers of today are willing to pay an extra buck for quality and a healthy meal brand.
The company’s major focus however is to increase brand expansion throughout the globe. Its particularly shifting its focus to France and India, where it assumes there is growth potential. According to statistics the fast food industry has been on a boom in those regions and up till now McDonalds (NYSE:MCD), Starbucks (NASDAQ:SBUX) and also Dunkin Donuts (NASDAQ:DNKN) have been enjoying high revenues from these regions. Burger King (NYSE:BKW) penetrated these market last year opening just two stores, but seeing their success it plans to open up to 400 new outlets in France.