Cooking with Gas

Steve Lewis was cold in the test kitchen

The 17-year franchisee was helping Burger King’s R&D team develop recipes for 2003 — the second phase of an ambitious menu expansion that began this spring.

Lewis has been adding spice to BK’s turnaround plans throughout his 3.5 years as president of the chain’s National Franchisee Association, which pressured parent Diageo to “decouple” Burger King. (Lewis’ tenure ended in December; Diageo is currently expected to field a management-led bid.)

Chilled, Lewis looked around the kitchen and realized he was the only one without a chef’s jacket. He ribbed the team about it. Within a week, chief global marketing officer Chris Clouser presented him with a monogrammed jacket.

Burger King’s latest management team is suiting up all its franchisees — who own 92 percent of the restaurants — to recapture lost market share and rebuild the battered brand.

The $11.2 billion chain is in the second month of a $300 million-plus brand relaunch that includes 14 new products and a slate of joint promotions with partners eBay, AOL Time Warner, DreamWorks SKG, Nickelodeon, and Universal Studios. It’s the first major initiative under chairman-ceo John Dasburg, who came from Northwest Airlines a year ago and brought Clouser with him.

Dasburg’s goal is to get Burger King’s “fair share” of the $45.4 billion fast-food hamburger business by goosing average store sales $250,000 a year (or about 23 percent) by 2005. That would give BK a 22.8 percent market share. It currently holds an 18.8 percent share, compared with McDonald’s Corp.’s 43.1 percent and Wendy’s International’s 12.7 percent, per restaurant consultancy Technomic, Chicago. Burger King’s average per-store transactions slipped about 18 percent to 20,000 per month in 2001 from a peak of nearly 25,000 in 1995.

“Our underlying customer base has been eroding precipitously,” says Dasburg. “Our task is to turn around top-line [revenue] by bringing more customers into our restaurants. If that was so easy, it would have been done before.”

The chairman is counting on two groups to make the turn-around plan successful: franchisees and marketing partners. BK has set the table with the kind of menu and marketing fare that franchisees have been starving for since sales began falling in 1995.

“This is a call to arms we couldn’t have had a year ago,” says Lewis, who now co-chairs BK’s Marketing Advisory Council. “Now we’ve got an artillery of firepower that would impress anyone.”

Impressing franchisees was the first hurdle. BK needs 80 percent of them to participate for the plan to succeed, says Lewis. (It got 83-percent approval for the re-launch.) Franchisees each contribute four percent of sales to the national marketing fund, and also pay for local marketing (via area-of-dominant-influence regions). ADI-level spending has fallen to less than a half-percent of sales.

This is a proving year for headquarters’ marketing plan. If franchisees like what they see, they may boost local spending to one percent of sales by 2004. “Franchisees are generally a tough bunch,” concedes Lewis.

But the group likes Dasburg better than his predecessors, all of whom were Diageo insiders. Dasburg spent 11 years at Marriott Corp., rising to president of Marriott’s Lodging Group, and is credited with turning around Marriott’s Big Boy restaurant chain. Current management “has a better chance to right the ship than some past teams,” says Salomon Smith Barney analyst Mark Kalinowski.

“Dasburg was a better choice than franchisees ever expected,” says consultant Chris Muller, a professor at University of Central Florida who helped with the turnaround plan. “Franchisees need to believe there’s a central voice and be willing to be led.” Muller blames BK’s woes on a decentralization strategy begun in 1995. “That’s a sin in brand marketing,” he says.

Also helping warm things up were second-half 2001 marketing efforts that began improving store traffic in August and “helped franchisee relations,” says Clouser.

Friends of Grill

The chain boosts ad and promotion spending to more than $300 million this year, plus an estimated $150 million for premiums. Clouser has negotiated an impressive slate of partnerships since joining Burger King in June. The most ambitious is BK Rewards, a “frequent-eater” program launching nationally in June (see story, this page).

A multi-year partnership with AOL Time Warner ties into BK Rewards, and also gives Burger King access to product placement in Warner Bros. movies and sitcoms and title sponsorship for various properties.

Promotions aren’t all cutting-edge. Burger King added a Big Kids Club to further segment its decade-old Kids Club, a strategy set last year (January 2001 PROMO).

Traditional movie tie-ins target kids (Twentieth Century Fox’s Ice Age in March and DreamWorks’ Spirit: Stallion of the Cimarron in May) as well as adults (Columbia Pictures’ Men In Black II in July). The May tie-in with Spirit puts buy-one-get-one coupons for DreamWorks videos in Big Kids Meals.

Clouser likes working with several studios because “it gives us a better inventory to choose from. [If you] sign with one studio, they tell you how many of their movies and which ones to promote each year.” (McDonald’s is in year six of an exclusive 10-year deal with Walt Disney Co.)

Menu Multiplication

Promotional food items are a likely ingredient for film tie-ins. “We want kids to come in because they love our food, not because they want the toy we have,” says vp-food marketing Dana Frydman. “We’d much rather bring kids in for food they can get every day rather than leveraging the latest entertainment property.”

The menu includes 14 new products, with another six or seven by year’s end and a second slate to follow in 2003. Dasburg says new items will give BK “category-relevant variety” (see chart). Among the highlights: at least three salads, bowing in summer; Back Porch Grillers, now testing in South Bend, IN, and launching as early as summer; and the Chicken Whopper, BK’s first-ever line extension and “the most major marketing initiative we’ll undertake in many years,” says Clouser. BK tested about 15 versions of that product, and considered at least 150 other new items.

Promotional items so far this year include Shake ‘Em Up fries (put fries and cheese seasoning in a bag and shake to coat), vanilla ice cream and blue-cherry frozen drinks for Ice Age; and shake flavors like King Praline (during the Super Bowl) and Key Lime Pie (for the Whopper’s 45th birthday party, which began in March).

Team Building

There have been structural changes as well. In his first year, Dasburg merged Burger King’s marketing group with its product group under a distinct Burger King Brands operation to foster product-focused marketing.

Clouser, who is also president of BK Brands, trimmed the agency roster from 16 to six: Amoeba, Los Angeles, (for TV); McCaffery Ratner Gottlieb & Lane, New York City (print and radio); Valentine McCormick Ligibel (Internet); Campbell Mithun, Minneapolis (kids’ advertising); D’Arcy, New York City (local creative); and DraftWorldwide, Chicago (promotions and P-O-P activity). Los Angeles-based Equity Marketing handles premiums, and recently took over international calendar planning duties from Draft.

Noticeably absent from the new roster is McCann-Erickson, New York City — which was named lead ad agency with great fanfare in January 2001, then unceremoniously dumped in October — and Irvine, CA-based Alcone Marketing (whose work on 10-year-old BK Kids Club has shifted to Draft), which was dismissed last fall.

New ad players include L.A. Lakers basketball star Shaquille O’Neal, who makes a second appearance in May after a March TV spot for the Whopper’s anniversary. A drill team of cartoon chickens launch the Chicken Whopper this month by clucking out the old “Hold the pickles, hold the lettuce” jingle. This year’s 10 TV spots all carry the new tagline, “At Burger King you got it!” runs alongside the long-standing “Have it your way.”

Burger King is also looking for new franchisees for the first time in five years, and hopes to sign 20 to 25 (for three to 10 units each) by September. Dasburg beefed up the field staff last year, hiring 53 operational excellence managers and boosting franchise business managers from 85 to 107.

Flame broilers will drive BK’s success, says Dasburg. “We’re starting with a preferred, differentiated product. We somehow ran customers off. It should be relatively easy to bring them back in.”

That’s up to franchisees now, says Lewis: “It’s on our shoulders to execute. It’s time we hold each other accountable.”

Lewis sounds warm to the plan, now.

Bidder King

Want a movie role with your fries?

Burger King’s new BK Rewards loyalty program tweaks an old airline recipe to suit fast-food prices. The effort launches in June with partner eBay.

Customers get codes on-pack that they can bank at bkrewards.com, then bid on goodies at the site, which is run by San Francisco-based eBay but owned by BK.

Rewards come in three levels: First-tier goodies such as CDs, books, hats, and magazine subscriptions rotate weekly, with 20,000 available at any time; The second tier includes “more name-brand things” like Palm Pilots, TVs, and scooters, says senior director-interactive and adult promotions Hal Rossiter. There’ll be 1,500 second-tier items available every two weeks; Top-tier rewards include cruises, vacations, walk-on parts in movies (via deals with Universal and DreamWorks), and a game with the Harlem Globetrotters (which BK sponsors this year). Nine top-tier prizes will be dangled each quarter. Internet agency Valentine McCormick Ligibel, Kansas City, KS, handles.

Partners ranging from AOL to local spas provide prizes. Bidding times will rotate, and registrants can sign up for e-mail alerts on current auctions or upcoming prizes.

BK Rewards began testing in Erie, PA, and Albany, NY, in February and registered 967 members in its first weekend, says chief global marketing officer Chris Clouser. Site registrants give name, address, and e-mail so franchisees can e-mail local offers to their best customers.

“It’s all in the reward,” says Clouser, who ran Northwest Airlines’ WorldPerks program. “Make it valuable and appropriate to scale.”

Burger King can afford the program because it uses eBay’s model, not the airline’s, adds senior vp-marketing Rick Dow. “Rewards have no intrinsic value” like frequent-flier miles do, he explains. “Bidders set the value.” Since BK barters for the prizes, there are no upfront costs. “We’d go broke [using an airline model] with low-ticket items like burgers.”

“As more people register, it becomes advertising for [partnering brands],” says Clouser. “Nike won’t want Reebok there,” so category-exclusive deals should become more attractive.

AOL Time Warner, New York City, enters the loop via BK Backstage, a new feature set to launch in summer alongside Rewards. AOL’s 33 million members can use Rewards points to download songs and see exclusive content each time they add points to their Rewards account. (Rewards members get access, too, AOL account or no.) The tie-in “is great for AOL because it’s an ongoing program, and we supply the instant gratification,” says AOL vp-interactive marketing Mark Hosbein.