Can a new marketing menu satiate consumers – and franchisees?

The game of catch-up is growing old at Burger King. This quarter, the No. 2 burger chain turns up the heat on promotions, launching a year-long alliance with Sassy Baby Products and readying first work from promotion and ad agencies fresh from reviews.

Dogged by slack sales and a revolving cast, BK is now ready to risk new partners to court different-aged kids.

Toy maker Sassy – best known for educational infant toys and pacifiers – will provide premiums for kids under three as BK challenges McDonald’s dominance with toddlers. BK also cut a deal with eGames for game CDs targeted to four- to 12-year-olds through its Burger King Big Kids Club.

The alliances point to a shift in strategy as BK more aggressively targets younger kids, rather than conceding them to McDonald’s and trying to lure them away later as tweens. That move comes as BK’s ambitious store redesign puts Virtual Fun Centers with age-appropriate computer games in restaurants.

At the same time, the Miami-based chain is at the tail end of agency reviews for its $400 million ad account and $200 million-plus promotion business. BK says it expects to name an ad agency early this year. At press time, Upshot, Chicago, and Zipatoni, St. Louis, were thought to be front-runners for the promo account, also expected to be assigned early this year. (Upshot’s work for Coca-Cola and its ability to source premiums through parent Ha-Lo Industries reportedly gave it an edge.) BK declined to make executives available for interviews.

Burger King needs to boost same-store sales, which were flat for fiscal 2000, ended June 30. Its gain in system-wide sales – a 4.6-percent lift to $11.4 billion – came mostly through new-store sales, with 624 units added in 2000. Parent Diageo is counting on the store redesign and more targeted promotional activity to boost sales this year.

“Burger King needs to do something to reverse the trends,” says Ron Paul, president of restaurant consultancy Technomic, Chicago. “They’ve spent some money, but has it had an impact?”

BK’s share of the quick-service burger market fell to 19.6 percent in `99 from 20.4 percent in ’98, Technomic reports. (By comparison, Wendy’s share rose to 12.2 percent from 11.6 percent, and both Wendy’s and Jack-in-the-Box outpaced BK in same-store sales growth.)

Exacerbating the pressure is unrest among franchisees frustrated with short-term marketing. “Most people can’t say what they think Burger King stands for,” says Larry Jaro, chairman-ceo of franchise group AmeriKing. “It’s been one gimmick after another, different properties to hook into. That approach doesn’t work because it doesn’t position the brand. A lot of our marketing problems have to do with not having top management with vision and strategy.”

Some franchisees want to cut loose from Diageo. The London-based parent plans a 20-percent spin-off of the chain through a stock offering early this year. Franchisees chafe at what they consider poor management – Diageo’s core business is liquor, a separate universe from restaurants – and have said a total spin-off and shift to restaurant-experienced management is the only way to right the ship.

After Diageo’s partial spin-off announcement last June, BK’s National Franchisee Association started putting together its own plan, hiring an investment bank to seek potential buyers. NFA planned to make an offer by January.

Toy Story In the meantime, BK execs are trying a new marketing tack by tightly segmenting kids. Sources say BK plans to offer Sassy toys year-round for kids under three, and may sell the toys without food purchase. If the one-year test goes well, the two may cement a longer-term deal. It’s BK’s first targeted push for toddlers, similar to McDonald’s ongoing partnership with Fisher-Price, and part of a general QSR awakening.

“`Kids two-to-11′ is a huge range. QSRs are realizing they can make a difference being more targeted to specific age groups,” says Gaetano Mastropasqua, executive vp-promotion and client services for Equity Marketing, Los Angeles.

Equity sold BK on the idea of targeting little kids in 1999, when Taco Bell’s spring Star Wars tie-in and McD’s simultaneous Beanie Babies giveaway had BK’s core audience, six-to nine-year-olds, locked up. Equity suggested Teletubbies, and the promo caught moms’ attention (as well as teens and college kids riding the Teletubbies craze). Still, BK has concentrated on toys that skew older to establish its 18-month-old Big Kids Meal, piggy-backing entertainment properties like Dragonball Z and Nickelodeon’s Wild Thornberries.

BK is reportedly taking a pass on movie tie-ins this summer, but may link with a fall or holiday flick. The company won’t comment on promotions this far in advance, but “not all big movie tie-ins come in June and July,” a spokesperson says.

Its summer 2000 tie-ins with The Flintstones in Viva Rock Vegas, Chicken Run, and Pokemon 2000 didn’t do enough to boost same-store sales. Last fall’s Backstreet Boys tie-in was a flop, Jaro says: “It was horrible. By the time it got to market, everyone already had those songs.” A holiday tie-in with Rugrats in Paris did fairly well, he adds.

Enter Sassy. The Northbrook, IL-based company sells educational toys via mass merchandise and specialty stores. Adding a third channel of distribution complicates its juggling act to keep high-end retailers happy. (It’s the same issue Ty, Inc. faces with McDonald’s.)

Last month, BK started sending eGames CDs in its welcome packets for new Burger King Big Kids Club members. The discs carry all-age games and a BK-branded, browser-like interface that’s the proprietary technology of Langhorne, PA-based eGames. Each time kids launch a game they see BK’s browser, which gives one-click Internet access to the BK and eGames sites. The browser is “hobbled,” says eGames president Jerry Klein. “Burger King had concerns about giving kids unfettered access to the Internet.” Discs also have screen savers and e-coupons that reinforce the Big Kids Club. “The browser is a convenient way to establish a relationship and present messages to consumers,” Klein says.

eGames designed two suites of games exclusively for BK, one for kids under eight and another for kids eight and older. The chain expects to distribute 500,000 discs this year – 30,000 to 50,000 a month – and may expand distribution to all five million club members. Alcone Marketing, Irvine, handles the club and brought the idea to BK.

The third new initiative for kids is Virtual Fun Centers, which will feature educational, non-violent, age-specific computer games. The first unit opened in Miami in August after 18 test stores in Orlando saw sales jump an average of 30 percent. BK expects to remodel all 8,400 U.S. stores by 2004. Overseeing the redesign is vp-restaurant transformation Jim Joy, who added the title of regional vp-franchise operations for the Northeast in December.

Agency Angst The kids push comes as BK wraps up two lengthy agency reviews. There were signs in late fall that the chain had slowed its promo shop review to pick an ad agency first. Work from long-time promo partners Alcone Marketing, Irvine, and Equity will carry BK into second quarter, with first work from the review winner expected by summer. BK is thought to have dropped the incumbents from its finalist list in early December, narrowing the choice to Upshot, Zipatoni, and Pizza Hut veteran Ryan Partnership, Westport, CT. “There was lots of energy, and then [the review] just went into a dark hole,” says a source familiar with the process.

Losing BK would be a major blow to Equity’s bottom line. The burger chain accounted for 80 percent of Equity’s 1999 revenues of $227 million. (Equity projects 2000 revenues of $245 million to $255 million.) The company has worked on BK projects since 1986 and has been a premiums agency of record since 1996.

Alcone would take a heavy hit, too: It has handled BK’s Kids Club since its 1990 inception and handled regional work since `88. BK is a marquee client and accounts for a large percentage of Alcone’s ’99 revenues of $176 million.

The separate ad agency review began in mid-September as president-North America Mikel Durham took charge (filling a post vacant since January). An informal review in December `99 left Lowe Lintas on the business it held (as Ammirati Puris Lintas) since 1993, but the agency was cut from the finalist list in November. As of mid-December, finalists were Campbell Mithun, Minneapolis, and New York agencies Grey Worldwide and McCann-Erickson Worldwide.

Some critics say BK’s fundamental problem is that it picks agencies for ideas, not for strategy. Its ad review comes down to how well the three finalists’ spec campaigns test with consumers, say sources close to the review. “They’re basing their decision on test results,” one agency source says. “And what if history repeats itself and they have a new president or marketing chief a year from now? It could all go up in smoke. They need to make a decision about partnering with an agency that knows the QSR business.”

First, BK needs the proper ceo to replace interim chief Colin Storm, contends franchisee Jaro. “Until someone takes that post as a long-term leader, it’s all just dog-paddling. We have to put our house in order before we can execute on marketing.”

Outsiders speculate that franchisee complaints cause high executive turnover and, therefore, agency turnover. “There’s a new person in charge so often,” says a source close to the chain. “They have strategic cacophony and a lack of good people. Their only consistency is the Whopper.”

BK isn’t leveraging that asset, Jaro says. “Whopper has a stronger brand image than the Burger King brand. So why not leverage that and focus on the Whopper to move sales?”

The latest suite of top executives includes Durham, new to the restaurant business from Diageo’s Guinness division, and Stefan Bomhard, senior vp-marketing, North America since April. He joined BK two years ago (from Procter & Gamble) as vp-marketing for Europe, Middle East, and Africa. Longest tenured is vp-marketing Richard Taylor, who’s moved up the ranks since his days as director of youth and family marketing in 1995.

And the door keeps swinging: Derek Correia left in November after only five months on the job as vp of food marketing-U.S. He joined BK from Pizza Hut in 1999 as director of food marketing.

The National Franchisee Association – 1,300 franchisees who own about 7,600 restaurants – has new marketing leadership, too: This fall, the association’s Marketing Advisory Committee (MAC) named its first-ever co-chairs, Dan Fitzpatrick and Joe Mirabile. Each is a past MAC chair; together, they represent the franchisee agenda at a critical point as the schism between corporate and franchisees grows.

BK franchisees have more leverage than, say, McDonald’s owners, because 94 percent of BK units are franchised, and franchisees own or lease their own real estate. That gives them a stronger voice than in an owner/operator system like McDonald’s, where corporate controls the real estate and only 70 percent of units are franchised. With more ownership – and more at stake – BK franchisees want a say in marketing decisions.

BK’s problems run deep and go beyond marketing. No slate of promotions alone can solve them, but it’s a good sign that the chain is taking a fresh look at consumer segments. The real test is how the chain follows that tack to build relationships with consumers, agencies, and franchisees.

“Someone’s going to look like a hero here,” Jaro says. “This is a brand with a lot of potential that’s been mismanaged for 15 years. We need management with a long-term vision for the brand. People need to connect emotionally to the product.”

Until then, the catch-up continues.

Can a new marketing menu satiate consumers – and franchisees?

The game of catch-up is growing old at Burger King. This quarter, the No. 2 burger chain turns up the heat on promotions, launching a year-long alliance with Sassy Baby Products and readying first work from promotion and ad agencies fresh from reviews.

Dogged by slack sales and a revolving cast, BK is now ready to risk new partners to court different-aged kids.

Toy maker Sassy – best known for educational infant toys and pacifiers – will provide premiums for kids under three as BK challenges McDonald’s dominance with toddlers. BK also cut a deal with eGames for game CDs targeted to four- to 12-year-olds through its Burger King Big Kids Club.

The alliances point to a shift in strategy as BK more aggressively targets younger kids, rather than conceding them to McDonald’s and trying to lure them away later as tweens. That move comes as BK’s ambitious store redesign puts Virtual Fun Centers with age-appropriate computer games in restaurants.

At the same time, the Miami-based chain is at the tail end of agency reviews for its $400 million ad account and $200 million-plus promotion business. BK says it expects to name an ad agency early this year. At press time, Upshot, Chicago, and Zipatoni, St. Louis, were thought to be front-runners for the promo account, also expected to be assigned early this year. (Upshot’s work for Coca-Cola and its ability to source premiums through parent Ha-Lo Industries reportedly gave it an edge.) BK declined to make executives available for interviews.

Burger King needs to boost same-store sales, which were flat for fiscal 2000, ended June 30. Its gain in system-wide sales – a 4.6-percent lift to $11.4 billion – came mostly through new-store sales, with 624 units added in 2000. Parent Diageo is counting on the store redesign and more targeted promotional activity to boost sales this year.

“Burger King needs to do something to reverse the trends,” says Ron Paul, president of restaurant consultancy Technomic, Chicago. “They’ve spent some money, but has it had an impact?”

BK’s share of the quick-service burger market fell to 19.6 percent in `99 from 20.4 percent in ’98, Technomic reports. (By comparison, Wendy’s share rose to 12.2 percent from 11.6 percent, and both Wendy’s and Jack-in-the-Box outpaced BK in same-store sales growth.)

Exacerbating the pressure is unrest among franchisees frustrated with short-term marketing. “Most people can’t say what they think Burger King stands for,” says Larry Jaro, chairman-ceo of franchise group AmeriKing. “It’s been one gimmick after another, different properties to hook into. That approach doesn’t work because it doesn’t position the brand. A lot of our marketing problems have to do with not having top management with vision and strategy.”

Some franchisees want to cut loose from Diageo. The London-based parent plans a 20-percent spin-off of the chain through a stock offering early this year. Franchisees chafe at what they consider poor management – Diageo’s core business is liquor, a separate universe from restaurants – and have said a total spin-off and shift to restaurant-experienced management is the only way to right the ship.

After Diageo’s partial spin-off announcement last June, BK’s National Franchisee Association started putting together its own plan, hiring an investment bank to seek potential buyers. NFA planned to make an offer by January.

Toy Story In the meantime, BK execs are trying a new marketing tack by tightly segmenting kids. Sources say BK plans to offer Sassy toys year-round for kids under three, and may sell the toys without food purchase. If the one-year test goes well, the two may cement a longer-term deal. It’s BK’s first targeted push for toddlers, similar to McDonald’s ongoing partnership with Fisher-Price, and part of a general QSR awakening.

“`Kids two-to-11′ is a huge range. QSRs are realizing they can make a difference being more targeted to specific age groups,” says Gaetano Mastropasqua, executive vp-promotion and client services for Equity Marketing, Los Angeles.

Equity sold BK on the idea of targeting little kids in 1999, when Taco Bell’s spring Star Wars tie-in and McD’s simultaneous Beanie Babies giveaway had BK’s core audience, six-to nine-year-olds, locked up. Equity suggested Teletubbies, and the promo caught moms’ attention (as well as teens and college kids riding the Teletubbies craze). Still, BK has concentrated on toys that skew older to establish its 18-month-old Big Kids Meal, piggy-backing entertainment properties like Dragonball Z and Nickelodeon’s Wild Thornberries.

BK is reportedly taking a pass on movie tie-ins this summer, but may link with a fall or holiday flick. The company won’t comment on promotions this far in advance, but “not all big movie tie-ins come in June and July,” a spokesperson says.

Its summer 2000 tie-ins with The Flintstones in Viva Rock Vegas, Chicken Run, and Pokemon 2000 didn’t do enough to boost same-store sales. Last fall’s Backstreet Boys tie-in was a flop, Jaro says: “It was horrible. By the time it got to market, everyone already had those songs.” A holiday tie-in with Rugrats in Paris did fairly well, he adds.

Enter Sassy. The Northbrook, IL-based company sells educational toys via mass merchandise and specialty stores. Adding a third channel of distribution complicates its juggling act to keep high-end retailers happy. (It’s the same issue Ty, Inc. faces with McDonald’s.)

Last month, BK started sending eGames CDs in its welcome packets for new Burger King Big Kids Club members. The discs carry all-age games and a BK-branded, browser-like interface that’s the proprietary technology of Langhorne, PA-based eGames. Each time kids launch a game they see BK’s browser, which gives one-click Internet access to the BK and eGames sites. The browser is “hobbled,” says eGames president Jerry Klein. “Burger King had concerns about giving kids unfettered access to the Internet.” Discs also have screen savers and e-coupons that reinforce the Big Kids Club. “The browser is a convenient way to establish a relationship and present messages to consumers,” Klein says.

eGames designed two suites of games exclusively for BK, one for kids under eight and another for kids eight and older. The chain expects to distribute 500,000 discs this year – 30,000 to 50,000 a month – and may expand distribution to all five million club members. Alcone Marketing, Irvine, handles the club and brought the idea to BK.

The third new initiative for kids is Virtual Fun Centers, which will feature educational, non-violent, age-specific computer games. The first unit opened in Miami in August after 18 test stores in Orlando saw sales jump an average of 30 percent. BK expects to remodel all 8,400 U.S. stores by 2004. Overseeing the redesign is vp-restaurant transformation Jim Joy, who added the title of regional vp-franchise operations for the Northeast in December.

Agency Angst The kids push comes as BK wraps up two lengthy agency reviews. There were signs in late fall that the chain had slowed its promo shop review to pick an ad agency first. Work from long-time promo partners Alcone Marketing, Irvine, and Equity will carry BK into second quarter, with first work from the review winner expected by summer. BK is thought to have dropped the incumbents from its finalist list in early December, narrowing the choice to Upshot, Zipatoni, and Pizza Hut veteran Ryan Partnership, Westport, CT. “There was lots of energy, and then [the review] just went into a dark hole,” says a source familiar with the process.

Losing BK would be a major blow to Equity’s bottom line. The burger chain accounted for 80 percent of Equity’s 1999 revenues of $227 million. (Equity projects 2000 revenues of $245 million to $255 million.) The company has worked on BK projects since 1986 and has been a premiums agency of record since 1996.

Alcone would take a heavy hit, too: It has handled BK’s Kids Club since its 1990 inception and handled regional work since `88. BK is a marquee client and accounts for a large percentage of Alcone’s ’99 revenues of $176 million.

The separate ad agency review began in mid-September as president-North America Mikel Durham took charge (filling a post vacant since January). An informal review in December `99 left Lowe Lintas on the business it held (as Ammirati Puris Lintas) since 1993, but the agency was cut from the finalist list in November. As of mid-December, finalists were Campbell Mithun, Minneapolis, and New York agencies Grey Worldwide and McCann-Erickson Worldwide.

Some critics say BK’s fundamental problem is that it picks agencies for ideas, not for strategy. Its ad review comes down to how well the three finalists’ spec campaigns test with consumers, say sources close to the review. “They’re basing their decision on test results,” one agency source says. “And what if history repeats itself and they have a new president or marketing chief a year from now? It could all go up in smoke. They need to make a decision about partnering with an agency that knows the QSR business.”

First, BK needs the proper ceo to replace interim chief Colin Storm, contends franchisee Jaro. “Until someone takes that post as a long-term leader, it’s all just dog-paddling. We have to put our house in order before we can execute on marketing.”

Outsiders speculate that franchisee complaints cause high executive turnover and, therefore, agency turnover. “There’s a new person in charge so often,” says a source close to the chain. “They have strategic cacophony and a lack of good people. Their only consistency is the Whopper.”

BK isn’t leveraging that asset, Jaro says. “Whopper has a stronger brand image than the Burger King brand. So why not leverage that and focus on the Whopper to move sales?”

The latest suite of top executives includes Durham, new to the restaurant business from Diageo’s Guinness division, and Stefan Bomhard, senior vp-marketing, North America since April. He joined BK two years ago (from Procter & Gamble) as vp-marketing for Europe, Middle East, and Africa. Longest tenured is vp-marketing Richard Taylor, who’s moved up the ranks since his days as director of youth and family marketing in 1995.

And the door keeps swinging: Derek Correia left in November after only five months on the job as vp of food marketing-U.S. He joined BK from Pizza Hut in 1999 as director of food marketing.

The National Franchisee Association – 1,300 franchisees who own about 7,600 restaurants – has new marketing leadership, too: This fall, the association’s Marketing Advisory Committee (MAC) named its first-ever co-chairs, Dan Fitzpatrick and Joe Mirabile. Each is a past MAC chair; together, they represent the franchisee agenda at a critical point as the schism between corporate and franchisees grows.

BK franchisees have more leverage than, say, McDonald’s owners, because 94 percent of BK units are franchised, and franchisees own or lease their own real estate. That gives them a stronger voice than in an owner/operator system like McDonald’s, where corporate controls the real estate and only 70 percent of units are franchised. With more ownership – and more at stake – BK franchisees want a say in marketing decisions.

BK’s problems run deep and go beyond marketing. No slate of promotions alone can solve them, but it’s a good sign that the chain is taking a fresh look at consumer segments. The real test is how the chain follows that tack to build relationships with consumers, agencies, and franchisees.

“Someone’s going to look like a hero here,” Jaro says. “This is a brand with a lot of potential that’s been mismanaged for 15 years. We need management with a long-term vision for the brand. People need to connect emotionally to the product.”

Until then, the catch-up continues.

Can a new marketing menu satiate consumers – and franchisees?

The game of catch-up is growing old at Burger King. This quarter, the No. 2 burger chain turns up the heat on promotions, launching a year-long alliance with Sassy Baby Products and readying first work from promotion and ad agencies fresh from reviews.

Dogged by slack sales and a revolving cast, BK is now ready to risk new partners to court different-aged kids.

Toy maker Sassy – best known for educational infant toys and pacifiers – will provide premiums for kids under three as BK challenges McDonald’s dominance with toddlers. BK also cut a deal with eGames for game CDs targeted to four- to 12-year-olds through its Burger King Big Kids Club.

The alliances point to a shift in strategy as BK more aggressively targets younger kids, rather than conceding them to McDonald’s and trying to lure them away later as tweens. That move comes as BK’s ambitious store redesign puts Virtual Fun Centers with age-appropriate computer games in restaurants.

At the same time, the Miami-based chain is at the tail end of agency reviews for its $400 million ad account and $200 million-plus promotion business. BK says it expects to name an ad agency early this year. At press time, Upshot, Chicago, and Zipatoni, St. Louis, were thought to be front-runners for the promo account, also expected to be assigned early this year. (Upshot’s work for Coca-Cola and its ability to source premiums through parent Ha-Lo Industries reportedly gave it an edge.) BK declined to make executives available for interviews.

Burger King needs to boost same-store sales, which were flat for fiscal 2000, ended June 30. Its gain in system-wide sales – a 4.6-percent lift to $11.4 billion – came mostly through new-store sales, with 624 units added in 2000. Parent Diageo is counting on the store redesign and more targeted promotional activity to boost sales this year.

“Burger King needs to do something to reverse the trends,” says Ron Paul, president of restaurant consultancy Technomic, Chicago. “They’ve spent some money, but has it had an impact?”

BK’s share of the quick-service burger market fell to 19.6 percent in `99 from 20.4 percent in ’98, Technomic reports. (By comparison, Wendy’s share rose to 12.2 percent from 11.6 percent, and both Wendy’s and Jack-in-the-Box outpaced BK in same-store sales growth.)

Exacerbating the pressure is unrest among franchisees frustrated with short-term marketing. “Most people can’t say what they think Burger King stands for,” says Larry Jaro, chairman-ceo of franchise group AmeriKing. “It’s been one gimmick after another, different properties to hook into. That approach doesn’t work because it doesn’t position the brand. A lot of our marketing problems have to do with not having top management with vision and strategy.”

Some franchisees want to cut loose from Diageo. The London-based parent plans a 20-percent spin-off of the chain through a stock offering early this year. Franchisees chafe at what they consider poor management – Diageo’s core business is liquor, a separate universe from restaurants – and have said a total spin-off and shift to restaurant-experienced management is the only way to right the ship.

After Diageo’s partial spin-off announcement last June, BK’s National Franchisee Association started putting together its own plan, hiring an investment bank to seek potential buyers. NFA planned to make an offer by January.

Toy Story In the meantime, BK execs are trying a new marketing tack by tightly segmenting kids. Sources say BK plans to offer Sassy toys year-round for kids under three, and may sell the toys without food purchase. If the one-year test goes well, the two may cement a longer-term deal. It’s BK’s first targeted push for toddlers, similar to McDonald’s ongoing partnership with Fisher-Price, and part of a general QSR awakening.

“`Kids two-to-11′ is a huge range. QSRs are realizing they can make a difference being more targeted to specific age groups,” says Gaetano Mastropasqua, executive vp-promotion and client services for Equity Marketing, Los Angeles.

Equity sold BK on the idea of targeting little kids in 1999, when Taco Bell’s spring Star Wars tie-in and McD’s simultaneous Beanie Babies giveaway had BK’s core audience, six-to nine-year-olds, locked up. Equity suggested Teletubbies, and the promo caught moms’ attention (as well as teens and college kids riding the Teletubbies craze). Still, BK has concentrated on toys that skew older to establish its 18-month-old Big Kids Meal, piggy-backing entertainment properties like Dragonball Z and Nickelodeon’s Wild Thornberries.

BK is reportedly taking a pass on movie tie-ins this summer, but may link with a fall or holiday flick. The company won’t comment on promotions this far in advance, but “not all big movie tie-ins come in June and July,” a spokesperson says.

Its summer 2000 tie-ins with The Flintstones in Viva Rock Vegas, Chicken Run, and Pokemon 2000 didn’t do enough to boost same-store sales. Last fall’s Backstreet Boys tie-in was a flop, Jaro says: “It was horrible. By the time it got to market, everyone already had those songs.” A holiday tie-in with Rugrats in Paris did fairly well, he adds.

Enter Sassy. The Northbrook, IL-based company sells educational toys via mass merchandise and specialty stores. Adding a third channel of distribution complicates its juggling act to keep high-end retailers happy. (It’s the same issue Ty, Inc. faces with McDonald’s.)

Last month, BK started sending eGames CDs in its welcome packets for new Burger King Big Kids Club members. The discs carry all-age games and a BK-branded, browser-like interface that’s the proprietary technology of Langhorne, PA-based eGames. Each time kids launch a game they see BK’s browser, which gives one-click Internet access to the BK and eGames sites. The browser is “hobbled,” says eGames president Jerry Klein. “Burger King had concerns about giving kids unfettered access to the Internet.” Discs also have screen savers and e-coupons that reinforce the Big Kids Club. “The browser is a convenient way to establish a relationship and present messages to consumers,” Klein says.

eGames designed two suites of games exclusively for BK, one for kids under eight and another for kids eight and older. The chain expects to distribute 500,000 discs this year – 30,000 to 50,000 a month – and may expand distribution to all five million club members. Alcone Marketing, Irvine, handles the club and brought the idea to BK.

The third new initiative for kids is Virtual Fun Centers, which will feature educational, non-violent, age-specific computer games. The first unit opened in Miami in August after 18 test stores in Orlando saw sales jump an average of 30 percent. BK expects to remodel all 8,400 U.S. stores by 2004. Overseeing the redesign is vp-restaurant transformation Jim Joy, who added the title of regional vp-franchise operations for the Northeast in December.

Agency Angst The kids push comes as BK wraps up two lengthy agency reviews. There were signs in late fall that the chain had slowed its promo shop review to pick an ad agency first. Work from long-time promo partners Alcone Marketing, Irvine, and Equity will carry BK into second quarter, with first work from the review winner expected by summer. BK is thought to have dropped the incumbents from its finalist list in early December, narrowing the choice to Upshot, Zipatoni, and Pizza Hut veteran Ryan Partnership, Westport, CT. “There was lots of energy, and then [the review] just went into a dark hole,” says a source familiar with the process.

Losing BK would be a major blow to Equity’s bottom line. The burger chain accounted for 80 percent of Equity’s 1999 revenues of $227 million. (Equity projects 2000 revenues of $245 million to $255 million.) The company has worked on BK projects since 1986 and has been a premiums agency of record since 1996.

Alcone would take a heavy hit, too: It has handled BK’s Kids Club since its 1990 inception and handled regional work since `88. BK is a marquee client and accounts for a large percentage of Alcone’s ’99 revenues of $176 million.

The separate ad agency review began in mid-September as president-North America Mikel Durham took charge (filling a post vacant since January). An informal review in December `99 left Lowe Lintas on the business it held (as Ammirati Puris Lintas) since 1993, but the agency was cut from the finalist list in November. As of mid-December, finalists were Campbell Mithun, Minneapolis, and New York agencies Grey Worldwide and McCann-Erickson Worldwide.

Some critics say BK’s fundamental problem is that it picks agencies for ideas, not for strategy. Its ad review comes down to how well the three finalists’ spec campaigns test with consumers, say sources close to the review. “They’re basing their decision on test results,” one agency source says. “And what if history repeats itself and they have a new president or marketing chief a year from now? It could all go up in smoke. They need to make a decision about partnering with an agency that knows the QSR business.”

First, BK needs the proper ceo to replace interim chief Colin Storm, contends franchisee Jaro. “Until someone takes that post as a long-term leader, it’s all just dog-paddling. We have to put our house in order before we can execute on marketing.”

Outsiders speculate that franchisee complaints cause high executive turnover and, therefore, agency turnover. “There’s a new person in charge so often,” says a source close to the chain. “They have strategic cacophony and a lack of good people. Their only consistency is the Whopper.”

BK isn’t leveraging that asset, Jaro says. “Whopper has a stronger brand image than the Burger King brand. So why not leverage that and focus on the Whopper to move sales?”

The latest suite of top executives includes Durham, new to the restaurant business from Diageo’s Guinness division, and Stefan Bomhard, senior vp-marketing, North America since April. He joined BK two years ago (from Procter & Gamble) as vp-marketing for Europe, Middle East, and Africa. Longest tenured is vp-marketing Richard Taylor, who’s moved up the ranks since his days as director of youth and family marketing in 1995.

And the door keeps swinging: Derek Correia left in November after only five months on the job as vp of food marketing-U.S. He joined BK from Pizza Hut in 1999 as director of food marketing.

The National Franchisee Association – 1,300 franchisees who own about 7,600 restaurants – has new marketing leadership, too: This fall, the association’s Marketing Advisory Committee (MAC) named its first-ever co-chairs, Dan Fitzpatrick and Joe Mirabile. Each is a past MAC chair; together, they represent the franchisee agenda at a critical point as the schism between corporate and franchisees grows.

BK franchisees have more leverage than, say, McDonald’s owners, because 94 percent of BK units are franchised, and franchisees own or lease their own real estate. That gives them a stronger voice than in an owner/operator system like McDonald’s, where corporate controls the real estate and only 70 percent of units are franchised. With more ownership – and more at stake – BK franchisees want a say in marketing decisions.

BK’s problems run deep and go beyond marketing. No slate of promotions alone can solve them, but it’s a good sign that the chain is taking a fresh look at consumer segments. The real test is how the chain follows that tack to build relationships with consumers, agencies, and franchisees.

“Someone’s going to look like a hero here,” Jaro says. “This is a brand with a lot of potential that’s been mismanaged for 15 years. We need management with a long-term vision for the brand. People need to connect emotionally to the product.”

Until then, the catch-up continues.

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