Bill Ackman is the hedge fund investor who played a key role in formulating Burger King's current strategy[1].
Ackman brought former Apple retail chief Ron Johnson in to run J.C. Penney, which turned out to be a huge disaster. Ackman reportedly lost ~$500 million.
Now, don't get me wrong. I'm not saying that Ackman is not a smart man based on one failed investment. In fact, I'd argue that he was 100% correct about the need for J.C. Penney to change, but it's one thing to identify a need for change and another to make the right change. If you execute well the wrong strategy, you're still going to fail.
The problem with Burger King is that what you call "a well defined playbook" is far from a proven playbook. There has been a trend in the restaurant business for chains to reduce the number of stores they own, but as a percentage of all stores, Burger King has basically dumped all of its company stores.
Today, that gives Burger King a financial profile that investors can cheer, but the company's ultimate success depends on what happens tomorrow. There are more reasons than not to believe Burger King's strategy will hinder and not help the company over the long haul.
If I was an investor in such a competitive space, I'd absolutely bet on companies being led by a visionary leader like Steve Ells (founder and CEO of Chipotle) over companies being led by former Wall Street folks with little to no restaurant experience.
[1] http://online.wsj.com/news/articles/SB1000142405297020333550...
I remember reading something about McDonald's chefs. As in, the people who design new menu items. One of them described it as a really interesting job, because you have to take into account things like 'what is the world supply of this ingredient.' I forget what their example was, but they had built something new, and they had determined though sales projections that McDonald's would have to purchase _the entire world supply_ of this ingredient for it to work out.
Or, consider things like the McRib. If I remember correctly, McDonald's only offers it for limited times because they have to wait until the pork market is cheap enough that they can turn a profit.
I worked at a pizza chain, and our chefs often had to make new foods work with the ingredients we already were stocking, at least, as much as possible.
There is creativity and invention in fast food, it just works under a very peculiar set of constraints.
In the world of fast food, I see this as a problem. Taco Bell released the Dorito Loco Taco which has now made its way on to the main menu. Subway releases new promotional subs and items like the Flatizza, it seems almost bi-monthly. While the latter may not be as big of a success, it still garners awareness.
I can't think of one "crazy" item Burger King has released in the last few years.
Inventing something is "easy"
Now, after inventing it you have to:
- engage your whole supply chain for the needed ingredients and make sure they reach their destination
- engage marketing, produce all the needed support (packaging, new menus, new billing items, etc)
- create procedures and train staff
- deploy new equipment if needed
I mean, it's mexican food, for breakfast (not!).
So ya, nobody does do "crazy" anymore in Fast Food. Just normal, add some more onions + BBQ Sauce and it will sell.
Is it different in America? Still relevant?
BK has lagged way behind McDs and Subway on various fronts. Lack of new product items, old technology, minimal promotion, dirty and outdated dining rooms. The last BK near me that hasn't closed down looks like it hasn't had a coat of paint in 15 years. Meanwhile McDs is tearing down and rebuilding new stores ground-up all over town.
Twenty or thirty years ago, in America, McDonald's and BK were literally in a deadlocked battle of the giants. Burger wars! Those days are long gone.
That and McDonald's just owns kids.
There is a BK near the office, and I used to attempt a drive-thru on my lunch -- but, their drive-thru was actually slower than going inside. After a few attempts (and being late back to the office once) I gave up.
"He’s Burger King’s 21st CEO since the company was founded in 1954"
That's literally a new CEO every 36 months since the company was started sixty years ago. That's just boggling.
I did see them in Russia, several places, and the only thing they had going for them was that there was no waiting. Because nobody EVER went there, that I could recall.
I only noticed maybe seven or eight months ago when it was the only place available for a quick meal, but I've been back once since, at the other end of the country, and it was also good.
I suspect these things are a bit cyclical.
They're most notable for their advertising campaign featuring the King mascot. It was entertaining in a creepy/surreal way but didn't make me want to eat their hamburgers.
That said, if the plan is right, sometimes it is energy that's required to make things happen. If some very wise board members have set the right strategy, I think he can pull it off.
I'm not sure if it's any harder or easier than Facebook, but in today's economy, the right skills and intensity are more important than the longest resume.
seems like new food inventions drive alot of the marketing behind their competetors
trying out new menu items is just 1 thing that pops to mind, and I'm probably completely missing 100 other things that a burger place could inovate on
Maybe they've all done the math and it doesn't make financial sense, I don't know. But there's certainly nothing inherent about the type of food that makes it impossible; I've had great burgers and fries delivered by a few independent restaurants.
Burger King sells a well-known product in a predictable market. They don't invent crazy new things. They operate efficiently and scale operations that work.
Facebook pioneers technology and products that the world hasn't seen before. For Facebook to do so well requires a combination of grand vision, operational effectiveness, recruiting and managing ultra-high caliber talent, and more.
Burger King isn't an "easy" business to run but it's a well-defined business with a simpler playbook than a company like Facebook.
I'm sure BK's investors are great advisors but I suspect the company's success is because of the highly capable team tackling a market with a well defined playbook.