Burger King at the Third Crossroads: Leave for Good or Stay and Grow? | FRIDAY DIGITAL

Burger King at the Third Crossroads: Leave for Good or Stay and Grow?

Aftermath of Hong Kong Fund's Sale of Business

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Photo: Afro

In the Corona disaster, hamburger chains such as McDonald’s and Mos Burger have been increasing their presence. Among them, Burger King has been gaining momentum in the past few years.

In fact, in January 2022, Burger King opened three new stores: the AEON Mateopia store in Nagoya City, Aichi Prefecture; the Hongo Sanchome store in Bunkyo Ward, Tokyo; and the Izumiya Yao store in Yao City, Osaka Prefecture. 149 stores are currently operating nationwide (as of January 25, 2022). In May 2019, the company found itself in a difficult situation, as it closed 22 stores, or about 20% of the 99 it had at the time. In May 2019, it closed 22 stores, or about 20% of the 99 it had at the time.

Burger King’s main selling point is its “Whopper” (*), which means “incredibly large. It is about 1.4 times the size of a typical hamburger, and its impressive size has become a topic of conversation, especially on social networking sites.

However, it is not only the size of the burger that is attractive. Burger King’s Whopper series does not use artificial salts such as synthetic coloring, chemical seasonings, synthetic flavors, or synthetic preservatives. With the growing health consciousness in recent years, the company is rapidly gaining fans.

Still, when some people hear the name “Burger King,” they may recall two major stumbling blocks: the withdrawal from the Japanese market and the transfer of the management company. Now, Burger King is at a crossroads for the third time.

Affinity Equity Partners, the Hong Kong-based investment fund that holds the rights to operate the business in Japan, has begun the process of selling the Burger King business in January 2022. There is still a lot of uncertainty as to which company will manage the business and how, but depending on the choice, it could “sink”.

Let’s take a look back at the history of Burger King and find out more about it.

Burger King was founded in 1954 in the United States and is currently the second largest fast food hamburger chain in the world. McDonald brothers and established “McDonald’s System”, the predecessor of McDonald’s Corporation, in the same year.

However, when compared with the arrival in Japan, the two companies have come a long way. Mr. Fujita acquired the franchise rights of “McDonald’s” and opened the first store in Ginza Mitsukoshi in 1971. On the other hand, Burger King arrived in Japan in 1993, more than 20 years later than McDonald’s.

(*) Whopper has a registered trademark mark at the end.

The company that brought Burger King to Japan was Seibu Corporation, then a member of the Seibu Group. The company signed a franchise agreement with Burger King in the US and opened its first Japanese store in the Seibu Iruma Pepe station building adjacent to Iruma Station on The Seibu Ikebukuro Line. However, the two companies could not agree on store strategy and other issues with the US headquarters, and in 1996, the business was transferred to JT, which established Burger King Japan Co.

However, the deflationary economy hit the company. While rival McDonald’s became a “deflationary winner” by selling hamburgers for 65 yen in a “half-price campaign,” Burger King was unable to take effective measures and eventually transferred its business assets to Lotteria. In 2001, after only eight years, Burger King was forced to thoroughly exit the Japanese market.

Burger King did not reenter the Japanese market until 2007. The previous year, Burger King Japan Co., Ltd. was established as a joint venture between Lotte and Revamp to compete in the Japanese market again. Revamp is a management support company founded by Takashi Sawada, former vice president of Fast Retailing, and Motoichi Tamatsuka, former president of Fast Retailing.

The company had been focusing on the development of foreign brands in Japan, such as bringing Krispy Kreme Doughnuts to Japan in 2006 and creating a huge boom. Based on this experience, Shinichi Kasa, who had served as an executive at McDonald’s Japan and then as President of Wendy’s Japan at Zensho, was appointed president of Burger King Japan. In a change from the previous year, he used his expertise in food service to capture the market.

As a result of these efforts, Shinjuku Island Tower, which opened in June 2007, drew huge crowds and created a huge buzz. However, after that, not only did the number of stores fail to grow, but management also came to a standstill, leading to the mass closure of the stores mentioned at the beginning of this article. The management was then taken over by BK Japan Holdings, Inc.

The company was established by Affinity Equity Partners, a Hong Kong-based investment fund, as the operator of the Burger King business in Japan after signing a master franchise agreement with Burger King Asia Pacific Co. The company undertakes marketing in Japan, full control of store operations, training of new franchisees, menu development, sales strategy, store development and new store openings.

Affinity Equity Partners also operates Burger King in South Korea, where it has expanded to 440 stores, more than rival McDonald’s in the country.

To tell the truth, the Korean market is difficult to capture. Since Korea has developed its own food culture, there have been many cases where Japanese restaurant companies have been rebuffed by the high barriers to entry. The power of Affinity Equity Partners cannot be ignored. when considering their achievements in penetrating such a market and expanding the number of restaurants.

In contrast to the past two histories, the company has been steadily expanding its store network. In spite of the Corona disaster, the momentum is accelerating rather than declining, and it is only a matter of time before the In light of these circumstances, the company has probably decided that now is the time to sell. However, there is a great deal of uncertainty as to whether the company will be able to maintain stable growth in the future.

There are two major factors that stand in the way of Burger King’s success. One is the ” hamburger boom ” and the other is the changing market environment due to the Corona disaster .

The hamburger market is currently experiencing a major boom, which has been called the fourth boom. The history of the boom is as follows.

  • 1970 The first hamburger boom: the birth of the hamburger chain
    → McDonald’s, Dom Dom hamburger, Mos Burger, etc.
  • 2000: The second hamburger boom: Local burgers
    → Sasebo Burger, etc.
  • 2015: The third hamburger boom / gourmet burgers
    → SHAKE SHACK, Carl’s Jr., etc.

The fourth boom is being led by chicken burger restaurants. Since the Corona disaster, there have been a number of chicken burger restaurants, including TORIKI BURGER, operated by Toriki Holdings, which operates the Toriki restaurant chain; Lucky Rocky Chicken, operated by Royal Holdings , which operates the Royal Host restaurant chain; and Yakiniku Like, operated by Dining Innovation Co. Ltd., which operates Royal Host, Lucky Rocky Chicken, and DooWop, a chicken burger specialty restaurant owned by Dining Innovation Co.

In the US, chicken sandwiches have become a big hit, and Barkin has expanded its product line.

Many restaurants and bars were hit hard by the Corona disaster, as they were required to declare a state of emergency and refrain from business operations under the “priority measures to prevent the spread of the disease. However, hamburger chains have been able to meet the In fact, McDonald’s and Mos Burger have shown tremendous growth in the Corona disaster, once again demonstrating the strength of the fast food business.

In response to this situation, the rush to open hamburger restaurants continues. In the wake of the Corona disaster, the strong performance of the hamburger business is attractive when it is necessary to enrich the business portfolio and aim for stable management. Since it is easy to make proposals that leverage the strengths of existing businesses, new entrants to the hamburger business have been pouring in.

However, it is not clear how much demand there is for chicken burgers in the first place. In addition, as the cost of raw materials continues to soar, the logic of companies that focus on the low cost of chicken tends to take precedence. is a danger that the market will become overly competitive, and that each company will simply be worn out.

In addition, the restaurant industry has been forced to undergo major changes due to the Corona disaster. In particular, the decline in demand for eating out and the serious shortage of labor have had a significant impact. As the number of times we eat out is decreasing, customers’ expectations for a single meal are rising. However, restaurants have no choice but to respond with a limited number of staff. If they are not able to provide a valuable customer experience, they will not become the “restaurant of choice” and will not survive.

This is why restaurant companies are focusing on “DX,” which stands for “Digital Transformation,” which in English means “change and transformation through digitalization. DX stands for” Digital Transformation, “which in English means” change and transformation through digitalization. Simply put, it is a movement that aims to “establish a competitive advantage” by “utilizing data and digital technology” and “transforming business models.

Currently, many companies are accumulating customer data through mobile ordering and customer management systems, and using it for sales promotion and product development. Burger King has also introduced “mobile ordering” and is making use of technology.

On the other hand, the restaurant’s strength is its social networking strategy. The case of Akihabara in 2020 is a striking example. To coincide with the closing of the McDonald’s Akihabara Showa Dori store, which is located two doors down from the Burger King Akihabara Showa Dori store, a banner was hung in the store that shows a different message when read vertically. The clever direction of the banner was spread on SNS and attracted a lot of attention. If such manual measures and technology work well together, it will lead to an increase in brand value.

However, solving the labor shortage is an extremely difficult task. In addition to a declining population, the food service industry is finding it difficult to be chosen by job seekers. Corona has hit the industry hard, and I have heard that it has become an industry that is not chosen even for part-time workers because of the lack of stable shifts.

Under these circumstances, there are more and more cases where companies want to expand their stores but give up because they cannot secure human resources. The key to store expansion will undoubtedly be how to promote DX and improve the value of the customer experience while reducing the burden on people.

So, based on the above, what kind of company will take over the management of Burger King? In the first place, the restaurant industry is being consumed by the Corona disaster, and there are only a limited number of companies with the strength to do Or it could be absorbed by another hamburger chain, as Wendy’s and First Kitchen did together. So. The best candidate would be a company that is willing to invest in technology and is familiar with the restaurant market.

Whether the world’s second largest hamburger chain will be able to successfully conquer the Japanese market or not, all eyes are on the third time’s a charm.

  • Reporting and writing Daisuke Miwa

    Food journalist

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