Fierce competition among some of the most important companies active on the quick service restaurant market has led to a slow-down in sales and profit recorded during this year’s third quarter, on the background of the worldwide recession.
Fast food operator Burger King Worldwide Inc announced that during the third quarter of 2012, system-wide comparable sales growth was positive across all segments except in the Asia-Pacific region. The U.S. and Canada delivered 1.6% comparable sales growth driven by the company’s Summer BBQ and Chicken offerings. The company was pleased with the results of its limited time offerings and progress in attracting a more diverse customer base, but experienced a deceleration in comparable sales growth due to more challenging prior year comparisons and the loss of some value based traffic.
Europe, the Middle East and Africa (EMEA) delivered comparable sales growth of 1.8%, driven by double digit comparable store sales growth in the company’s expanding Russian market, continued success of „Kings of the Day” promotions in the United Kingdom, and „King of the Month” deals in Germany. Performance in Southern Europe was softer, with the company’s key Spain market showing deceleration as economic conditions deteriorated during the quarter.
Latin America and the Caribbean (LAC) delivered comparable sales growth of 2.7%, despite challenging prior year comparisons in each of the company’s key markets. BKW has implemented new value initiatives in Brazil and Mexico in October to balance its menu options and complement premium offerings such as the Picanha burger in Brazil, and is seeing initial signs of success in driving incremental traffic. Asia-Pacific’s comparable sales declined by 2.2%, driven by weaker results in Australia and Korea as well as a particularly challenging prior year comparison in New Zealand, which hosted the rugby world cup in 2011.
As part of BKW’s global refranchising strategy, the company refranchised 221 company-owned restaurants during the quarter, including 182 restaurants in the U.S. and 39 restaurants internationally. In connection with this quarter’s refranchising transactions, BKW received cash proceeds of $31.6 million, development commitments both domestically and internationally, and domestic re-imaging commitments for 356 restaurants. BKW Chief Executive Officer Bernardo Hees said, “We completed our first full quarter as a public company with continued positive momentum despite the challenging global economic environment. BKW is fortunate to have one of the most widely recognized and resilient brands in the global QSR industry and we are proud of the hard work and dedication of our employees and franchisees who are striving to deliver a strong finish to a critical year for the Burger King system. In the U.S. and Canada, we are executing on our four pillar strategy, while internationally we completed additional refranchising and development agreements that we believe will accelerate restaurant growth in the years to come.”
Decent Q3 results for McD
McDonald’s U.S. posted a comparable sales increase of 1.2% for the third quarter amid broad competitive activity. During the quarter, the U.S. showcased beverages, breakfast and classic core favorites, featured everyday value and continued to upgrade McDonald’s existing restaurant base with fresh, modern designs. Operating income for the quarter declined 1%. A slightly higher increase during the third quarter was recorded in Europe, a region which generated comparable sales growth of 1.8% and delivered market share gains despite negative guest traffic. Europe’s operating income decreased 7% for the quarter (increased 3% in constant currencies). Comparable sales and operating income in Russia, the U.K. and France led the segment’s results, partially offset by Germany. Throughout Europe, premium food events, emphasis on everyday value and the ongoing benefits of reimaged restaurants supported the segment’s results.
Don Thompson concluded, „The McDonald’s System remains focused on building the business for the long-term by meeting the evolving needs of our customers. We continue to execute against our global priorities of optimizing our menu, modernizing the customer experience and broadening accessibility under the Plan to Win while implementing near-term tactical shifts to build momentum, enhance the relevance of our brand and deliver increased value to the McDonald’s System and our shareholders.”
Yum! Brands profit grows in all regions
Yum! Brands announced that worldwide operating profit grew 18%, prior to foreign currency translation, including 22% in China, 14% at Yum! Restaurants International (YRI) and 13% in the U.S. Worldwide operating profit increased 16%, after foreign currency translation. At the same time, worldwide system sales grew 6%, prior to foreign currency translation, including 22% in China, 4% at YRI and 1% in the U.S, while same-store sales grew 6% in China, 2% at YRI and 6% in the U.S. Although YRI same-store sales were negatively impacted by 1 percentage point due to the timing of Ramadan, the company recorded strong international development, with 394 new restaurants opened, including 192 new units in China and 181 new units at YRI; 86% of this development occurred in emerging markets.
Based on these figures, Yum! decided to raise their full-year EPS growth forecast to at least 13%, or at least $3.24, excluding Special Items. David C. Novak, Chairman and CEO, said, “Very strong sales and profit at all of our divisions, including China, Yum! Restaurants International, India and the U.S., drove 19% third-quarter EPS growth. Given the strength of our year-to-date results, I’m pleased to report we are raising our full-year EPS growth forecast to at least 13%, excluding Special Items. Restaurants International (YRI) reported its best quarterly operating profit performance of the year with growth of 14%, prior to foreign currency translation. YRI, combined with Yum! Restaurants India, will have a record year of new unit development. When you add it all up for Yum!, we will open at least 1,750 new restaurants outside the U.S., further strengthening our leadership position in emerging markets. At the same time, our heightened operations focus and product innovation has driven much better performance in the U.S., with all three brands growing sales, margin and profit.”
Subway brand eyes expansion in the UK
The President and co-founder of the Subway brand set out ambitious plans to increase the number of Subway stores in the UK and Ireland to 2000 over the next three years, creating around 6000 new jobs. There are currently 1423 Subway stores in the UK, almost a fivefold increase on the 2004 store count, and 99 stores in Ireland. Globally there are now more than 36,000 Subway stores in 98 countries from Afghanistan to Zambia. All stores are independently owned and operated by franchisees and the UK is the largest market outside North America.
The Subway business model is a proven business with low start-up costs, making it an ideal entry point for entrepreneurs. It is now the largest QSR (Quick Serve Restaurant) brand in the world, as measured by number of stores. „We are particularly proud of the fact that over the years the Subway brand has been able to provide entrepreneurs with business opportunities where they can open and operate their own small business and provide great food, exceptional customer service and job opportunities in their communities,” said Fred DeLuca.
Growth has been fuelled by consumer demand for convenient, affordable food and fresh, healthy choices made to order. According to an official company report, about four in ten Subs sold in the UK and Ireland are Low Fat. Each Low Fat Sub delivers less than 5g of fat and less than 370 calories. The Subway brand signed all three of the UK Government’s Responsibility Deal pledges, among which the pledges to remove trans fats and reduce salt content, which were signed last year. Trevor Haynes, area development manager for the UK and Ireland, said: “The UK and Irish markets have been fantastic success stories for the Subway brand and we see ample opportunities for further growth as more and more consumers demand fresh, healthy food on the go.” In addition to our traditional store development we see huge potential in non-traditional settings such as stations, convenience stores, hospitals, airports and petrol stations.”