BK Franchisees Halt Growth Plans, Say Brand Must Beef Up
Miami-Several top Burger King franchisees, citing continuing poor performance for the brand, have pulled back on their plans for expansion of the concept.
Pointing to a rut of sluggish or negative same-store sales, the franchisees said they've either tempered or halted growth until the chain's new corporate management is able to turn the brand around. The list includes the two largest franchisees in the 8,200-unit Burger King system: AmeriKing, based in Westchester, Illinois, and Carrols Corp. of Syracuse, New York.
AmeriKing's expansion of the brand "literally stopped within the last year," says Lawrence Jaro, CEO of the No. 1 Burger King franchisee. The company, he says, wanted "to make sure the business was going the other way and not just south."
Rob Doughty, Burger King's vice president of corporate communications, says he has no comment on the statements made by the company's two largest franchisees.
"We will acknowledge that we have had some soft sales, and we understand some franchisees are feeling economic pressure, but we don't make comments on that," Doughty says.
Over the past year, a number of Burger King franchisees have reported financial difficulties brought about by over-leveraging of debt for expansion purposes. The debt load proved too heavy when sales began to sag.
Jaro claims AmeriKing had been Burger King's most aggressively expanding franchisee, building about 20 stores a year and buying somewhere between 20 and 40 additional stores. But the company put the brakes on expansion about a year ago as it saw its same-store sales slide into the negative range of 6 to 8 percent in fiscal 2000. Year-to-date same-store sales followed the same trend.
Jaro said the company is waiting for its same-store sales to climb out of negative numbers before looking at additional growth. He adds that the company is current on its loan payments. "We do believe in the brand and would like to expand, but not until the brand starts performing," Jaro says. -Nation's Restaurant News