Burger King, the third-largest fast food chain in the U.S., plans to close up to 400 restaurants by the end of 2023 as it faces stiff competition and recession concerns.
The company has already closed 124 locations in the first quarter of 2023, leaving fewer than 7,000 U.S. restaurants. Several large franchisees have also filed for bankruptcy, including Meridian Restaurants Unlimited, which operated more than 100 Burger King outlets.Embed from Getty Images
The closures are part of a strategy to improve the overall health of the franchise system and focus on working with high-quality operators who can deliver better results. Joshua Kobza, the CEO of Restaurant Brands International Inc., which owns Burger King, said in a call announcing Q1 earnings results that the company is cracking down on underperforming franchisees.
“There will always be a minority [of franchisees] who aren’t dedicated, enthusiastic operators. We’ll work with them to leave the system and move on to do something else,” he said. “There simply is no room for franchisees who are not willing or able to work hard to operate restaurants that are better than the system average over the long term.”
Kobza admitted that the plans to close between 300 and 400 locations are a “historic high” for the company, which usually shuts down “a couple hundred” restaurants each year. He said the exact number of closures will depend on the pace of recovery in the business, which has already begun to see some improvement.Embed from Getty Images
Burger King reported an 8.7% increase in sales in the U.S. in Q1, driven by strong demand for its new chicken sandwich and other menu innovations. The company also invested in digital capabilities and delivery services to attract more customers.
However, Burger King still faces fierce competition from rivals such as McDonald’s and Wendy’s, which have also launched new products and promotions. The fast food industry is also grappling with rising labor costs, supply chain disruptions and inflation pressures.Embed from Getty Images
Moreover, the U.S. economy is showing signs of slowing down amid concerns of a possible recession. The number of job openings in the country dropped to 9.59 million in March, the lowest level in about two years, according to the Bureau of Labor Statistics. The White House warned that failing to raise or suspend the debt limit could trigger a recession that would be worse than in 2008.
Burger King’s decision to close hundreds of stores reflects the challenges facing the fast food sector and the uncertainty of the economic outlook. The company hopes that by streamlining its operations and working with better franchisees, it can improve its performance and profitability in the long run.
- Burger King to shut 400 US locations by end of 2023 in face of stiff competition (New York Post, 5/5/2023 )
- Burger King to close up to 400 stores by end of year as CEO admits it’s a historic high (Mirror, 5/5/2023 )
- Burger King To Close Up To 400 Stores This Year (Today, 5/4/2023 )