Burger King 2009 Annual Report Download - page 16

Table of Contents
terminated, we would be obligated to pay significant termination fees and certain other costs, including in the case of the contract with
Coca−Cola, the unamortized portion of the cost of installation and the entire cost of refurbishing and removing the equipment owned by
Coca−Cola and installed in Company restaurants in the three years prior to the termination.
Research and Development
Company restaurants play a key role in the development of new products and initiatives because we can use them to test and
perfect new products, equipment and programs before introducing them to franchisees, which we believe gives us credibility with our
franchisees in launching new initiatives. This strategy also allows us to keep research and development costs down and simultaneously
facilitates the ability to sell new products and to launch initiatives both internally to franchisees and externally to guests.
We operate research and development facilities or “test kitchens” at our headquarters in Miami and at certain other regional
locations. In addition, certain vendors have granted us access to their facilities in the U.K. and China to test new products. Independent
suppliers also conduct research and development activities for the benefit of the Burger King system. We believe new product
development is critical to our long−term success and is a significant factor behind our comparable sales growth. Product innovation
begins with an intensive research and development process that analyzes each potential new menu item, including market tests to gauge
consumer taste preferences, and includes an ongoing analysis of the economics of food cost, margin and final price point.
We have developed a flexible batch broiler that is significantly smaller, less expensive and easier to maintain than the previous
broiler used in our restaurants. We have installed the flexible batch broiler in all of our Company restaurants in the United States and
Canada. Franchisees in the United States and Canada are required to install the new broilers in their restaurants by January 2010 and, as
of June 30, 2009, new broilers were ordered or installed in 79% of the restaurants in the U.S. and Canada and in 55% of the system
worldwide. We intend to launch the Steakhouse XTtm or the extra thick burger prepared on the flexible broiler in the U.S. on a national
basis in February 2010. We have filed patent applications to protect our worldwide rights with respect to the flexible batch broiler
technology. We have licensed one of our equipment vendors on an exclusive basis to manufacture and supply the flexible batch broiler
to the Burger King system throughout the world.
Management Information Systems
Franchisees typically use a point of sale, or POS, cash register system to record all sales transactions at the restaurant. We have not
historically required franchisees to use a particular brand or model of hardware or software components for their restaurant system.
However, we have established specifications to reduce costs, improve service and allow better data analysis and starting in January
2006 have approved three global POS vendors and one regional vendor for each of our three segments to sell these systems to our
franchisees. Currently, franchisees report summary sales data manually, and we do not have the ability to verify sales data electronically
by accessing their POS cash register systems. We have the right under our franchise agreement to audit franchisees to verify sales
information provided to us. The new POS system will make it possible for franchisees to submit their sales and transaction level details
to us in near−real−time in a common format, allowing us to maintain one common database of sales information and to make better
marketing and pricing decisions. Franchisees are required to replace legacy POS systems with the approved POS system over the next
few years, depending on the age of the legacy system. All U.S. franchisees must have the new POS systems in their restaurants by no
later than January 1, 2014.
Quality Assurance
We are focused on achieving a high level of guest satisfaction through the close monitoring of restaurants for compliance with our
key operations platforms: Clean & Safe, Hot & Fresh and Friendly & Fast. We have uniform operating standards and specifications
relating to the quality, preparation and selection of menu items, maintenance and cleanliness of the premises and employee conduct.
The Clean & Safe certification is administered by the Company and an independent outside vendor. The purpose of the
certification is to bring heightened awareness of food safety, and includes immediate follow−up procedures to take any action needed to
protect the safety of our customers. We measure our Hot & Fresh and
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