Burger King 2011 Annual Report Download - page 10

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Table of Contents
In the United States and in those other countries where we have Company restaurants or manage the advertising fund, we coordinate the development,
budgeting and expenditures for all marketing programs, as well as the allocation of advertising and media contributions, among national, regional and local
markets, subject in the United States to minimum expenditure requirements for media costs and certain restrictions as to new media channels. We are required,
however, under our U.S. franchise agreements, to discuss the types of media in our advertising campaigns and the percentage of the advertising fund to be spent
on media with the recognized franchisee association, currently the National Franchisee Association, Inc. In the U.S. and certain other markets, we typically
conduct a non-binding poll of our franchisees before introducing any nationally- or locally-advertised price or discount promotion to gauge the level of support
for the campaign.
Supply and Distribution
We establish the standards and specifications for most of the goods used in the development and operation of our restaurants and for the direct and indirect
sources of supply of most of those items. These requirements help us assure the quality and consistency of the food products sold at our restaurants and protect
and enhance the image of the Burger King system and the Burger King brand.
In general, we approve the manufacturers of the food, packaging and equipment products and other products used in Burger King restaurants, as well as
the distributors of these products to Burger King restaurants. Franchisees are generally required to purchase these products from approved suppliers and
distributors. We consider a range of criteria in evaluating existing and potential suppliers and distributors, including product and service consistency, delivery
timeliness and financial condition.
Restaurant Services, Inc., or RSI, is a not-for-profit, independent purchasing cooperative formed in 1992 to leverage the purchasing power of the Burger
King system in the United States. As the purchasing agent for the Burger King system in the United States, RSI negotiates the purchase terms for most
equipment, food, beverages (other than branded soft drinks) and other products such as promotional toys and paper products used in our restaurants. RSI is also
authorized to purchase and manage distribution services on behalf of the Company restaurants and franchisees who appoint RSI as their agent for these purposes.
As of December 31, 2011, RSI was appointed the distribution manager for approximately 94% of the restaurants in the United States. A subsidiary of RSI acts as
purchasing agent for food and paper products for our Company and franchise restaurants in Canada under a contract with us. As of December 31, 2011, four
distributors serviced approximately 85% of U.S. system restaurants and the loss of any one of these distributors would likely adversely affect our business.
There is currently no designated purchasing agent that represents franchisees in our international regions. We approve suppliers and distributors and use
similar standards and criteria to evaluate international suppliers that we use for U.S. suppliers. Franchisees may propose additional suppliers, subject to our
approval and established business criteria.
In Fiscal 2000, we entered into long-term exclusive contracts with soft drink vendors to supply Company restaurants and franchise restaurants with their
products, which obligate Burger King restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments
are not subject to any time limit. As of December 31, 2011, we estimate that it will take approximately 14 years for these purchase commitments to be completed.
If these agreements were terminated, we would be obligated to pay significant termination fees and certain other costs.
Quality Assurance
We are focused on achieving a high level of guest satisfaction through the periodic monitoring of restaurants for compliance with our operations platforms.
We measure our customer experience principally through Guest
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Source: Burger King Holdings Inc, 10-K, March 14, 2012 Powered by Morningstar® Document Research℠