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Table of Contents
Item 1. Business
Overview
Burger King Holdings, Inc. (“we” or the “Company”) is a Delaware corporation formed on July 23, 2002. We are the parent of Burger King Corporation
(also referred to as “BKC”), a Florida corporation that franchises and operates fast food hamburger restaurants, principally under the Burger King brand (also
referred to as the “Brand”). We are the world’s second largest fast food hamburger restaurant, or FFHR, chain as measured by the total number of restaurants. As
of December 31, 2011, we owned or franchised a total of 12,512 restaurants in 81 countries and U.S. territories, of which 1,295 restaurants were Company
restaurants and 11,217 were owned by our franchisees. Of these restaurants, 5,012, or 40%, are located outside the U.S. and Canada and account for over 33% of
our revenue. Our restaurants feature flame-grilled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other affordably-priced food
items. During our more than 50 years of operating history, we have developed a scalable and cost-efficient quick service hamburger restaurant model that offers
customers fast food at affordable prices.
We generate revenues from two sources: (1) retail sales at Company restaurants; and (2) franchise revenues, consisting primarily of royalties based on a
percentage of sales reported by franchise restaurants and franchise fees paid by franchisees as well as property income we derive from properties we lease or
sublease to our franchisees. Approximately 90% of our current restaurants are franchised and we have a higher percentage of franchise restaurants to Company
restaurants than our major competitors in the FFHR category. We believe that our high percentage of franchise restaurants provides us with a strategic advantage
because the capital required to grow and maintain the Burger King® system is funded primarily by franchisees. Our franchise dominated business model also
presents a number of drawbacks and risks, such as our limited control over franchisees and limited ability to facilitate changes in restaurant ownership. In
addition, our operating results are closely tied to the success of our franchisees, and we are dependent on franchisees to open new restaurants as part of our
growth strategy.
Our History
Our history dates back more than a half-century, having been founded in 1954 when James McLamore and David Edgerton opened the first Burger King
restaurant in Miami, Florida. The Whopper® sandwich was introduced in 1957. In 2006, we completed a successful initial public offering, and listed our stock on
the New York Stock Exchange. On October 19, 2010, we were acquired by 3G Special Situations Fund II, L.P. (“3G”), an affiliate of 3G Capital Partners, Ltd.,
an investment firm based in New York (“3G Capital”). As a result of the acquisition, our common stock ceased to be traded on the New York Stock Exchange
after close of market on October 19, 2010.
Our Industry
We operate in the FFHR category of the quick service restaurant, or QSR, segment of the restaurant industry. In the United States, the QSR segment is the
largest segment of the restaurant industry and has demonstrated steady growth over a long period of time. According to The NPD Group, Inc., which prepares
and disseminates CREST® data, QSR sales have grown at an annual rate of 3% over the past 10 years, totaling approximately $240 billion for the 12-month
period ended December 2011 and are projected to increase at an annual rate of 3% between 2011 and 2016.
According to The NPD Group, Inc., the FFHR category is the largest category in the QSR segment, generating sales of $69.8 billion in the United States
for the 12-month period ended December 2011, representing 29% of total QSR sales. According to The NPD Group, Inc., sales for the FFHR category are
expected to increase at an average rate of 4% per year over the next five years. For the 12-month period ended December 2011, Burger King accounted for
approximately 12% of total FFHR sales in the United States.
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Source: Burger King Holdings Inc, 10-K, March 14, 2012 Powered by Morningstar® Document Research℠