Burger King 2013 Annual Report Download - page 68

Table of Contents
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Burger King Worldwide, Inc. (“BKW,” the “Company,” “we,” “us” and “our”) is a Delaware corporation formed on April 2, 2012, and the indirect
parent of Burger King Corporation (“BKC”), a Florida corporation that franchises and operates fast food hamburger restaurants, principally under the
Burger King® 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, 2013, we franchised or owned a total of 13,667 restaurants in 97 countries and territories worldwide. Of these restaurants, 13,615 were
owned by our franchisees and 52 were Company restaurants.
We generate revenue from three sources: (1) retail sales at Company restaurants, (2) franchise revenues, consisting primarily of royalties based on a
percentage of sales reported by franchise restaurants and initial and renewal fees paid by franchisees, and (3) property income from properties that we lease or
sublease to franchisees.
Restaurant sales are affected by the timing and effectiveness of our advertising, new products and promotional programs. Our results of operations also
fluctuate from quarter to quarter as a result of seasonal trends and other factors, such as the timing of restaurant openings and closings and the refranchising
or acquisition of franchise restaurants, as well as variability of the weather. Restaurant sales are typically higher in the spring and summer months when the
weather is warmer than in the fall and winter months. Restaurant sales during the winter are typically highest in December, during the holiday shopping
season. Restaurant sales are typically lowest during the winter months, which include February, the shortest month of the year. The timing of religious
holidays may also impact restaurant sales.
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The consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. We consolidate entities in which we have
a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All material intercompany balances and transactions
have been eliminated in consolidation. Investments in affiliates owned 50% or less are accounted for by the equity method.
We also consider for consolidation an entity in which we have certain interests, where the controlling financial interest may be achieved through
arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary
beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic
performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. Our most significant variable interests
are in entities that operate restaurants under our franchise arrangements and certain equity method investees that operate as master franchisees. We do not have
any ownership interests in our franchisees’ businesses, except for our investments in various entities that are accounted for under the equity method.
Additionally, we generally do not provide financial support to our franchisees in a typical franchise relationship. As our franchise and master franchise
arrangements provide our franchise and master franchise entities the power to direct the activities that most significantly impact their economic performance,
we do not consider ourselves the primary beneficiary of any such entity that might be a VIE. Based on the results of our analysis of potential VIEs, we have
not consolidated any franchisee entities. Our maximum exposure to loss resulting from involvement with potential VIEs is attributable to trade and notes
receivable balances, outstanding loan guarantees and future lease payments, where applicable.
Certain prior year amounts in the consolidated financial statements and accompanying notes have been reclassified in order to be comparable with the
current year classifications. These reclassifications had no effect on previously reported net income (loss).
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Our operations include franchise and Company restaurants located in 97 countries and territories worldwide. Of the 13,667 restaurants in operation as
of December 31, 2013, 13,615 were franchise restaurants and 52 were Company restaurants.
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Source: Burger King Worldwide, Inc., 10-K, February 21, 2014 Powered by Morningstar® Document Research℠
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