The overhaul, still in its infancy, carries a heavy price tag-15% more than a construction of a traditional unit. And, although some franchisees say they're in favor of the upgrade, they add that corporate headquarters must first prove it will be a sound investment.
For now, several franchisees contacted by Advertising Age said they have put construction projects on hold as they await more information from their corporate parent.
PLANS DUE BY OCTOBER
Design options for new construction and remodels are expected to be presented to franchisees by October, according to executives familiar with the plans. That's when franchisees, who operate all but 444 of the chain's 8,020 U.S. restaurants, will have a better idea about whether they want to invest in the project.
"It's a dollars-and-cents decision," one franchisee said. Added another, "Burger King is not stupid. They're not going to propose something where they are going to have a massive revolt in their franchisee system."
The chain originally unveiled a prototype in Reno, Nevada. But the real test is in Orlando, where four units have been transformed so far. And company officials haven't ignored investors' appetites; one new unit featuring the redesign was opened quietly in the heart of Wall Street.
The choice of location, for the restaurant opened in late June, sparked some industry observers to wonder if Burger King is dressing up for investors at a time of softening sales. Burger King, a division of Diageo, the London-based food and beverage giant, has been the subject of spinoff rumors for a number of years. Company officials have continually denied the chain is for sale.
"Situating one of these new stores in New York City-and down near Wall Street-reflects that Diageo wants to let it be known to the financial community how they are developing the brand," said Lehman Bros. analyst Mitchell Speiser. Mr. Speiser and several other analysts said there has been no recent spinoff talk.
In a preliminary financial report for the fiscal year ended June 30, Diageo reported restaurant sales for the year are likely to be flat. The chain posted $10.3 billion in systemwide sales in fiscal 1998.
The new design, from Fitch, Worthington, Ohio, is one of many steps Burger King is taking to revive its fortunes in the brutally competitive $110 billion U.S. fast-food business, where archrival McDonald's Corp. is enjoying renewed strength.
ADDING LOCAL MEDIA
Burger King, long devoted to national advertising, has been quietly adding a layer of local media spending to fight price skirmishes. Through the first four months of this year, the chain boosted spot TV and spot radio spending to a combined $22 million, an 84% jump over the same period last year. Overall, Burger King spent $405 million on total measured media last year, according to Competitive Media Reporting.
McDonald's also has increased its local spending during the past two years, while regional chains such as Jack in the Box have shown strength in their core markets.
Burger King also kicked off a new TV campaign this month from Ammirati Puris Lintas, New York.
Steve Lewis, president of Burger King's National Franchisee Association, said franchisees are looking for any initiatives that spark sales. "We always have to