Burger King Sales in U.S., Canada Dropped 4.6% in First Quarter

Company Discusses Klein's Leave, Double Cheeseburgers and Its Focus on the 'Super Fan'

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CHICAGO (AdAge.com) -- Burger King executives were grilled during a first-quarter earnings call this morning on subjects ranging from advertising to the wisdom of its double-cheeseburger promotion to the status of chief marketer Russ Klein, who the company has said is taking a leave of absence.

The chain, which reports on a fiscal calendar, posted a 4.6% decline in same-store sales for the U.S. and Canada. Executives also for the first time quantified the CMO's personal leave of absence announced in mid-September as having a 90-day duration. They declined to comment further, and Mike Kappitt, Mr. Klein's day-to-day stand-in, took his place on the call.

CEO John Chidsey pointed to an NPD estimate that quick-service restaurant traffic declined 3% during the third quarter of calendar 2009. "And unemployment and underemployment levels, especially as it relates to the industry's targeted demographic which is our super fan, also continued to deteriorate," he said. "As a result, our top line, similar to most of our peers, was negatively impacted."

That prompted some analysts questioning Burger King about its focus on the "super fan" -- young men who are heavier fast-food users -- and whether it might want to consider another take on advertising, perhaps with less focus on gaming and movies like "Transformers 2." But Mr. Chidsey said Burger King is committed to staying the course. "Some of that gets potentially overshadowed by just what's going on in the economy and what's going on with unemployment," he said, adding that if Burger King hadn't done those marketing programs this year, "things would be even worse."

Burger King declined to give same-store sales guidance for the rest of the year, saying that there could be five-point swings, from slightly negative to slightly positive, depending on the success of its new dollar double cheeseburger, which based on tests could eventually account for 5% to 10% of sales at some restaurants.

Most analysts' questions pertained to its controversial double-cheeseburger promotion. Franchisees strongly opposed the promotion, which is now a nationally advertised push anyway. (McDonald's took its smaller double cheeseburger off the value menu about a year ago, in response to franchisee complaints about commodity costs.) Burger King has admitted that it's suffered in the area of value perception, and it's fought to build awareness of deals since the summer through advertising, couponing and various promotions.

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