Restaurant Brands International CEO Daniel Schwartz wanted to talk about its very exciting Tim Hortons development deal in The Philippines rather than the very disappointing Q2 performance of its larger brand’s largest market. For the three months ended June 30, 2016, Burger King’s same-store sales in the U.S. & Canada declined to -0.8%, compared with a 7.9% gain a year ago.
Schwartz allowed that yes, it did “see some softness in the industry in the second quarter” but he insisted that the six-year-old Burger King game plan of “fewer, more impactful new product launches” is still sound. “We try not to get too focused on macroeconomics,” he said.
I wouldn’t focus on macroeconomics either if it showed the “fewer/bigger” approach hadn’t worked. Consider Burger King’s series of new products this year: Grilled Dogs (February); red-bun Angriest Whopper (March); Chicken Fries Rings (April); Egg-normous Burrito & Whopper Dogs (May); and Mac ‘n Cheetos (June). If social-media impressions rather than sales were the important metric, Grilled Dogs and Mac ‘n Cheetos would have been smashing successes, but they’re not.
Throw in a “2 for $10 Whopper Meal” deal in May and it’s fair to ask whether the -0.8% slide in comp sales signals a need for rethinking strategies, especially if there’s only “some” softness in the market. Burger King’s unit count in the U.S., which accounts for 47% of its system, declined by a net 15 stores in Q2. These are not positive signs, but Schwartz was steadfast in his optimism about the future.
BK’s Q2 numbers are substantially below those of sister chain Tim Hortons, which grew comp sales by 2.3% in Canada and 5.9% in the U.S. Given those performances, it was difficult for Schwartz to use market softness as an explanation for Burger King’s decline. Schwartz said he didn’t want to return to introducing “a variety of new small [menu] items” at Burger King, but that approach obviously worked well for Tim Hortons, where new but not flashy items such as Savoury Potato Wedges, panini and salads performed well.