Burger King's CEO Is 33

http://www.businessweek.com/printer/articles/214894-burger-king-is-run-by-children

by AVTizzle • 12 years ago

90 74 12 years ago

businessweek.com

circa• 12 years ago

I miss the creepy King commercials. Those were the best.

strozykowski• 12 years ago

We can't forget the Subservient Chicken.

smacktoward• 12 years ago

Those all had more to do with BK's ad agency at the time, Crispin Porter + Bogusky (http://en.wikipedia.org/wiki/Crispin_Porter_%2B_Bogusky). CP+B is famous for creating highly viral, somewhat weird, vaguely unsettling campaigns.

mrspeaker• 12 years ago

Where did the Britney Spears thing come from? It's not in the article... or is it the generally accepted "football-fields-long" of age?

qq66• 12 years ago

Also, Britney Spears is 32. Should they have said the CEO is one year older, and the CFO younger?

Cuuugi2• 12 years ago

I thought she was like 40 something.

Cuuugi2• 12 years ago

Downvote all you want, the lady's got some miles on her.

dang• 12 years ago

The title was badly editorialized. Submitters: that's against the guidelines. Please don't do it.

walshemj2• 12 years ago

So excessively young CEO often indicates problems (ie no one else would take the risky job) maybe its time to short there stock

cowsandmilk• 12 years ago

He was appointed June 7, 2013.

Since his appointment, BKW is up 43%. the S&P 500 is up 22%. DOW Jones is up 13%.

In his industry: Mcdonalds down 1% Wendys up 39% Jack in the box up 56%. Panera down 22% Chipotle up 77%

Does not seem like Burger King is hurting on the stock market from his leadership.

chillingeffect• 12 years ago

Yes, but that is actually on par with the entire restaurant industry for the last year. It did shockingly well. I blame cell phones and people too lazy to cook!

Still though, I don't see BK as stock to short. Above someone said execs may be emptying it out, but at the same time, I see treeeeemendous upside in BK (and McDonald's). The other fast-risers (like Panera) are showing how to do it, and BK and McD have the infrastructure already in place. They could seriously upgrade their quality to next level.

You see this happening in the auto industry. Remember how Kias used to suck? Remember how Hyundais used to suck? And remember a generation before them how Toyota and Nissan were low-end? These restaurants could mature by supplying what people want, such as slightly healthier food.

RankingMember• 12 years ago

Who determines the age considered to be "excessively young" for a CEO? I'd imagine the most obvious metric is stock performance, and it speaks for itself in this case.

walshemj2• 12 years ago

There is a noticeable trend in business for "risky" jobs to be taken by female and BME candidates.

fred_durst3• 12 years ago

Financial engineering

Could not have said it better myself. He's just there to facilitate the transition of Burger King into a brand property play. There is little or no company left to run. The buyout and sale of 1,200 locations was the tough part. A young CEO is perfect for staying out of the way and doing what he's told while they expand royalty payments unsustainably based on the prior trust in the Burger Kind brand in order to pump money out of it until its worthless.

deskamess• 12 years ago

When BK disposes of restaurants how much control does it have and how much does the franchisee have. Is it just the royalty or are there some other binds?

If the royalties go higher how easy would it be for the restaurant owner to switch to another fast food type restaurant/franchise. How much could BK (Corporate) block that move?

7Figures2Commas3• 12 years ago

While your comment might be a little bit too cynical, I don't think it's far off from reality.

Over time, it'd be very surprising if Burger King's lack of company stores didn't catch up with it. These stores are the best channel for taking the pulse of the market. It's very hard to see a company maintaining its brand and evolving with the market with what basically amounts to a franchise-only play.

It's worth noting that Chipotle, which does not currently franchise, is absolutely killing it from both a financial standpoint[1] and a customer experience standpoint[2]. Burger King's model has an attractive financial profile (for now) but according to the same recent Consumer Reports survey that gave Chipotle top marks in its category, Burger King received one of the worst marks for burgers.

More interestingly, based on a quick glance at the Consumer Reports rankings, it appears there may be a correlation between customer perception of product quality and the percentage of company stores. In Burger King's category (burgers), the number two chain, In-N-Out, doesn't franchise, and the number one chain, The Habit, just started franchising last year and is still relatively small. Food for thought, no pun intended.

[1] http://www.equities.com/editors-desk/stocks/consumer-discret...

[2] http://news.investors.com/business/070214-707190-mcdonalds-y...

fred_durst3• 12 years ago

Right. Chains try to maintain at least some amount of stores run by the company to help guide and preserve the brand. Especially in new and high profile markets.

But 3G doesn't need to maintain the brand. The Burger King brand, both to the customer and the franchisee is still decent based upon its historical success. It will take quite a few years for that to trickle down to retail investors and potential franchisees. You have contractual 4.5% royalty of gross and 4.5% for advertising of gross. It does not matter if the franchises make any profit. The IPO paid for the original expenditure, so all BK is left with is debt. Debt which has very little teeth because the majority of assets have already been sold off with some more equity about to be drained out during a debt refinancing. Maybe this is just 3G getting in first on the feeding frenzy of the shrinking fast food, burger joint market, and didn't really change Burger King's path too much, but no one should pretend any of this has to do with running a traditional corporation looking out for its own best interest.

joezydeco4• 12 years ago

Just as another data point, Subway is 100% franchised. Out of 42,000+ stores worldwide, zero are company-owned.

chuck80883• 12 years ago

100% correct - RSI handles all the big decisions for the fracnhisees

dublinben• 12 years ago

I wonder what their customer demographics are like in the US. I don't eat fast food, and probably haven't been to a Burger King in over a decade. Somehow they're still running thousands of profitable locations though.

chiph• 12 years ago

I get the impression that they appeal to lower-income people.

Personally, I stopped going there when they switched to coated fries. Note to restaurateurs: I don't care how good the burger is -- if you have bad fries, I'm not eating there.

soneca• 12 years ago

"Jorge Paulo Lemann, 3G’s 74-year-old billionaire co-founder, likes to enlist young executives and put them in top positions at the firm’s companies."

Do you remember PG essay about the PR submarine? That's more like it. Make no mistake, Jorge Paulo Lemann and the other two billionaire partners are among the best business men in the world. They got there building huge business after huge business (not like the gambler ex-billionaire Eike Batista).

So there are 3 very smart, wise (and old) guys telling these young smart folks where to go and what to do. Not micro-managing, of course, but the biggest, toughest decisions are theirs. So it is very different in autonomy and leadership from public companies CEOs. And a world of distance of Zuckerberg's owner, founder, CEO, rules-it-all role.

PS: I don't want to minimize the young guys success, I am sure they worked hard and smart and deserve their positions. Just clarifying what exactly means the "CEO role" here - according to my own personal opinion, of course.

vm• 12 years ago

Having met Schwartz and his team, I think you'd be surprised by how he describes his role: it's simple. That's why he can do the job at a young age.

Burger King sells a well-known product in a predictable market. They don't invent crazy new things. They operate efficiently and scale operations that work.

Facebook pioneers technology and products that the world hasn't seen before. For Facebook to do so well requires a combination of grand vision, operational effectiveness, recruiting and managing ultra-high caliber talent, and more.

Burger King isn't an "easy" business to run but it's a well-defined business with a simpler playbook than a company like Facebook.

I'm sure BK's investors are great advisors but I suspect the company's success is because of the highly capable team tackling a market with a well defined playbook.

mattmanser• 12 years ago

In the UK Burger King has been absolutely destroyed by McD's and Subway on the highstreet. The only time I ever see a busy BK is in their monopolies in motorway service stations and inside railway stations.

Is it different in America? Still relevant?

pitt1980• 12 years ago

why can't a burger place invent a 'crazy new thing'?

seems like new food inventions drive alot of the marketing behind their competetors

trying out new menu items is just 1 thing that pops to mind, and I'm probably completely missing 100 other things that a burger place could inovate on

7Figures2Commas3• 12 years ago

I'm sure BK's investors are great advisors...

Bill Ackman is the hedge fund investor who played a key role in formulating Burger King's current strategy[1].

Ackman brought former Apple retail chief Ron Johnson in to run J.C. Penney, which turned out to be a huge disaster. Ackman reportedly lost ~$500 million.

Now, don't get me wrong. I'm not saying that Ackman is not a smart man based on one failed investment. In fact, I'd argue that he was 100% correct about the need for J.C. Penney to change, but it's one thing to identify a need for change and another to make the right change. If you execute well the wrong strategy, you're still going to fail.

The problem with Burger King is that what you call "a well defined playbook" is far from a proven playbook. There has been a trend in the restaurant business for chains to reduce the number of stores they own, but as a percentage of all stores, Burger King has basically dumped all of its company stores.

Today, that gives Burger King a financial profile that investors can cheer, but the company's ultimate success depends on what happens tomorrow. There are more reasons than not to believe Burger King's strategy will hinder and not help the company over the long haul.

If I was an investor in such a competitive space, I'd absolutely bet on companies being led by a visionary leader like Steve Ells (founder and CEO of Chipotle) over companies being led by former Wall Street folks with little to no restaurant experience.

[1] http://online.wsj.com/news/articles/SB1000142405297020333550...

drum• 12 years ago

"They don't invent crazy new things."

In the world of fast food, I see this as a problem. Taco Bell released the Dorito Loco Taco which has now made its way on to the main menu. Subway releases new promotional subs and items like the Flatizza, it seems almost bi-monthly. While the latter may not be as big of a success, it still garners awareness.

I can't think of one "crazy" item Burger King has released in the last few years.

mathattack• 12 years ago

Their challenge is they have to scale via people, as opposed to via technology (like Google) or money (Hedge Funds). This can be very difficult.

That said, if the plan is right, sometimes it is energy that's required to make things happen. If some very wise board members have set the right strategy, I think he can pull it off.

I'm not sure if it's any harder or easier than Facebook, but in today's economy, the right skills and intensity are more important than the longest resume.

steveklabnik• 12 years ago

They don't invent crazy new things.

I remember reading something about McDonald's chefs. As in, the people who design new menu items. One of them described it as a really interesting job, because you have to take into account things like 'what is the world supply of this ingredient.' I forget what their example was, but they had built something new, and they had determined though sales projections that McDonald's would have to purchase _the entire world supply_ of this ingredient for it to work out.

Or, consider things like the McRib. If I remember correctly, McDonald's only offers it for limited times because they have to wait until the pork market is cheap enough that they can turn a profit.

I worked at a pizza chain, and our chefs often had to make new foods work with the ingredients we already were stocking, at least, as much as possible.

There is creativity and invention in fast food, it just works under a very peculiar set of constraints.

JPKab• 12 years ago

Part of me tires of these ivy league automatically gets CEO crap. How does success on Wall Street translate to operating burger company, other than knowing how to keep shareholders happy?

Why can't Jorge just find a badass manager somewhere who knows how to operate the restaurants to a T and put her in charge?

freyr3• 12 years ago

Getting into an Ivy League school means you had the foresight and intelligence in high school to create a truly outstanding college application -- you're smart, but also willing to play the game and jump through hoops. That's an immediate qualifier for employers.

Or you're well connected. And even if you weren't well connected going in to an Ivy League school, you will be by the time you leave. You're now friends with people who will hold financial, political, or managerial power in 10-20 years.

This networking effect is compounded because the top consulting firms and investment banks (CEO/CFO factories) target Ivy League grads. As a management consultant, you learn how to give a convincing and engaging Power Point presentation despite the fact that you're 22 years old and know nothing. This is an extremely useful skill.

It's a path. If you're on it, it's risky to step off; once you're off, it's nearly impossible to get back on.

But, in all fairness, entry-level IB or management consulting is probably much better preparation for the skills required of a CEO than sitting at a computer all day writing code.

allsystemsgo• 12 years ago

Do you have a link to said essay?

Edit: Here's the link, I believe. http://paulgraham.com/submarine.html

batbomb2• 12 years ago

I went to Puerto Rico recently and one thing I remember was how strange it seemed to me how much more popular Burger King was versus McDonalds there. I'm not sure if this is a general Latin American (including Miami?) trend, but I just remember it being a little noteworthy.

Here's a picture I found of (supposed) market share in Puerto Rico, for example:

http://dialog.scarborough.com/wp-content/uploads/2013/05/Pue...

wcfields• 12 years ago

Maybe it's because Burger King is more willing to make their items spicy?

chuck80883• 12 years ago

Basically 1 company owns all the fast food restaurants in Puerto Rico. This company owns 0 McDonalds franchises.

AndrewKemendo• 12 years ago

Burger King Is Run by Children

I don't think Businessweek could have come up with a more patronizing headline if they had tried to.

Kudos to Jorge Paulo Lemann, William Ackman and others who can see value regardless of age.

gdilla• 12 years ago

More context here: http://www.businessweek.com/articles/2013-08-29/the-brazilia...

"In two years under Hees the company more than doubled its margins, as measured by Ebitda (earnings before interest, taxes, depreciation, and amortization), Wall Street’s preferred gauge of cash flow. He did this in part by recasting Burger King as an owner of franchises rather than an operator of restaurants and sold off locations owned by the company. This allowed Hees to shove about 28,000 employees off Burger King’s balance sheet. It also meant the company didn’t need to spend as much to refurbish aging restaurants; instead, it offered incentives and lined up loans for franchisees to revamp their locations, replacing dull old plastic countertops with shiny metallic surfaces and futuristic stripes of neon. "

rayiner• 12 years ago

The Britney Spears reference is silly: she's 32, closing in on what the U.S. census defines as "middle age" (35-55). It's not that unusual. E.g. Jamie Dimon was President of Travelers at 36.

zheshishei• 12 years ago

"In 2009, Burger King put the $1 Double Cheese Burger on the menu. The item increased sales, which meant Burger King collected more in royalties. But franchisees abhorred it: They couldn’t make money selling a big cheeseburger for a low price. The Burger King franchisee association sued the company to get the burger off the menu. “It was beyond toxic,” says consultant Knapp of the chain’s relationship with its franchisees at the time."

I subsisted off the $1 Double Cheeseburger for a year in college. Now I feel rather guilty about it. Oops.

jqm• 12 years ago

I live in a small town in the South West US. Well over 50% of the town is Latino. There was one BK in town and it closed. For several years there was no BK. Then, a new one was opened around 2 years ago and it was quite the event. For weeks the line stretched for hundreds of feet through the parking lot (they actually had to put up cones to snake it around) and you couldn't get a seat.

I personally don't care for BK at all and scratched my head about this. Their food is abominable in my opinion... not to be negative but it just is what it is. It frankly tastes like they put sugar in their hamburger and they probably single handedly use 30% of the mayo consumed in the US. But maybe they have something that appeals to a certain group of people. Apparently they do. The restaurant is still consistently pretty busy. I went once just to find out if they were as awful as I remember and determined they were worse. But in certain demographics they appear to remain popular. No point... I just found all this interesting.

Scoundreller• 12 years ago

"They talk about the need to instill everybody at Burger King with an “ownership mentality,” meaning mainly that employees should husband the company’s money as if it were their own."

I always translate this to: "Share in the losses, and maybe, just maybe, we'll share some of the wins with you, if there's enough after satisfying our insatiable desires"

Burger King's CEO Is 33

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