
Burger King's CEO Is 33 - AVTizzle
http://www.businessweek.com/printer/articles/214894-burger-king-is-run-by-children
======
soneca
_" 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
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
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?

~~~
joezydeco
No, it's the same in America.

BK has lagged way behind McDs and Subway on various fronts. Lack of new
product items, old technology, minimal promotion, dirty and outdated dining
rooms. The last BK near me that hasn't closed down looks like it hasn't had a
coat of paint in 15 years. Meanwhile McDs is tearing down and rebuilding new
stores ground-up all over town.

Twenty or thirty years ago, in America, McDonald's and BK were literally in a
deadlocked battle of the giants. Burger wars! Those days are long gone.

~~~
Shivetya
Well up until just a few years ago BK was in near constant fights with its
franchise owners. That and changing ownership a few times isn't going to give
you a good base to operate from.

That and McDonald's just owns kids.

~~~
Alupis
I still prefer a BK burger to most MCD's burgers.

There is a BK near the office, and I used to attempt a drive-thru on my lunch
-- but, their drive-thru was actually slower than going inside. After a few
attempts (and being late back to the office once) I gave up.

~~~
joezydeco
To contrast, there are a group of McDonald's stores near my office that are
testing a linked drive-thru timing application. There's a scoreboard visible
from inside the work area that ranks all the local stores in terms of drive-
thru speed and service time. _They 've gamified the system_.

------
fred_durst
_> 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.

~~~
7Figures2Commas
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...](http://www.equities.com/editors-desk/stocks/consumer-
discretionary/chipotle-rolls-up-some-fat-earnings)

[2]
[http://news.investors.com/business/070214-707190-mcdonalds-y...](http://news.investors.com/business/070214-707190-mcdonalds-
yum-lose-taste-test-chipotle-tops.htm)

~~~
fred_durst
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.

~~~
7Figures2Commas
> It will take quite a few years for that to trickle down to retail investors
> and potential franchisees.

You might be right, but I would make the observation that markets seem to be
capable of changing a lot faster today. I think anyone investing in consumer
segments like retail and fast food should be open to the possibility that
meaningful trend shifts can occur and businesses can rise and fall relatively
quickly (on the order of a few years as opposed to a decade or more).

------
gdilla
More context here: [http://www.businessweek.com/articles/2013-08-29/the-
brazilia...](http://www.businessweek.com/articles/2013-08-29/the-brazilian-
billionaire-who-controls-your-beer-your-condiments-and-your-whopper)

"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. "

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AndrewKemendo
>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.

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

~~~
strozykowski
We can't forget the Subservient Chicken.

~~~
smacktoward
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](http://en.wikipedia.org/wiki/Crispin_Porter_%2B_Bogusky)).
CP+B is famous for creating highly viral, somewhat weird, vaguely unsettling
campaigns.

~~~
batbomb
My friend worked at CP+B for a while (he's now creative director at EVB). I
don't think he worked directly on the BK stuff, but I think he did have a hand
in some of it. What he did actually work on was most of the Dominos
commercials, (the LARPing and exploding car bit), some Best Buy stuff, some
viral things. We used to get private youtube links of a lot of their
commercials before they aired.

------
mrspeaker
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?

~~~
Cuuugi
I thought she was like 40 something.

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

------
jqm
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.

------
batbomb
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...](http://dialog.scarborough.com/wp-
content/uploads/2013/05/Puerto-Rico-Burgers-e1369863169485.png)

~~~
chuck8088
Basically 1 company owns all the fast food restaurants in Puerto Rico. This
company owns 0 McDonalds franchises.

------
zheshishei
_" 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.

------
Scoundreller
"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"

------
dublinben
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
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.

------
rayiner
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.

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

~~~
cowsandmilk
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
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.

