Management at the world's second largest burger chain is positioning the company to go public as early as 2006.
While the chain's chief executive officer, Greg Brenneman, has not given a specific date, he indicated to Reuters News that an initial public offering (IPO) is the likely exit strategy for the company's present owners, a group of three private equity investors consisting of Bain Capital, Texas Pacific Group and Goldman Sachs Capital Partners. Meanwhile, management is trying to maximise the potential outcome of an IPO, and it has taken steps to improve the company before returning it to public hands.
Following troubled years under ownership of Diageo Plc, Burger King was restructured. In the past two years, it turned around declining sales that stripped more than US$700 million from operations its largest market, the US, and resulted in the closure of nearly 600 outlets. Burger King's sales last year reached US$7.8 billion in the US and nearly US$11.3 globally, while its same-store sale have grown for fifteen consecutive months in the US.
Burger King has revitalised its business and is poised for greater growth. The chain has blazed a trail to open outlets in new international markets, development new products, and design new restaurant layouts.
Recently opened locations in Brazil and China, two fast food growth markets where it has been noticeably absent, are major markets for the expansion of the chain. While new products, such as its new BK Veggie Burger, BK Joe premium coffee and a product under development called BK Chicken Fries, are in tune with consumer demands for healthy menu items, premium coffee, and portable and inexpensive fast food products. The chain has also designed a compelling store layout that may lower start-up costs and increase profitability for franchisees.
IPO is an incentive for building value in BK
While its management discusses the chain's IPO, the chain is pushing to improve its value before a public offering takes place. Its owners rightly expect a sizeable return on their US$1.5 billion investment. Supporting the owners' effort and Burger King's overall success, the chain is expected to continue expanding and innovating, while strengthening relationships with franchisees that could lead to even greater performance.
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