030509 Burger King Refocuses Ads on QualityMay 9, 2003Miami, FL - Burger King Corp. is refocusing its marketing to emphasize the quality and taste of its sandwiches, as the company tries to move away from the deep discounts that have hurt profits industrywide. The No. 2 fast-food chain will again promote how its burgers are cooked over an open flame, trying to differentiate itself from the fried burgers of industry leader McDonald's Corp., Burger King spokesman Rob Doughty said Friday. Burger King will increase its network television advertising to get its new campaign out. The chain hired Young & Rubicam last month to replace Deutsch Inc., the agency responsible for advertising the company's 99-cent menus. The strategy was created by new Burger King chief executive Brad Blum, who outlined his efforts to shake up the chain at an annual meeting of franchisees this week in Dallas. The fast-food industry has seen sales languish as the result of a price war, increasing competition and consumers choosing to eat at higher-quality restaurants. Burger King's operating profit fell $27 million to $250 million in fiscal 2002, which ended June 30. AmeriKing, one of the company's biggest franchisees with over 300 restaurants in 11 states, sought Chapter 11 bankruptcy protection in December. McDonald's last month reported first-quarter profits rose 29% to $327.4 million, but the company suffered its first-ever net loss of $344 million for the fourth quarter of 2002. McDonald's officials did not immediately return a phone message seeking comment. "Long-term, indiscriminate price wars are a bad thing -- bad for quality, bad for innovation, bad for reinvestment in the business, bad for everyone's profits and ultimately bad for the consumer," Blum said Friday. Burger King has no immediate plans to offer nationwide discounts on any of its products, Doughty said. Franchisees own more than 92% of Burger King restaurants worldwide and can make their own pricing decisions, Doughty said. He said in several markets, including Dallas, some franchisees have decided to keep discounts. But most franchisees at the Dallas meeting will go along with the company's new strategy, said Julian Josephson, president of the National Franchisee Association, a group that represents 95% of Burger King franchise owners. "These guys have got it right," he said. "We have a path out of this." The company will also reevaluate its 99-cent value menu, Doughty said, but he did not specify what changes could be made. The deep discounts have left franchisees in a precarious financial situation, with about 20% on the verge of bankruptcy, said Carl Sibilski, a fast-food industry analyst with Morningstar in Chicago. That will be a challenge as the chains try to increase quality to meet consumers' demands, he said.
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