Burger King parent Restaurant Brands International Inc said on Tuesday that it stripped its most famous sandwich, the Whopper, from discount menus and will raise menu prices again this year as to offset higher costs.
U.S.-listed shares of the company rose more than 3% after it topped results estimates for the fourth quarter ended Dec. 31, led by soaring online sales and better-than-expected same-store sales growth at Burger King in the United States and Tim Hortons in Canada.
Restaurant chains are raising prices because they are paying higher costs for shipping, labor and commodities including chicken, coffee and cooking oils amid COVID-19-related disruptions.
The record inflation levels and staffing disruptions due to the omicron variant dulled profits at McDonald's Corp and coffeehouse chain Starbucks Corp.
Burger King's Whopper — made from a quarter pound of grilled beef — is an "iconic" product that has "been on this core discount platform for too long," Restaurant Brands Chief Executive Officer Jose Cil told Reuters in an interview.
The chain, which often caters to lower-income customers, removed the item from its two for $5 deal but could offer limited discounts on the burger in the future.
Burger King also said it would stop selling some less-popular menu items altogether, including sundaes, whipped toppings and chocolate milk.
Cil declined to provide timelines for overall price hikes in 2022.
Toronto, Ontario-based Restaurant Brands reported total revenue of $1.55 billion, above estimates of $1.52 billion.
But U.S. comparable sales fell at Popeyes, in part because some locations have had to reduce operations by an average of one hour due to staffing shortages.
Popeyes' sales had been soaring even through much of the pandemic after the 2019 launch of its fried chicken sandwich, which was so popular that most rivals — including McDonald's and Yum Brands Inc's KFC — introduced their own similar product.
Restaurant Brands reported per share earnings of 74 cents in the fourth quarter, topping Refinitiv estimates of 69 cents.
(Reporting by Deborah Sophia in Bengaluru and Hilary Russ in New York; Editing by Krishna Chandra Eluri and Nick Zieminski)
Reuters
As an industry expert with extensive knowledge in the field of business, specifically within the fast-food and restaurant industry, I bring a wealth of experience to analyze and interpret the recent developments mentioned in the article. My understanding is deeply rooted in the nuances of the market dynamics, financial performance metrics, and strategic decisions made by key players in this sector.
The recent announcement by Restaurant Brands International Inc, the parent company of Burger King, regarding the removal of its iconic Whopper from discount menus and the intention to raise menu prices reflects a strategic response to a complex set of challenges facing the fast-food industry. This move comes in the wake of the company's positive performance in the fourth quarter, where it exceeded result estimates, driven by notable achievements in online sales and same-store sales growth at Burger King in the United States and Tim Hortons in Canada.
One of the key drivers behind the decision to raise prices is the escalating costs incurred by restaurant chains due to various factors. The article mentions higher costs for shipping, labor, and commodities such as chicken, coffee, and cooking oils, attributing these increases to COVID-19-related disruptions. This aligns with the broader industry trend, where major players like McDonald's and Starbucks have experienced challenges, including record inflation levels and staffing disruptions due to the omicron variant, impacting their profitability.
The Whopper, being a flagship product made from a quarter pound of grilled beef, holds an iconic status for Burger King. The decision to remove it from core discount platforms is a strategic move to address the prolonged discounting strategy, signaling a shift in pricing strategy. The company, often catering to lower-income customers, acknowledges the need to offset these changes by adjusting its pricing strategy and potentially offering limited discounts on the burger in the future.
Furthermore, Restaurant Brands International Inc also announced the discontinuation of less-popular menu items, such as sundaes, whipped toppings, and chocolate milk. This streamlining of the menu aligns with industry practices to enhance operational efficiency and focus on core offerings.
The article also touches upon the challenges faced by Popeyes, another brand under Restaurant Brands, where U.S. comparable sales fell due to staffing shortages, leading to reduced operating hours at some locations. Despite the setback, Popeyes had previously experienced success, especially with the launch of its fried chicken sandwich in 2019.
In conclusion, the strategic decisions made by Restaurant Brands International Inc, as outlined in the article, reflect a comprehensive response to the dynamic challenges posed by the current economic and operational landscape. These decisions, including menu adjustments and price hikes, are indicative of a forward-looking approach to sustain profitability and navigate the complexities of the fast-food industry.
