Burger King failed to compete with McDonald's and KFC

Wednesday, 15 April 2020

Burger King slumps into receivership after Covid-19 forces stores to close.

The demise of Burger King in New Zealand has been in the tea leaves for some time, fast food industry experts say.

Burger King announced it was going into receivership on Tuesday.

Over the last 30 years Burger King has struggled to gain significant market share in New Zealand's competitive fast food market.

The chain managed to capture only 14.9 per cent of the market in 2018, according to research company Roy Morgan.

Burger King sat just behind Domino's pizza chain which held 15 per cent of the market and KFC, with 17.7 per cent but well behind McDonald's 33.3 per cent.

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Burger King has struggled to shine in the competetive fast food market, says First Retail Group managing director Chris Wilkinson.

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Industry experts said Burger King's demise reflected more on the company than the industry overall.

One analyst said Burger King's financial performance had been average over a number of years so it was not surprising that it was one of the first to fail.

'I wouldn't look at that and read through to other operators. This is more a company specific issue that has just been brought to light because of Covid-19,' he said.

First Retail Group managing director Chris Wilkinson said New Zealand had an intensely competitive and innovate selection of fast food companies.

'We have the likes of the Burger Wisconsins, Burger Fuel, Hell Pizza and a lot of these home grown challenger brands sit alongside the likes of Carl's Jr and the strength of McDonald's and KFC,' Wilkinson said.

New Zealand had a high number of fast food brands.

'That means if you are not strong, you fade into the background,' he said.

Burger King sat in the middle of the market and had struggled to stand out, he said.

This wasn't always the case.

When Burger King launched in 1993, it was quite innovative, Wilkinson said.

'But that disappeared quite early on. If you look at the model compared to others, they are a wholly company-owned brand where as if you look at McDonalds and the challenger brands, they are franchised and individually owned.'

Over the last decade, Burger King has been up for sale a number of times.

The current parent shareholding companies in receivership were Tango Finance Limited, Tango New Zealand Limited and Antares New Zealand Holdings Limited.

In a letter to staff, Burger King New Zealand chief executive Michelle Alexander said the company did not have the cash flow to fund trade creditors and rent payments.

'When the business is restarted, it will take time for us to reach our pre-lockdown trading levels and there is uncertainty as to when the lockdown will end and how quickly trading will recover.

'Our shareholders have advised that they will not be putting any further equity into the business. As a result, Tango New Zealand Limited, has been placed into receivership with KordaMentha.'

A new owner for Burger King would be sought after the business resumed trading.

In 2018, the company was barred from hiring immigrant workers for a year after it was found to have underpaid a worker.

Burger King has 83 restaurants with over 2600 staff.