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First Timbits, now Whoppers: Burger King owner eyes revamp

A Burger King franchise is seen in Toronto on Tuesday.

Chris Young/The Canadian Press

The Brazilian private-equity firm that acquired and improved the financial performance of brewer Anheuser-Busch and food specialists Heinz, Kraft and Tim Hortons is turning its attention to Burger King's Canadian unit.

Brazilian owned 3G Capital Management LLC bought Burger King Holdings Inc. in 2010, but put few resources into its Canadian division, leaving the chain to underperform bigger rivals such as McDonald's Restaurants of Canada Ltd. and A&W Food Services of Canada Inc.

Now 3G is fighting back, installing its own president at Burger King Canada for the first time – Eric Hirschhorn, a former 3G general counsel who helped put together the Burger King deal and then became an executive at the chain in Miami. He's bringing a team here from Burger King to engage in earnest in the domestic burger wars.

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Mr. Hirschhorn said in an interview that he is determined to bolster the chain's operations in Canada.

"It was just never really a focus for the business," said the 35-year-old executive, clad in khakis and white shirt under a sweater sporting a pin of the chain's signature Whopper burger.

"So we realize there is tremendous opportunity in the country to be much more than we are."

3G has managed to boost Burger King's results over all, partly by applying the 3G cost-slashing playbook to its business and also by expanding the operations globally. But the chain remains something of an outlier in Canada, where it has failed to keep up with fast-paced competition.

Restaurant Brands International Inc., parent to Burger King and Tim Hortons, reported recently that Burger King's third-quarter sales at existing restaurants in the United States and Canada combined slipped 0.5 per cent, although Mr. Hirschhorn said those sales rose here and have been positive for the past 29 months as customers responded to the chain's heavy discounting and deals. (The company doesn't break out its Canadian Burger King numbers.)

Branding expert Bruce Philp said Burger King has been in "slow motion" in Canada, switching to different menu options and marketing campaigns.

"They've never, to me, behaved like a healthy, confident brand," said Mr. Philp of Heuristic Branding.

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In the Canadian burger restaurant market, Burger King Canada ranks No. 5 in dollar-sales after McDonald's, A&W, Wendy's and Dairy Queen, industry data indicate.

Robert Carter, executive director of researcher NPD Group, said Burger King's brand recognition is strong in Canada because of U.S. advertising spillover. But the chain has little Canadian identity and "it's just not resonating with Canadians," he said.

He said Burger King ranks No. 1 among burger chains in offering discounts, deals and coupons. "In this marketplace, discounting is not really a strategy for growth," Mr. Carter said.

In the year ended Sept. 30, the Canadian burger restaurant market grew 6 per cent to about $8-billion, according to NPD Group. Sales in the segment grew about 5 per cent annually over the past four years, it found. But Burger King has underperformed the market, Mr. Hirschhorn said.

As well, Burger King Canada has trailed its U.S. sister chain in customers' perception of such matters as "pleasant, friendly service" and food quality and taste, said Robert Byrne, senior manager of consumer insights at researcher Technomic, which tracks customer views on those issues. Still, Burger King Canada's ratings have recovered slightly in 2016 after bottoming out last year, he said.

Mr. Hirschhorn, formerly chief marketing officer at Burger King North America, said his team has now moved into the same head office as Tim Hortons in Oakville, Ont., which is RBI's headquarters. Previously, Burger King ran its Canadian business out of Miami, where Mr. Hirschhorn still lives; he commutes here weekly.

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He said Burger King will take lessons from Tim Hortons, which in Canada has one restaurant for every 9,000 people compared with Burger King, which has one outlet for every 129,000 people in Canada and one for every 45,000 people in the United States.

He noted Tim Hortons' ratio of restaurants per capita is so attractive "it's unheard of."

With 281 Burger King restaurants in Canada, compared with 7,101 south of the border, the chain will add many more outlets here, he said, without elaborating. "We see this country to be one of our fastest-growing, largest opportunities around the world."

He said he is looking for more franchisees. Currently, master franchisee Redberry Investments Corp. of Montreal runs 125 restaurants.

He also plans to invest in remodelling restaurants, giving them a modern look as Burger King has done at its U.S. locations, and pump up its marketing here.

But he said it's important to recognize the differences between Canadian and U.S. consumer tastes, despite similarities. For example, poutine is one of Burger King's top-selling products in Canada although it's not offered south of the border. "We still need to understand those nuances."

And he said consumers on both sides of the border appreciate deals, such as two sandwiches for $5 and "Whopper Wednesday" promotions.

The chain will try to draw more customers with new product launches, such as jalapeno chicken fries this week, he said. It introduced hot dogs this year in the United States and could eventually follow suit in Canada, he said.

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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