POSTED: 1:30 a.m. HST, Oct 30, 2012
NEW YORK » Burger King's net income fell 83 percent in the third quarter as the world's second-biggest hamburger chain sold more of its restaurants to franchisees as part of a turnaround push. But the company's adjusted results topped Wall Street expectations.
The private investment firm that owns a majority stake in the fast-food chain, 3G Capital, has been working to put the shine back in Burger King's crown since purchasing it in 2010. In addition to unveiling its biggest-ever menu expansion and a celebrity-studded ad campaign this spring, the firm has been shifting to an entirely franchisee-owned model to cut overhead costs and boost profit margins.
Burger King, which is based in Miami and has more than 12,600 locations, said global revenue at stores open at least a year in the third quarter rose 1.4 percent. In the U.S. and Canada, the figure rose 1.6 percent as barbecue-themed menu items for the summer drove sales.
The growth was slower than in the year-ago period, however, as the chain saw a decrease in the number of "value-focused" customers. Steve Wiborg, president of North American operations, noted that Burger King is less dependent on its value menu than McDonald's and Wendy's.
CEO Bernardo Hees said sales at restaurants open at least a year are showing signs of picking up again for the fourth quarter. The sales figure is a key metric because it strips out the impact of newly opened and closed locations.
For the three months ended Sept. 30, net income fell to $6.6 million, or 2 cents per share. That compares with $38.8 million, or 11 cents per share, last year. Net income excluding one-time items totaled 17 cents per share. Analysts expected 15 cents per share, according to FactSet.
Revenue fell 26 percent to $451.1 million but was above the $439.7 million Wall Street expected.
Much of the revenue decrease came from Burger King selling restaurants to franchisees, which means the company no longer includes sales from those stores on its books.
As of Sept. 30, Burger King said 95 percent of its restaurants were owned by franchisees; the goal is to reach 100 percent.