Markets

With New Owners, Burger King is out of the Frying Pan...

By Carol Tice

Updated on: September 3, 2010 / 2:45 PM EDT / MoneyWatch

Well, that was fast. As soon as rumors circulated that 3G Capital was looking to buy out the existing Burger King (BKC) shareholders, the $4 billion deal was done. Now begins the tricky work of trying to make Burger King's time under this new private-equity owner more fruitful than all the others BK has endured.

Historically, Burger King has gone into creative neutral gear under private-equity ownership. It's hard to see how things will be different on this turn of the ownership merry-go-round.

3G Capital (best known recently for being the employer of Mark Mezvinsky, who just wed Chelsea Clinton) doesn't seem like the greatest choice for a new owner. It's put money into Wendy's Arby's Group (WEN) and Carl's Jr., in the past... and those brands continue to flounder. 3G is definitely not catching BK on an upswing -- the chain posted its annual results last week, and revenue is down.
This is 3G's first time owning a fast-food chain outright. Bet Burger King franchise owners just can't wait to be the guinea pigs in this experiment. Not.

Rumors are already spreading that BK CEO John Chidsey is history after three years at the helm. Maybe that's a good thing, but 3G's replacement will need to be chosen carefully. They need a real star here -- someone who will empower menu innovation that drives sales growth, and someone who can get a cohesive marketing plan together that gets results. This brand could use a major refresh in pretty much every department. We'll know more about the outlook once we see who 3G puts in the top spot.

Then there's the touchy matter of franchisee-corporate relations. There's an ongoing class-action lawsuit franchise owners filed when BK compelled them to sell $1 cheeseburgers even though it made the franchisees lose money. BK franchisees are not happy campers.

3G could win over franchisees by settling that lawsuit saga pronto. And getting franchisees on board with the ownership change will be critical to making this next private-equity phase for Burger King a productive one.

Photo via Flickr user Creative Tools
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