McDonald's and Burger King are competing on very different business models. Photo / Getty Images
McDonald's and Burger King are competing on very different business models. Photo / Getty Images
Fast food's biggest competitors, Burger King and McDonald's, compete for the same dollar but their operating models could not be more different.
McDonald's, the world's largest hamburger chain, operates on an owner-operator franchise model within New Zealand with 170 stores while Burger King, which has a network of83 stores, runs on a corporate model ultimately owned by a offshore private equity company.
In the year to December 31, McDonald's Restaurants NZ posted a net profit of $66.3 million, down $1.3m from $67.6m in the same period earlier.
The local division of the global fast food operator had total revenue of $252.3m in the 2018 financial year compared to $260m in 2017. Revenue from New Zealand operations was down $7.6m in the last financial year, according to its latest financial statement filed to the Companies Office.
McDonald's NZ employee expenses in the year were $42m ($48.2m in 2017), raw materials and consumables $38m ($46.4m), and property expenses $13.2m (11.3m).
It carried goodwill of $27.5m in the 2018 financial year compared to $35.1m in 2017. Meanwhile, the owner of Burger King NZ, Tango Holdings has written off $73 million in goodwill on the back of the fast food chain's slowing growth.
In financial statements filed to the Companies Office, Tango Holdings NZ said revenue growth and gross margins in the 2018 financial year had resulted in the writedown.
Tango held goodwill of $118.5m after parent company and American private equity firm Blackstone Group bought the New Zealand Burger King chain and its operator, Antares Restaurant Group, in 2011. Tango carried goodwill of $46 million after the $73m writedown.
Company accounts show Tango had revenue of $188.3m in the 2018 financial year to December 31, up marginally from $187.3m in the previous year.
It made a loss of $72.3m in 2018 compared to a net profit of $3.07m in 2017.
Employee expenses accounted for $58m - an additional $2.4m in the 2018 year, raw materials and consumables $57.4m, promotional activity $10m and property expenses $29.3m in the last financial year.
Burger King general manager James Woodbridge said goodwill was an intangible asset and the write-off had no impact on the day-to-day operation, banking covenants or the ability to generate profitable earnings in the business.
He said the business outlook for Burger King NZ remained positive and the chain would look to deploy self-order checkouts to its restaurants, launch its own app and partner with companies to offer a home-delivery platform.
Burger King is in the process of rolling out self-order kiosks to the majority of its restaurants - so far about 50 of its 83 outlets have received the technology.
The chain has also partnered with Uber Eats to offer home delivery and is in the process of launching its own mobile ordering app under development by Irish software company WeDispatch.
Burger King NZ made a loss of $72.3m in the 2018 financial year. Photo / Getty Images
McDonald's managing director, Dave Howse, said the dip in McDonald's profit reflected a global move to sell down the number of company-owned restaurants. The company has sold a number of restaurants to existing franchisees in 2016, 2017 and 2018, mainly in the Waikato, Auckland and Northland regions.
During the year the company invested $23.3m in building new restaurants in 2018, with a further $5.2m spent on renovations to company-owned restaurants.
Howse said McDonald's partnership with Uber had paid off and "continued momentum" throughout the year. He said delivery had proven popular with customers and had generated incremental sales for about 70 restaurants.
Retail analyst Chris Wilkinson, managing director of First Retail Group, said Burger King's corporate ownership model meant there was less of an "emotional connection" that helps consumers connect with a brand and offer.
Wilkinson said McDonald's had a greater brand presence and owner-operated stores enabled franchisees to adapt to the community they were in with marketing, opportunity and local needs.
"What you'll find with McDonald's, the stores are not all cookie cutters. They all respond to their markets really well. With McDonald's owner-operators you will find the stores increasingly mirror their market," Wilkinson said.
"Burger King sort of sits in a no-man's land - no one really understands what its brand values are and where it is heading."
Analyst Chris Wilkinson says McDonald's franchise model works in its favour. Photo / Getty Images
Burger King had found itself in "no man's land" following an uptake in new niche market operators entering into the market and expanding throughout the country, he said.
Wilkinson said Burger King's connection to New Zealanders was not as strong as McDonald's. "It comes down to that local connection. [McDonald's] have got really strong what we would call 'depth of connection' with the markets and that's really because of the owner-operator aspect. The owners are in their markets and they are sponsoring things like sports events and activities."
Blackstone Group put Burger King NZ on the market in March. At the time Craigs Investment Partners confirmed it had been mandated to sell the business on behalf of Blackstone and Deutsche Craigs had been hired to run an auction for the fast-food business.
Craigs Investment Partners had no comment to make when the Herald contacted it to confirm whether or not the fast food chain was still up for sale.
Woodbridge did not respond to questions about the status of the franchise's sale.
Blackstone paid close to $108m in 2011 for the franchise for 75 restaurants. Today, there are 85 spread across the country, with 83 owned by Blackstone.
