Burger King Franchise Review 2022

Written by: Patrick Findaro
Last Updated: January 25, 2022
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This article is based on a video originally recorded on Vetted Biz YouTube channel.

Patrick Findaro here, co-founder at Vetted Biz. As many of you might know, my brother and business partner out of Georgetown, his university, worked at Burger King and really got a lot of his franchise training at Burger King.

So today, I’m going to go through some of the insights we learned from our analysts at Vetted Biz, and from my discussions with my brother, Jack, about the Burger King franchise. And looking into 2022, could this be a good opportunity for you?

So let’s go first through the numbers on their last franchise disclosure document that they do disclose, 2020 Burger King median franchise sales were pretty good at $1.35 million. We can estimate based on the net revenue of $1.3 million, operating about a 13% profit margin, the average Burger King franchisees making about $175,000.

Midpoint investment for Burger King

Now, from the onset, that does look really nice, but you have to see how much money you’re investing in that business to get about a $200,000 income from that business. So the midpoint investment is pretty high. It does include a lot of cost, the leasehold improvements, even building out the facility. It doesn’t include the land, many Burger King franchisees also own the land, and that is a cost that you have to add in.

But looking just at the business for a second, the midpoint investment’s $2.6 million. So based on profits of $175,000, it’s gonna take you a long time, about 15 years to recuperate your initial capital investment. The high-performing locations make margins of an excess of 20%. The payback period based on the business can be shorter, even as close to five years, especially you had just invested $1 million or $1.5 million. However, keep in mind, their largest franchisee Carol’s Restaurant Group, which operates a thousand-plus locations has a profit margin of just 1% on the corporate level.


Most Burger Kings and quick-service restaurant franchises are not actually making most of their money from the business, they’re developing real estate.


 

Burger King’s return of investment

Again, the profit margin on the individual locations is higher than that, but they have a lot of overhead at the corporate level to manage those thousand-plus Burger King franchise locations. And from what I understand, their portfolio of other brands like Popeye’s, which is also owned by the parent company of Burger King Restaurant Brands International, does significantly better than the Burger Kings that Carol’s Restaurant Group owns.

Most Burger Kings and quick-service restaurant franchises are not actually making most of their money from the business, they’re developing real estate. They’re occupying the space as a franchisee, and then they’re selling that real estate to a REIT or an investor. And with that, you can recoup your investment in much faster than 15 years, and bring that period closer to five, if not better. And a lot of these multi-unit operators are using leverage, and you might be eligible through the SBA 7(a)loan program to get a loan to finance, not only the business operations of your Burger King but also the land acquisition.

Burger King, hamburguesa, papas fritas, combo

Non-traditional Burger King locations

Also, if you like the brand, the U.S. might not be the best place to open up. I was in France over the summer, and there were lines across the block in one of their locations in Paris. They’re selling a lot of burgers and the American burger, and especially with Burger King, is really well received in many countries. So you might wanna open up outside the United States, it’s something to consider.

Also think about some non-traditional locations like opening up in an airport where the total investment might be as low as $200,000, $300,000 because the space is already built to have a quick-service restaurant operating out of there. So if you can invest $200,000, $300,000 to open up in an airport, make $1 million of sales at a 13% profit margin, we’re talking about now recuperating your investment in two, three years compared to what potentially could be 15 years to recoup your initial capital investment in a traditional Burger King location when you don’t look at the real estate.

 

In closing

So those are some things to consider, maybe go the non-traditional route, like opening up a Burger King in an airport, opening a Burger King overseas, or thinking about some financial engineering as well as how you’re gonna partner with maybe a real estate developer to make money that way. I hope you liked this video. If you have any other franchises you’d like us to review, shoot me an email, patrick@vettedbiz.com. Thanks.

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