Burger King's Growth Plans On Track - Analyst Blog

By Zacks Equity Research,

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Leading restaurateur, Burger King Worldwide, Inc.   ( BKW ) has been undertaking a series of initiatives such as unit expansion, reimaging, closure of underperforming units and several other initiatives to improve brand recognition.

Recently, Burger King announced that it is set to unveil three restaurants in Martinique, an island in the eastern Caribbean Sea in an overseas region of France. The new restaurant launch is also part of the company's brand-building efforts. In collaboration with its franchisee partner, ADM Food Services, these three restaurants are slated to open in Le Lamentin, Fort-de-France and Guadeloupe in April, September and December 2014, respectively.

Burger King intends to capitalize on ADM Food Services' extensive knowledge of the local market to expand its flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks, and other food offerings in the market. It also plans to open four additional restaurants in the French Antilles by the end of 2015 in partnership with ADM Food Services. Moreover, it intends to work with the franchisee to set up the supply chain in Martinique, Guadeloupe and French Guyana to establish its restaurants across the territories over the next few months.

Burger King is looking to accelerate its presence in high-growth potential international markets mainly through franchising. Of late, the company has initiated ventures in key markets like Russia, China, Mexico, Central America, South Africa, Singapore, Malaysia, Korea and Vietnam.

We believe franchising a large chunk facilitates earnings and return on equity growth by reducing capital requirements. The company's franchised business model allows it to generate strong free cash flow, thereby helping it to maintain a healthy balance sheet. Moreover, since a major portion of its business is franchised, Burger King is less likely to be affected by inflation compared to its peers.

This Zacks Rank #2 (Buy) company posted mixed fourth-quarter 2013 results in January with earnings beating the Zacks Consensus Estimate and revenues missing the same. However, driven by net restaurant growth and higher comps in the Europe, Middle East and Africa and Asia Pacific regions, organic revenues grew 5.2%.

Some other stocks worth considering in the restaurant industry include Famous Dave's of America Inc. ( DAVE ), Jack in the Box Inc. ( JACK ), and Brinker International, Inc. ( EAT ). While Famous Dave's of America and Jack in the Box sport a Zacks Rank #1 (Strong Buy), Brinker International holds a Zacks Rank #2.

BURGER KING WWD (BKW): Free Stock Analysis Report

FAMOUS DAVES (DAVE): Free Stock Analysis Report

BRINKER INTL (EAT): Free Stock Analysis Report

JACK IN THE BOX (JACK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BKW , DAVE , EAT , JACK

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