Burger King PESTLE Analysis
Detailed PESTLE analysis of Burger King examining political, economic, social, technological, legal & environmental factors.
Political Factors:
Burger King is one of the largest food chains in the world. In 2014, Burger King Worldwide merged with Tim Hortons, and a new parent company was formed – Restaurant Brands International. As the parent company’s headquarters are located in Canada, it enjoys lower rates of corporate tax on offshore profits. Burger King’s offshore profits were subject to US Federal taxation laws, which mandated tax after repatriation also resulting in double taxation. Thus, Burger King is now able to enjoy tax savings. The brand continues to expand its stores in Asian markets like China and India. In India, it has filed trademark cases. There have been cases of joints in malls with similar names or logos, affecting its business. Thus, these events affect the financial performance of the business. Furthermore, Brexit could impact the supply chain, financial, tax, legal and trade side of Burger King’s operations in UK, and the European Union. The same has been stated as a risk in Restaurant Brands International annual report.
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This concludes the political factors in the Burger King PESTLE Analysis.
Economic Factors:
Below are the economic factors in the PESTLE Analysis of Burger King:
Since it is a global brand, it is affected by several economic factors. The impact of Covid-19 and consequent lockdowns has resulted in a decline in the global revenues.
Also, Burger King faces risks of fluctuating foreign currency exchanges and changes in interest rates. The company tries to minimize these risks by diversifying geographically and using derivatives, these strategies may not always be entirely effective and could affect performance of the business. Since it has a franchise-led business model, it is also labour-intensive. Labour costs and the long-term trend of increasing wages in both developing and advanced markets can potentially affect the profitability of the business. Also, it faces risks from labour unions affecting its daily operations. It sees tremendous opportunities in India and continues to expand its stores. As of September 2020, the company has 260 stores. Burger King India Ltd. came up with an IPO in 2020. The IPO was worth Rs. 810 crores.
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Social Factors:
Following are the social factors impacting Burger King PESTLE Analysis:
Many social factors define the business of Burger King. As the restrictions due to Covid-19 induced lockdowns are lifted or gradually reduced, consumers are still worried about social distancing rules and safety of food. Thus, they need to ensure eating out is safe for people. For example, in Italy it plans to introduce an app for three of its Milan restaurants, that allows users to check if the restaurant is crowded anytime. Increasing public health awareness poses new challenges to Burger King. Some of its products contain caffeine, dairy products, sugar, allergens, etc. These food items could pose health risks. Also, in the US and UK there is rising awareness of health risks, like obesity. There is also a growing trend towards vegan foods in many countries. Thus, this may lead to growing change in consumer taste and preferences, thereby reducing future sales.
Technological Factors:
The technological factors in the PESTLE Analysis of Burger King are mentioned below:
Burger King started The Traffic Jam Whopper service in Mexico. There are often very long traffic jams in cities. The chain created a service by which commuters can order food on King’s app, via voice commands. Then bike riders deliver the food in the middle of the traffic jam. The company also uses real-time data to understand the concentration of traffic and alerts local restaurants to ensure speedy delivery. In the first week, this resulted in a 60% increase in orders. Burger King unveiled new restaurant designs called as “Restaurants of Tomorrow”. These restaurants will have technology enabled components. These include Curbside delivery, Pick Up Lockers, Drive-Thru and suspended kitchen and dining room. For example, delivery orders can be picked up from coded food lockers facing exterior of restaurant. This enables food to be moved from the kitchen to pick up lockers.
This, the company claims, will improve customer experience.
Legal Factors:
Following are the legal factors in the Burger King PESTLE Analysis:
The company is subject to regulation by various health, sanitation, safety authorities. In many of its markets like US, UK, Canada, Europe, the company is facing growing regulations, which may affect its cost of doing business. Burger King may be subject to litigations with franchisees, employees, suppliers, customers and even cases related to intellectual property rights. This may harm company reputation, transfer funds away from operating activities and adversely affect financial performance. While the company has insured for some of the losses arising in case of unsuccessful legal cases, it may not be enough to cover very high costs. There is also the risk of delay in receiving sum insured or the amount may be insufficient to cover fully the losses.
Environmental Factors:
In the Burger King PESTLE Analysis, the environmental elements affecting its business are as below:
Burger King has found new opportunities by providing more environmentally-friendly products. They recently introduced new food items to reduce the environmental effect of consuming beef. ‘The Impossible Burger’ is an innovative food item, produced to serve meat-less burgers to customers. This burger is made from soy protein and is similar in texture and taste of meat. As people become aware of environmental impact of consuming meat products, this is good alternative to consumers who are environment-conscious and still want the same taste of original burgers.
This plant-based burger has 15% less fat and 90% less cholesterol, too. Yet, the company still faces high risks due to unpredictable events like adverse weather conditions, natural disasters, pandemics or catastrophic events. The most prominent example is the Covid-19 pandemic which caused reduction in restaurant sales globally.
To conclude, the above Burger King PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
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