BK details new broiler, smaller-building rollouts

MIAMI Burger King Holdings Inc. will have its energy-saving flexible batch broiler in all 850 company-operated stores within the United States and Canada by July 1, executives said at a financial conference in Las Vegas on Wednesday. The new equipment yields a savings of about $600 per restaurant annually, according to the officials.

Speaking at a Citicorp-hosted gathering of investors in small and mid-cap companies, BK executives also offered details about the chain's development of a new building prototype called Return on Capital, or ROC. At present, 26 of the new, smaller outlets are open, and 12 more are under development. About half the units currently under development, by the company and by franchisees, will use the new design, John Chidsey, chief executive, and Russ Klein, president, global marketing strategy and innovation, told attendees. The ROC building costs about $900,000, versus $1.2 million for the standard BK, Klein estimated.

The ROC features less seating capacity of between 40 and 80 seats, a smaller lot and savings on utilities and other costs. Yet, at an analysts meeting late in January, executives said some stores were generating volumes that annualize over $1.7 million, compared with a systemwide sales mean of $1.1 million. The ROC format yields a cash-on-cash return of 33 percent, according to BK.

The flexible batch broiler, Burger King's first new broiler design in 54 years, cuts gas and electricity usage by as much as half, Klein told analysts. He predicted that new equipment would be rolled out systemwide within two years. At the December investment meeting, executives explained that suppliers were unable to manufacture the devices more quickly.

Klein also forecast net new unit growth of between 100 and 125 domestic restaurants in the fiscal year that ends June 30 and more than 200 in fiscal 2008. The U.S. has some 3,500 areas that are "uncontested" by Burger King, he said, adding that 80 percent of growth is occurring internationally, currently in 65 countries.

The BK system consists of about 11,100 restaurants worldwide, of which roughly 90 percent are franchised.