Burger King loses food fight to McDonald's
By : Juliet D. Golden
In what most likely signals the imminent pullout of fast food giant Burger King from the Polish market, last month Wroclaw-based Pizza Hut and KFC operator American Restaurants (AmRest) bought out International Fast Foods Polska (IFFP), owner of Poland's 22 Burger King restaurants.
"We have entered into an agreement to buy IFFP and we expect to close it at the end of March," said Henry McGovern, president of AmRest.
Other than confirming that a takeover deal has been signed, representatives from both AmRest and IFFP would not comment on the details of the transaction nor would they confirm that the deal marked the demise of the Burger King brand in Poland.
AmRest holds the master franchise license for Pizza Hut and KFC in Poland and the Czech Republic. The majority of the company is held by five investors including McGovern and Don Kendall, PepsiCo's founder and chairman for 27 years. Operating more than 30,000 restaurants in 103 countries, Tricon Global Restaurants owns 49% of AmRest.
AmRest purchased IFFP from International Fast Foods Corp. (IFFC), owner of the franchise licenses for both the Burger King and Domino's Pizza brands in Poland.
While both AmRest and IFFP are being tight-lipped as to the ultimate fate of Burger King here, AmRest employees Tomasz Wisniewski and Jacek Trybuchowski have taken over as president and vice president of IFFP. In addition, two Burger King outlets in Opole and Torun have closed their doors suggesting that the brand's days in Poland are numbered.
"Some restaurants have already been closed, but that does not mean that they will stay closed," McGovern said. "Some stores are undergoing renovation."
But for competitors and others the deal marks the end of Burger King's eight-year attempt to win the burger wars with McDonald's and grab a significant market share. For these market watchers, the key question is not whether Burger King will pull out, but when.
"For sure it was done so that Burger King's excellent sites could be converted for (AmRest's) own restaurants," said Maciej Golinski, former operations director of Telepizza Polska, who took over the reigns as co-general director of the company this month. "The only question remaining is whether those sites will be converted into KFCs or joint KFC/Pizza Huts."
Burger King operates 22 restaurants in Poland, 16 of which are drive-through. Seven of the Burger King sites are in Warsaw's prime locations such as on Krakowskie Przedmiescie and Plac Konstytucji. Until now, Warsaw has been the frontline in the battle for Poland's fast food market.
"(AmRest) would probably not go into the burger business," said Piotr Kaszynski, a retail agent at real estate consulting firm Healey & Baker, which has worked for both companies in finding sites for their fast food joints. "They are probably looking for locations that are mostly prime."
McGovern is bound by confidentiality clauses that prevent him from releasing details of the agreement, but he said last week that the fate of the Burger King sites would be clear by the end of March.
Since entering the market in 1992, IFFP's attempt to grab a chunk of Poland's fast food market has been fraught with obstacles. Most significantly, a legal battle between Burger King Corp. and IFFC slowed IFFP's efforts to build a strong Burger King chain and brand name at a time in the mid-1990s when Poland's fast food market was in its most formative phase.
"Their expansion couldn't be as aggressive as McDonald's, that's the main issue," Kaszynski said. "They didn't expand fast enough, they didn't secure enough outlets, open enough units (and) they lost the competitive edge to McDonald's."
Since entering the market in 1992, McDonald's has opened 181 restaurants in Poland, of which all but 45 are company-owned. This year the company plans to open more than twenty restaurants across Poland.
"In the second half of the year we hope to open (our) 200th restaurant," said Krzysztof Klapa, McDonald's spokesman in Poland.
While the fall of Burger King may mean an end of the burger wars, all signs are that the fast food battle is between three main players: McDonald's, AmRest with its KFC and Pizza Hut brands and Spain's Telepizza.
"I think the market is maturing to the point now that the competition is just being defined," McGovern said. "That's the way I would define the Polish market."
Though present numbers indicate that McDonald's is the clear leader, both AmRest and Telepizza plan to speed up their expansion efforts over the next few years. At present AmRest operates 106 KFCs and Pizza Huts across Poland. While the company only opened eight new sites last year, according to McGovern, this year the company plans an "aggressive expansion" of 20 outlets.
For its part last year, Spain's food conglomerate Campofrio (the majority shareholder in Morliny meat plant) opened 20 Telepizza units across Poland. According to Golinski, Telepizza plans 30 new openings this year, and will use the country as a base to launch into a new market in Central and Eastern Europe, although it would not reveal where.
While the market leaders are now apparent, the consolidation process is not yet complete. Rumors abound as to the fate of IFFC's other Polish investment, Domino's Pizza. At present the company has 16 restaurants up and running, the majority of which are in and around Warsaw.
"There are rumors that they want to sell the network of Domino's and that they are looking for buyers," Golinski said.
