Fat's In The Fire For This Burger King

CEO Brenneman has to find the recipe for stopping the chain's decline

On a mid-September day, Burger King Corp.'s new CEO, Gregory D. Brenneman, rode into the parking lot of the company's Miami headquarters in a convertible wearing a costume and giant mask of the King, the fast-food chain's mascot. As 700 employees cheered, Brenneman presided over a ceremony in which all corporate staff members were handed bonus checks worth three times more than what they got last year.

Never mind that Burger King's sales and profits have been languishing for much of the past two years. Brenneman felt the generous bonuses would boost the morale of the workers he's counting on to turn around the ailing company. "We want to get healthy," Brenneman says.

It's going to take a whopper of an intervention to fix the nation's second-largest burger chain. From 2000 to 2002, when Burger King was still owned by the British liquor maker Diageo PLC (DEO ), the chain's profits dropped 21%, to $288 million. Burger King's hamburger market share fell from 18.5% in 2001 to 15.6% last year, estimates Technomic Inc., a Chicago restaurant research firm. Even after buyout firm Texas Pacific Group (TPG) scooped up Burger King and took it private in December, 2002, sales and profits continued to fall, analysts believe, as a stale menu and dirty restaurants drove fast-food lovers away.

Now TPG is counting on Brenneman, 42, to get the King back on its feet. Named CEO in July, the former consultant had built a reputation as a turnaround wizard at Bain & Co. and then at his own firm, TurnWorks Inc. After helping TPG-backed Continental Airlines (CAL ) return to profitability in the 1990s, he engineered the 2002 sale of PricewaterhouseCoopers to IBM (IBM ) for $3.5 billion. A triumph at Burger King would surely shoot him to the top of the A-list for CEO gigs at larger companies.

Still, developing a recipe to stop Burger King's decline will be Brenneman's biggest challenge yet. The chain had been a proud No. 2 to McDonald's Corp. (MCD ) for 50 years, winning over burger fans with its signature flame-broiled Whoppers and made-to-order meals. It faltered under Diageo, which was more focused on promoting Guinness beer, Smirnoff vodka, and its other booze brands. TPG, along with two other investors, picked up Burger King for $1.5 billion -- a steal, considering the original asking price was $2.6 billion. But the chain is on the verge of being overtaken by Wendy's (WEN ), and many industry watchers worry Brenneman won't be able to fend off the attack. "The odds are against him, given the quality of the competition," says David S. Palmer, restaurant analyst at UBS Securities Inc. (UBS ).


Brenneman hasn't had time to pay much heed to the naysayers. In his first 90 days, he developed a lofty turnaround plan that he hopes to cap with a public offering of Burger King shares in 2006. The chain had already introduced low-calorie salads and a veggie burger. But to ratchet up breakfast sales, Brenneman sent his menu crew off to develop the Enormous Omelette Sandwich -- an artery-clogging four-layer concoction of egg, sausage, and cheese -- which will make its debut next year. He plans to buy back some stores from franchisees to give the parent greater control over menus and store design. And he figured out how to lower startup costs from $1 million to $600,000 for each new store. Many of the 1,200 franchisees are optimistic. "This is real, not Memorex," says Alvaro M. Cabrera, who owns 178 outlets in six states.

Brenneman's Burger King game plan is, in part, a reprise. In 1994, after Continental had emerged from its second bankruptcy, CEO Gordon Bethune chose Brenneman, then a consultant at Bain, to become the airline's chief operating officer. Brenneman had already proven his mettle by advising Continental to cut $283 million in maintenance costs. A year later he was named president, and his eye for efficiency sharpened. When Continental's scheduling team confessed that six daily commuter flights had never made money, Brenneman jokingly asked if those routes existed because executives' boyfriends or girlfriends needed to fly them. The routes were quickly eliminated. By 1995, Continental had turned a profit.


A bruising dispute with his then-boss ended Brenneman's run at Continental in 2001. That year, rumors started flying that Brenneman and Continental's chairman of the board, TPG founding partner David Bonderman, were trying to orchestrate Bethune's ouster. People close to the matter confirm that Bonderman had discussed the top job with Brenneman. After word leaked back to Bethune, he froze out Brenneman, driving the executive to look for other jobs, says a Continental director.

Bonderman later installed Brenneman at Burger King. Singed by his Continental experience, Brenneman concluded that the key to fostering teamwork is open and honest communication. "Business is a team sport," he says. Each Friday, he broadcasts folksy voice mails about the chain's fortunes to employees and franchisees. He isn't afraid to play tough, though: In September, after hearing of nasty e-mails flying between feuding execs, he told perpetrators to cut it out or they would be fired.

Born into a Mennonite family in Newton, Kan., Brenneman developed an early appreciation for hard work. As a teenager, he manicured a golf course in the morning, delivered furniture in the afternoon, and chucked hay on his grandfather's wheat farm until dark. He had a penchant for mischief, too: He and a group of friends once disassembled a playground jungle gym late at night, lowered it through the skylight of the local middle school, and reassembled it on the gymnasium floor. School officials were stumped by the caper.

Burger King can appreciate that cheeky attitude. The chain's latest offbeat ad features the King in bed with a man, sharing a breakfast sandwich. On a company Web site, SubservientChicken.com, visitors instruct a lingerie-clad chicken to do push-ups and other tricks. Burger King even resurrected its 1970s slogan, "Have It Your Way." If Brenneman pulls off this turnaround, when it comes to his next career move, he may indeed have it his way.

By Brian Grow in Miami

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