Season 2 • Episode 2

00:00:00

SPEAKER

Everyone knows Burger King, there's 97 or 98% brand recognition. We like drive-throughs, they're our most profitable business. We're quite good at running them. I think we could be a lot better. So, how often are you seeing young professionals on the way home? Let's go and have a pizza. You know, Monday through Thursday, they're not doing that. But they were, they're just not doing it. I don't care what people try and tell me, but they aren't.

00:00:26

SPEAKER

Welcome back to What's Cooking. I'm Connor Sheridan, CEO and founder of Nory. This week we're talking about something that fundamentally reshaped the entire hospitality landscape over the last five years: delivery. Not just as a new revenue stream, but as a structural force that has changed consumer behavior, killed traditional high street dining patterns, and created a wedge between QSO brands and casual dining concepts that might be permanent. Here's the reality.

Fewer people are going out for early evening meals on regional high streets. That let's grab a bite before heading home has largely disappeared. Instead, they're ordering in. Same food, maybe even from the same restaurants, but consumed at home. For casual dining operators, this has been devastating. High fixed costs, lower traffic, margin erosion, but for large QSR brands operating at scale with the right price point and the right infrastructure, delivery hasn't been a threat, it's been an accelerant.

They win that business. They capture those occasions. And while delivery margins aren't great, delivery cash margins can be quite strong, especially when the average basket values are significantly higher than in-restaurers. Today's guest is Alistair Murdoch, CEO of Burger King UK. He oversees approximately 600 sites across the UK, predominantly operated by corporate travel partners, large sophisticated franchise organizations.

Like SSP, Welcome Break, Moto, Motor Fuel Group, he's managed the business through delivery's explosive growth, navigated supply chain volatility, where beef prices have jumped 50% over the last two years, and dealt with the operational reality of running a franchise system where you want to open about 30 sites a year while also closing underperforming locations. This is not about crystal ball gazing or industry trend forecasting, this is about the operational mechanics.

Running a large-scale QSOR franchise network through significant structural change and delivery integration. Not to mention regulatory pressure, portfolio rationalization, and maintaining growth when the entire industry is under strain. Let's get into it.

00:02:44

SPEAKER

Alistair, welcome to What's Cooking. Thanks so much for joining us. No problems. So obviously you're the CEO of Burger King UK, an absolute beast of an operation, 600 units. not that you need any introduction, but it'd be awesome for the listeners if you could give us a quick overview on your path to today and how you became to be leading such a such a large organization. Well, I've been in the industry a very long time, you know, nearly thirty years. So I've got a lot of experience. and a lot of my time has been spent in

QSR and False Casual. so working backwards and today, I've been with Burger King eight years. Prior to that, I was at Gourmet Berg Kitchen from 2010 to 2017. And before that, I ran Pizza Express International and then Pizza Heart, and I was COO at KFC. So yeah, I've had quite a long career. it just sort of

have you don't naturally just fall into these roles, but you kind of grow into them as such. And you know, I enjoy the fast pace. I, you know, I enjoy the nature of of the business that we run and, you know, employ some fantastic people. So really enjoy my job. Really nice. some incredible logos there. GBK, Pizza Express, Young Brands, all household names. what was attractive about you about taking on this opportunity, Lynota Rose? Well I I

We got back by Bridgepoint and bought the mask franchise back in the end of twenty seventeen. I think what was attractive is that you had a a global brand. You know, everyone knows Burger King. There's ninety-seven or ninety eight percent brand recognition. And that's a very powerful tool if you think when you're doing any form of PR or product launch, you know, you're always going to be able to make the sort of ripples in the pond move. So that is very attractive.

And relatively speaking, you had this global brand and it had a lot of outlets or a reasonable number of outlets and and it was just a little bit unlarved, a little bit tired, and needed reinvigoration. So I thought it was a very exciting opportunity, really. so you mentioned Bridge Point and you were part of the buyback of the master franchise. we'll talk a little bit on franchising dynamics given that the estate is about fifty-fifty from from equity to franchise.

00:04:58

SPEAKER

Is there anything different about operating in the constraints of a P environment, like pros and cons versus some of the other businesses you worked in? Or is it much of the same? Well, I think it's very different. You know, it's different from being in a big corporate. You know, they are asking smart questions. they are quite challenging in terms of the targets that they set to you, but by the same token, they're incredibly supportive. You know, Bridgepoint have been in now eight years and they have invested and invested and invested and

Just on the latest round, they invested a e you know, the towards over the course of the last year, thirty, thirty-five million pounds further. So they've been phenomenally supportive. And I think if you look at a bridge point, often the narrative with PE is that they come in, they rack it full of debt and then off they run. But if you look at Bridge Point, you know, look at the PRET, you know, they held PRET over ten years. And I think what they're looking for i i i is long term value and they're very supportive of the brand. And

us as a management team. So but are they demanding? Yes. Do they ask me challenging questions? Yes. But that's quite a good thing because I've been in the industry a long time. I kind of know a lot of the answers, but it's good to be put on one's pose. And I think that's the same for all of us. Yeah, a hundred percent. We feel that as well with our boards. stretches you as a leader. Exactly. Keeps you keeps you moving forward and keeps you moving quickly. so to move into the franchise dynamics.

Yeah, sure. Obviously, like significant state scale to run that level of complexity and that type of business model. Predominantly you're franchising through corporate travel partners, so SSP, Modo Travel, and a few partners like this. What was the decision to go that route versus smaller pack group franchisees or or more independent franchisees? Well, historically that that those relationships were there. And Burger King as a a travel partner for any of these large brands is very profitable for them.

It's a very recognizable. It will punch much more than their own brands if they have their own brands. And it is a a place that you will go to stop. It provides convenience, it provides speed, it's relatively easy to manage. So it's quite a you know, an easy choice for for those partners. I think what we like about corporate partners is, you know, if we look at welcome break, if we look at

00:07:22

SPEAKER

Moto and SSP, they're extremely well-run businesses. They've got a great infrastructure. They've got good leaders below the leadership level that can run our operations. They understand it. Again, they push us. you know, just this morning I was on having a conversation with Carrie who runs SSP here in the UK and Ireland. and you know, we have good contact and good relations with them. And

they grow, they grow steadily, but it's very important for us from a brand point of view, those corporate partners. and they also when times are a little bit tougher, they're able to take a longer term view and still carry on growing. Whereas for individual franchisees, it that that at times can be more challenging. Yeah, it's well publicized that where are the the percentages of or contribution from franchisees going to

The group PL for marketing or or brand rec or or operational improvements. And I can imagine at that scale, they can take a long-term view on okay, this is going to benefit the business in five years versus needing the cash in your pocket on a on a month-to-month basis, right? Yeah, that said we still have if you look, you know, we have a business in Wales that runs you know, f between 15 and 20 atlets called Union Burger.

You know, and they do fantastic operation and they're just growing steadily away and they're remodeling and they're growing one or two a year. And you know, they do a really good job. So there are opportunities for both to exist within the system. But I think the key in some of this franchising piece is you've got to invest into the brands, you've got to invest into the people. and standing still is not an op standing still and just taking the cash is not an option. You just you because

That will run out after a period of time where so you invest into the brand, you invest into your people, and you will get the returns. Definitely. you've executed a really sharp four court strategy if you look at the brand popping up in a lot of these travel hubs and a lot of these other areas. What was the deciding factor for that? And I think that's where you see a lot of those independent businesses come into play too. Is that fair to say? Yeah, that i that is fair. I think actually it was pioneered by EG Euro Garages as a group.

00:09:38

SPEAKER

And they were the people within the UK, I think it'd been going on in Ireland for actually for a lot longer, but within the UK, they were the some of the first people to pioneer saying, actually we've got this filling station, you know, how do we support it? And you end up with a third, a third, a third, a third from the shop, a third from the fuel and a third from F and B. You know, that's a simplistic model, but that's really ideally what you would like. You know, in Lasterly, you know, we've developed the relationship with Motor Fuel Group. They're opening

you know, within the last year or two last couple of years, they've opened between five and ten restaurants a year. Again, they're great partners. They've got capital. they want to run our our our brands well. And the other thing about the forecall, why it works so well for a business like Burger King is you can go to a small town where, let me give an example. So Falmouth in Cornwall, it's very unlikely that we would open drive-thru in Falmouth and Cornwall, but if you have MFG who have

you know, other strings to their bow, i i.e. on the fore chord, they can go there and they can do that market. And we're getting we're building our brand recognition and you know, the consumers are getting a Burger King to them. So i it's very complementary and very symbiotic. And, you know, clearly with all of these players we ha we have decent relations. Yeah. Yeah, really smart. At that scale it feels a little bit like and you probably say no it's not like

Portfolio optimization or al allocation. So you're thinking around where are you going to place your bets, your investments, what are the different shapes and sizes of units. you're running maybe 30 new units a year, is is the plan going forward, which is quite significant. how do you decide what goes through corporate, what goes through franchise, and what formats that you that you're gonna run with? Well, we have a fairly well developed sort of property capex process, which i i it's pretty in depth.

Mark Boulding, he's our chief development officer, been in the industry probably same similar sort of length of time as me, got huge experience. He's got an acquisitions director, who's great, and we have maybe eight or nine acquisitions managers out there on the field, regionally based. We have a number of regional agents. You and so we're spending an awful lot of time driving our pipeline. We've probably got a more developed pipeline of drive-throughs.

00:11:56

SPEAKER

Than any other business necessarily in the UK, and everyone's trying to chase it. And the problem with trying to chase it is they then pay too much rent, and then they find it they won't get the returns. And clearly we're not going to be that naive. So you know, we've got a well-developed program. But let's say you're a franchisee, so let's say you're MFG, they will submit what we would call postcode saying we want to open a restaurant in one, two, three, four, and a fairly simple process.

And then we start discussions with them going, well, actually you can, you can't. W we've got a site there that's coming or we haven't. and that's kind of how it works. Corporately, how it works is you know, so let's say we've got a couple of sites coming down the line in i in South Wales, we'll have an open discussion with Union Burger about should we open them? Do you want to take them? To you know, so it's

you know, quite open and quite transparent our discussions. I think it might not appear to those individuals, but it actually is. And you know what we're trying to do is grow our brand at the same time as growing ourselves corporately. But y you know, corporately, you know, the agent might find the site or the acquisitions manager might find the site. They will do a number of their own visits. We then have two or three different property meetings. So we'll have one with me and CFO and COO.

which is a a screening, we'll go and visit those sites. So for instance, I'm gonna go and look at a site in Dundee next week. you know, and normally the COO will go to every site and I'll probably go to 20, 30%. And then we have a CapEx meeting and our board are probably going to 10, 15% of the most challenging. And we have tools within that. So we're using a a tool from a company called Precisely, which is quite a standard tool, which looks a lot of our drivers looks at all of our history, where all of our locations are.

the drivers, i.e., what's the retail there, what's the traffic, what's the demographics, what's the credit card spending, what's the mobile phone usage, all of these in an algorithm which is far, far, far too clever for me to understand. and that's a sort of predictive tool that we that we use. and over time that becomes more and more accurate. And y y you know, you really ideally want to be within a sort of 10% accuracy with a tool like that. So

00:14:13

SPEAKER

We have lots of layers, but a ca our CapEx meeting, we'll have someone from Bridgepoint sitting on that, we'll have our chairman sitting on that, we'll have an on our non exec sitting on that, we'll have me. So we're well invested in this because we're spending a million pounds a site, roughly speaking. and you've got to be very, very, very careful, I think, and mindful with your investors' money. 'Cause I think quite often you see too much getting spanked away and you know, that's not that's not I don't think that's ideal.

definitely not. super interesting, right? So if you say within ten percent for precisely, it gives you a mapping on maybe the attractiveness of a of a geo. You might have things around cannibalization or don't be too close to other sites and then CapEx or a Hopex. Right, that's exactly right. How do you have to be imagine to be quite disciplined if it doesn't meet does it have to meet all of those criteria or is it some of those or how much flexibility do you know that's obviously flexibility and we've been around the system you know, and some of the people on our board, you know, have been

Involved in for 20, 30 years in other retail brands. So there's a lot of experience out there. And we'll go, well, actually, we're not sure that we agree with precisely on this factor because of one, two, three, four. We might be wrong, we might be right, but we will make that, we will take that decision consciously. But you can't have precisely saying you're gonna do 50% of what you need to do and then go, don't worry, we're gonna build it. Because I think.

You know, that's challenging. And I think you added to that, with the with the growth in delivery, see, there is delivery is great for us because we have many fewer units. We probably have a thousand less units, roughly speaking, than McDonald's. But we're able to access not exactly the same number of customers as them, obviously. but significantly more than 600 units 20 years ago would have derived because delivery is allowing you to reach the into those consumers. But the corollary of that, the flip side of that is

Clearly there then becomes, as you open new stores, cannibalization. So you have to live with that and you have to build that into your model. Yeah, definitely. there's a lot we can get into on delivery and jump into it in a in a few moments. well just finishing up the thread on maybe looking at like a portfolio approach. And I know that's when you've such a large business and many moving parts, oftentimes there's maybe parts of the business that are

00:16:35

SPEAKER

not performing as well as you would like or or have reached a maturity stage where it makes sense to transition or reformat it. How do you make those decisions? You mentioned something around washing the estate previously, which is making sure that the you have a certain level or benchmark of performance as you grow? Look, I mean I think you know a lot of Burking's restaurants were opened in the early to mid 80s. So almost irrelevant of whether they've been invested or not.

quite often, you know, the nature of the high street and the nature of the consumer has changed a lot in 40 years. So you will often find, you know, certainly within Burger King, you you would have found, we find it a lot less now, you know, small old high street sites or big old high street sites where the high streets completely moved away from them. So those kind of decisions become quite easy. I think it's profitability cool, but also we're quite focused on

if you are my franchisee and you have an agreement with me and your leases for thirty years or you know, and you've still got ten, fifteen years left to shut, you're not just gonna be able to shut just like that. It it doesn't quite work like that. We're gonna have discussions, okay, if you're gonna shut that, you're gonna open somewhere else. You know, how do we help you do that? Or how do we help you relocate? And the same with us. We we're exactly the same. So we're managing our franchisees, but the same applies to us. You know, one of the ways that we grew

to to nearly 300 units of our own corporately is by buying a lot of franchisees in. And a lot of those franchisees in the nineties and noughties hadn't shut perhaps a number of restaurants which they should have done because it is quite difficult to do and to get out of leases. And we have that estate function and we're quite good at that. But by the same token we can't just shut as many as would like to. There are other factors at play here too. Yeah. Yeah of course hard constraints. But I do think going back, I think you need to

You you do need to and people don't want to talk about it because they wanna go, we've never shot anything. You know, that's all great. But you know, when your brand is gets to a certain size and keeps growing, you're going to need to you know, not re-gear your estate, but you're gonna keep re need to refreshing it. So the criticality comes when we have a restaurant around the corner and you're actually not really making any money or making a tiny little amount of money and it's in the wrong place, and then all of a sudden you've got to put in a quarter of a million pounds into it.

00:19:01

SPEAKER

or whatever the number happens to be, are you gonna save that money and are you gonna force a franchisee to put that quarter of a million pounds in when perhaps commercially that's not the right thing? So you know it it's quite complex, but we're doing those we're having those kind of discussions and that that's just our business and part of our business and we're doing that on an ongoing basis. But we're reasonably sophisticated at it, I would suggest. Yeah. Whether we're successful or not, it's a different matter. But I think we try and make decisions.

With all the information. Yeah. Have you seen we touched on a few things like high street changing consumer preferences. you touched on it precisely previously around targeting the right fit geos in your eight years or even in the last four or five years. Have you seen the locations which make the most sense for the business change much? Like high street versus maybe regional locations due to the fact you have a delivery arm now or you Yeah, you know, definitely. I think

You know, high streets perhaps six, seven, eight years ago were dying. Then, you know, a lot of the high streets were quite near to residential. So, you know, the advent and the growth of delivery has really helped a lot of those high streets. So I think i you know, regionally, if you are a QSR player like us, we can go back onto the high street. We're not actually chasing this too much, by the way, but you could go back onto the high street. because you know, you're gonna do a lot of delivery, but equally by the same token.

Lot of those regional rents in high streets have had to fall because those high streets, for all the sad reasons that we know, are emptying of their offer. And so there are there are opportunities, I would say, to be had, but we're put still predominantly focused. We like drive-throughs. they are most profitable business. We're quite good at running them. I think we could be a lot better. and the convenience of a drive-thru.

works. it's just, you know, the location is obviously critical. But yeah, we're still trying to open, you know, it's a significant proportion of the 30 that we're opening, we would like them to be drive throughs. And they are going to be drive throughs. Yeah. Okay. You touched on a bit of a resur resurgence in High Street or or an opportunity for for your business to keep trading there at a lower opex regionally because of delivery. On the flip side,

00:21:20

SPEAKER

Delivery gets a lot of publicity around margin compression and com commission rates and the contribution. Like how do you think about balancing that and the business model? I think it is it's pretty challenging. but I think what the consumer is undoubtedly telling you is so look if you look at casual dining and the pressures that they've been under. Now these businesses aren't badly run. You know, I've been in them and you know, by and large, the leaders in our sector are really good and they do really good jobs, but

Convenience is driving it. So how often are you seeing young professionals, you know, on the way home, let's go and have a pizza, let's go and have e you know, a another type of food, you know, Monday through Thursday, they're not doing that like they were. They're just not doing it. I don't care what people try and tell me, but they aren't. So, you know, that consumer is still consuming, but they're consuming in a different way. And they're consuming through delivery. So

I think what you have to do, and we clearly have a product that delivers quite well. I think what you have to do is embrace that. and we have done that. I think we work very hard with our aggregators, we work very hard on trying to drive our operational metrics. So if you have one restaurant and I've got 600, it's much easier for you to run a better delivery business than it is for me. So the skill for a QSR business is how do you get all those operational metrics, the ride await times, you know, the availability, the

order accuracy, all the key things, the heat, all of those things that are speed, all of those things which are vital for the consumer, how do you get them the same? That's the skill for a business trying to do it across six hundred outlets or five hundred or however many we're in. So I think that's the that's a challenge, but what the consumer is telling you, and you you should listen to the consumer before you listen to me, consumer is telling you they're c wanting to consume in a different way. Yeah, no, I fully agree.

And it's completely different shift in preferences. We can see even with thousands of restaurants we're supporting and Ori, the share of the wallets off premise is just growing every single year, particularly in the QSO or in in FastCasual in in central areas. Some businesses try to lean into maybe a single delivery partner for economies of scale or or preferential rates. You've gone more broad based approach in terms of using the main the main players.

00:23:42

SPEAKER

What's the strategy there? Is it coverage or yes, I think it's coverage. I also think i y there's a lot of incrementality that perhaps let's I don't know. let's say there's 20% crossover in each brand because there's a segment across the aggregators that are the sort of that are the bargain hunters that are going out there and looking at it. But there are y you know, you know, there they're slightly different demographics within each

aggregator and they're slightly different areas of coverage. So some aggregators are better, have hotter spots than other parts of the country. But I think if you're a growing brand, it makes a lot of sense to focus potentially with one aggregator. Or if you are a big you know, if you're very successful, you know, maybe slightly more upscale, mid-scale casual dining or fast casual to do that. then I think when you get to scale, you are naturally going to move across. You are naturally going to move to more

aggregators and you know managing of those relationships is very important. You know, we would like to think, you know, that we as a brand have very good relations with all of the three aggregators. You know, I see a lot of them myself, a lot of their their their leadership myself, you know, on a quarterly basis, I'm going to be seeing those people and our teams, we have dedicated teams. You know, we have a dedicated delivery team which is we have driven and grown.

and they are spending almost all their time or all their time do it A with our own operations but also with them. I think what's important to understand, and people get very hung up on margin. Now margin is obviously very important, but you know, the age-old adage, you don't bank a margin, but you do bank cash. So I think what you need to look at, or in our case, what we need to look at is cash margin. So what you see, what you will see on delivery at whatever brand you are, is the A ATV or the average spend.

call it what you will on delivery will be higher because often the party size is different that at that than coming into your own restaurant. So I I I think you need one needs to think more about the cash margin is what I would say. Yeah, it's really smart ache. cash is king. When you look at casual dining and the pressure they're under, we work with a lot of casual dining brands that'd be household names and we can

00:26:05

SPEAKER

In our conversations, in the data, we can see they're under pressure. QSOR is having a bit of a moment, given that a lot of the investment and the scaling we're seeing in in the UK is in QSOR brands. Why do you think that is? Why do you think that in today's economic environment that it's a a more resilient segment? Well, I think a couple of things. One is, you know, in times quite tough and times are reasonably tough for consumers at the moment. I think consumers go back to brands they know, brands they love, brands they trust.

and you'll see that across the QSR brand portfolio. I think you have that. I also think there's a bit of a it's a slightly different point, but I think there's a bit of one needs to be careful and mindful, one needs to be mindful around Gen Z. I think they're a really important part of our audience, but also they're very they're very driven by they're driven by fashion. So you need to make sure that if you're getting a lot of those consumers, you're keeping investing in your brand.

So when their eyes go on to the newest, hottest, sexiest thing, that you are still relevant. And I think that is important. I think for going back, trying to answer your question, there's also a piece around value, as a huge piece around value. You know, from a value point of view, what we're trying to do is give you, you know, value that works for from Burger King point of view. So value isn't just about price, but price is certainly an element of it.

It's about quality. It it's about you know how much food you get for that price. So you know, there's a lot of different aspects to value. But there is no doubt, there is no doubt that there are more consumers that want to eat at our price point than they want to eat at a casual diner's price point. And I don't know what those stats are, but is it five times bigger? If you just look at the populace in the UK, there are many more that

we'll be trying to eat at a QSR type of prices versus a casual dining type of prices. And the other thing I'd say about casual dining, what is so difficult for casual dining is that you know, how do they stop themselves? And there are a lot of new entrants as well on the fast casual, just becoming a one-day part play. You've got to be able to do more than one day part, and it's got to be.

00:28:27

SPEAKER

you know, it's gotta be real. You can't just say I do a breakfast or I I I I do a dinner. And actually you kinda do, but you kinda don't. That doesn't mean to say you your food at breakfast or food at dinner isn't good enough, but it's because is your brand just known for I'm going to this because I'm getting that at lunchtime. Yeah. So I think day parting is increasingly important and one of the things that the consumer has done is that they've exacerbated that day parting.

from an insight point of view. But equally I think there's more stuff that if you are building a brand, I think it's much harder if you're existing by the way, but if you're building a brand, I think that would be something I would think really carefully, really, really carefully about. Yeah, really good advice. We used ever rule when we were setting up the restaurants to go, it has to be seven days a week, ten to twelve hours a day, confidently in terms of trading pattern, if if the geo can't match that.

No point investing in it because, as you mentioned, if you can only do dinner, that's 35 hours a week versus maybe 120 euros a week, right? Yeah. I think that's right. And funnily enough, because of all the costs, inputs that have been coming into our business, you're seeing it also, you're seeing that almost exacerbated at the right at the top end. So fine dining, you know, the the chefs are having to charge for the skill and the quality of the green having to charge you 185 to 220 quid for a a meal and

There aren't enough consumers that want to spend that seven days a week. Now that doesn't mean their food's no good. If their food is still historic. You know, absolutely fantastic. But, you know, that's difficult as well. So I I I think just think of those those bookends, yeah. You look at kind of input inflation, beef has risen by fifty percent over the last two years. Obviously we've just touched on price sensitivity. Consumers don't always want to go above a certain price point. How do you navigate that in in your business? Well, I think it's very challenging.

You know, it is it's a big challenge that has faced us. you I don't think the the beef producers, we get all of our beef from the UK and from Ireland, and I don't think any of our producers also want it at that level because you think of their working capital for the volumes that that they have to hold. You know, it's probably gone up fivefold, maybe more. But as an aside point, but it's very difficult for us. You know, the the the challenge is if you're a QSR brand, you are unable

00:30:52

SPEAKER

When price rises steadily, when we're rising in line with inflation, you can probably price along along that. But when price is rising at a disproportionate speed to inflation, which is what you've seen with beef, which is what you're intimating, that becomes harder. So you you get to a certain point when you're go you when you have to solar margin. But i i you know, we what we've been successful in doing over the last three years is growing our tickets, growing our transactions, whereas you would see

you know, lots of other operators that have had either have taken huge price and we would pride ourselves on we've potentially taken less price than almost all of our competition and certainly all of the casual diners out there, in order to keep transactions going. Because, you know, there's a fairly straight line graph between price and, you know. Production of covers, yeah. Yeah, exactly. Or and or slash increase in covers within reason.

You know, okay, I'm being simplistic, but you know, unless we're not a a luxury handbag, you know, we're an everyday wonderful quality item, product, food that you want to eat, which is this wonderful beef, but there still comes a point where people are actually going, that's quite expensive. So we're very conscious of that, and it is a wrestle. But you know, we have a couple of people who do our pricing, you know, Pete Dogin, fantastic. You know, these are very smart people. and

From time to time we bought an experts that have helped us do that. We then kind of use their thinking and we apply that. But you know, it's a it's a difficult game. I will wouldn't be one I'd say that we've entirely cracked. I think we're just hoping, you know, we are hoping for, you know, downward pressure later in the year on some commodities. But we have no visibility or certainty on that. But we probably have more visibility than others. Yeah. I think like you mentioned, I think the business seems like you're

You operate in a long term view, as in like you're gonna see bumps in a road up up and downs where you might see margins go up and go down. But if you take a long term view and keep delivering quality with consistency, you'll keep the share of the market, right? From an efficiency point of view on a supply chain or on the operational side, given that you've see these price increases, have you invested in the business much in recent years around tooling, new processes, technology to help supply chain or help on profitability?

00:33:14

SPEAKER

yeah, productivity, we talk about labor productivity, that's a very, very significant part of our work. we have a fantastic operational team and that's very difficult for them. But you know, we are again, I think we'll be one of the few businesses is whose labor percentage perhaps has risen under one percent over the last four or five years. And if you look at the labor growth, you know, minimum wage has gone up fifty percent or living wage gone up fifty percent over the last four years, and our labor percentage hasn't moved that much, maybe a little bit.

Course it's moved a little bit, but it hasn't moved that much. And that is because we're driving productivity. Do we have the best tools in the world? No. Are there the best tools in the world out there? I think they're coming, but there is no panacea. It's about you knowing your business. It's about working with what you've got. It's about driving expertise. But it is not easy. It really isn't easy on labor productivity. But I'd be very if I was an operator, I'd be super focused on it. Now.

People will say, well, it's much easier for Burger King because you've got many less skews and you're doing less chefing in the kitchen. And those things are correct. and I would suggest that perhaps our labor cost reflects that. But nevertheless, we're very good within that at doing it. I'm sure we could be better, I'm sure there's more we could learn off other people, but I think labor productivity is critical to you know any business. And you know, that's why it's such a sh a shame when.

You you see things like you know, and I I know they've tried to correct it, but you see the sort of issue that pubs have with rateable values. If you're an independent pub in the country, you can't do the things that I'm talking about. You can't have that productivity. You've got to employ a chef. The chef is gonna be 40,000, 50,000 pounds, they've got to have a second chef, you've got to have a manager, you've got to have an assistant manager. You need to be selling 10, 12, 15 grand of food a week, net, to to to make those numbers stack up. And the reality is that's not.

easy to do. So I have an awful lot of sympathy and empathy, but I think labour productivity is crucial. Going back to the second part on the supply chain point of view, I think we get increasingly sophisticated sophisticated on the supply chain. But you know, dealing with some of the volumes that we do, you know, our suppliers are are I'd I would suggest constantly investing. You know, one of our beef supplies is just putting a in a new piece of kit in and, you know, that's six or seven million pounds. And

00:35:40

SPEAKER

They're only going to do that on the back of volumes, I suppose, that we're going to help them e you know, deliver. So our supply chain partners is very important. I think perhaps one of the good things that we have done in our major commodity category is we like to have at least two players. A from a food security point of view. We like to be UK Ireland based. Look at our beef. We've got Key Pack in Ireland who do a fantastic job. And we've got Dovecut here up in based up in

outside of Doncaster. So we like that tension. but we're ver we have great relations with with with those kind of players. And it's the same with our other you know, key lines out there. But we like to have a couple of suppliers because y you know, if your bun factory goes down and you only have one and you don't have enough, y you then start flapping. And that that's not what I'm gonna do. Yeah, a hundred percent. so you have to deliver the volume you mentioned for those for that supply chain for the economies of scale and

Burger King is renowned for quality of its innovation, LTOs, new products, NPD. I'd love to hear a bit about how you balance all the discipline that you have in the business with trying to get new products out there to market. What's that process look like internally? Well, a lot of that is driven by brand, by Katie, who leads our brand team and all of her team. And you know, we have certain pillars from a food point of view that we would like our food

To aspire to, we believe that our beef is better. We think it is better. We think it tastes better because it is better. It is grass-fed. it is UK and Irish. and there are any number of initiatives that we're doing, working with our our partners i i i i i in furthering enhancing that quality. But we have a number of sort of pillars from a food point of view, but we're all about big taste. We it the taste is so important. Flame grilling is critical to us.

And our customers say that's what tastes better. And so we're gonna do you know, do that. We have a great innovation team in our office led by Christian and they do a wonderful job. And yeah, innovation is important for us. And I think it's important. Innovation is important for QSR. People like new ni newness. Even if you come in and go, I've seen this new product, and you go an audio whopper or you audio chicken royale, because I always have that and I love that. Well there's nothing wrong with that, but I'm still bringing you back in. So

00:38:01

SPEAKER

we use it as a lever, we have lots of partnerships that we try and work with, but big taste and y you know, the quality of our beef and that is absolutely critical to us, you know. And remains so. And I think, you know, people forget that y you know, the business like boking, you know, there's no artificial flavourings, there's colourings, there's no preservatives in any of our foods. So you know, we've done a lot of work on our nutritionals and the quality, if you look at something like the Whopper, the quality of that's absolutely fantastic.

You know, and clearly we're talking about the wagyu that we launched with Gordon Ramsay, you're not gonna get support from you know, such eminent chef as Gordon Ramsay, unless the the actually the provenance of the food, the provenance of everything that we're doing, the quality that you know, he visited the he saw some met some of the farmers, and you know, that's important. You know, these are not we're not just pretending, these are real things that are out there. So, yeah.

Food quality is critical to us. You know, big taste. i i is a sort of thing that we we talk about internally a lot. And as I said, we have certain pillars that we're trying to drive against. You know, reinforcing the fact that our beef is better. Yeah, really nice. sorry, that's a bit of an ad first, but yeah. No, it's really cool, right? I think I was gonna touch on the Gordon Ramsey

Think it was an inspired partnership, given the reach. He definitely covers everything from Gen Z all the way to to millennial and and and above. I think I saw it first on TikTok, then you see it on Instagram, then you see it on a bus, and then you see it on a TV. You seem to have an amazing omni channel team internally that's able to get these new LTOs, these partnerships out. Has that changed fundamentally in the business in the last few years about how you reach people to let them know about the great quality, the new innovations?

Yeah, I mean, I'm not the expert to talk to you on this, but you know, we have changed and everyone has changed the way they use our media budgets. You know, the days of smacking of everything on y you know, terrestrial TV, you know, one still might need to be there to have a presence. But I I think that omni channel experience, the video on demand, I think the the social channels are yeah, they're all very important. And I think the skill, which is what you're hinting at, Carl was

00:40:20

SPEAKER

What is important is i is the interaction. How do you ladder the story up? How do you ladder the the story through? And you know, we have a great person, Susie, who leads our team and she's fantastic at home. So I think I'm talking out of term when I say I know what I'm talking about. But yeah, I think it's very important. But the other kind of advantage one has, you know, with scale is you are able to employ more people to do this. you are able to have bigger budgets. Now we don't have the budgets of our competitors, but you know, we can use

We can use our scale and our skill and we work with great partner agencies too, who are fantastic for us, you know. That was amazing. It landed really well. speaking of scale and unemployment, you're one of the biggest employers in in the sector in in the UK. You touched on a little bit earlier and some of the regulatory and employment pressures the industry is facing. how have you seen that in your business? I think you mentioned that you have volumes that are ten to fifteen percent bigger, but almost employ a thousand fewer people in the business today.

A that could be from automation and efficiency, or maybe that's actually driven by some of the pressures. Be great to hear from you. Yeah, I think I mean we touched on it earlier, productivity is really important. I think the first thing I'd like to say is that we want to employ more people. We don't want to employ less people. And if not, also it's not as though we're have been making people redundant. People have been come going naturally as such, but that is right. We employ I don't know the exact numbers today, but we are we do employ a thousand less than we did.

You know, and our volumes are significantly up on where they were, you know, a year, 15 months ago. And I think the challenge is that in order to make a return, and it's not just about QSR, anyone opening a restaurant business, in order to make a return, it it you know, labor cost is one of your key costs, as are as is food. You know, those are two that these are your two most expensive lines. You've got to make sure.

that your labour cost i is affordable. And I think the irony is of employing those less people is y you know, I think what we do with young people is we give them often we give them their first jobs. we give them, you know, how do you work in a team, you know, y you know lots of sort of you know, self discipline and control and, you know, confidence and how to talk to people and how to interact and a variety of skills and

00:42:39

SPEAKER

You know, our kind of businesses are very meritocratic. That's one of the great things about the hospitality industry. You can start as a, you know, a school kid, you know, earning it earning some some money, etc. And then you could end up at twenty-one, twenty two, running a big business, running businesses turning over millions of pounds. And we do that in our industry. And it's it's a shame I find at times that you know, the sector i i is not that. I don't think it's for me to be political, but i i you know.

If it was more benign, if you look at VAT as an example, you know, VAT, we pay twenty percent here. most of our products are are vattable in the UK at Burger King. Whereas you go to France, you're paying five, and in Ireland it's about to reduce as well. and the most of Europe is ten points lower, it's half. You know. And if you were able to do that, you know, hospitality would definitely be healthier. We would definitely be employing more people, I'd be opening more restaurants, but so would everyone.

You know, so I I I I I think, you know, sometimes you know the growth there is more to growth than that, but I'm not having to balance government to books and that is no easy task. No, definitely not. we had Kate Nichols on the show last year and had a pretty deep discussion on it, like the purview of such a larger contribution to GDP, if we can get all these sites filled, higher employment

Feels like something has to be done there in the in the medium or long term for the industry to fall in line with the rest of Europe. But as you said, we're not making the decisions. thankfully. And you know, you also ha it you also I think these are we are. We have to raise the point, but equally you have to get on with it. It is this is what you're operating in. So you've got to get it to work for you. Because just relying on that gonna happen five years down the time, it's not gonna happen or it could, but you can only deal with what's in front of you and

Y we often sometimes need to do that, I think. Yeah. Yeah. there's a good entrepreneurial phrase, one of my pals uses like nobody's coming to save you, right? So you need to be able to to to get out yourself. So just moving on a little bit on your own leadership style, which I was super keen to learn about. Obviously you're operating on such a level of scale.

00:44:57

SPEAKER

is super interesting. How how you can manage your time, how you can manage all the different constraints, all the different opportunities. What does your operating rhythm look like personally or as a leader in the business at such a scale? I think you know, for me, and I think a lot of people do this, but for me, you know, the first day of the week, so let's say our our weekends on a Sunday, the Mondays are really important. You know, I want everyone in the office on a Monday.

And we have a lot of meetings, not just with me, but there are lots of meetings that happen. And that rhythm, you know, we have a trading meeting with my senior team. We have a a trading meeting every Monday at four o'clock where we raise issues. Every month we'll have an extended one where people bring initiatives. You know, that's where we all share information. I think you know, in our business, you've got to know the detail. You know, I expect if you ask me within reason, I could tell you the rent and I could tell you the sales of each one of our 300 diet, 300 restaurants.

You know, I don't say that as a brag, and I'm sure I'd be wrong if you tested me now. But the point is I think you've got to understand the detail, but it's not my job to run that detail. from a leadership point of view, it's a hat-need expression, but genuinely employ the best people that you that you can. And I think I'm blessed. I've got a fantastic team. I think I've got the best team in the industry, and a lot of them have been with me you know for a number of years and

The thing I really try to do, you know, a couple of things that I would say I do consciously is I try and ask them the right question. I'm not trying to do Mark Boulding's job on development or Seb who's our CO on labour or Labour productivity. I don't begin to understand it, or Katie driving Bram, but I think what you have to do is give them room.

And I think they'd all say that that, give them room and let them make decisions. Let them take decisions because it then means y you know, it's very obvious and easy thing to say, but you are actually genuinely empowering empowering the business. You're not micromanaging every person because if you do that, people become frightened of making decisions. And we've all been in organizations like that, and that's just terrible. So I think you need to empower people to make decisions. And you know, if you've got three hundred outlets or six hundred outlets, if we make a

00:47:15

SPEAKER

decision and it's one, well we can come back and we can do something else, you know. It's not a, you know, we're not gonna make you're not gonna be allowed to make a catastrophic decision, but people don't, you know, and they're good. So I think I let people do that, I let people run that. I try and have a one-to-one with each of my direct reports. It doesn't always happen, you know, once a week. And there again, you y you know, we're just talking and I'm just trying to ask questions. Have you thought of this? Have you thought of that? You know, you're doing this, how

have you seen that competitors doing that? Or whatever, or here's a photo of this, and they'll go, that's really annoying. But but no, the point is I think, you know, 90% of the time, of course they're gonna have thought about it, and of course they are going to have done it. But every now and then I go, actually that's quite good point. And I think that's the same for me with my investors. You know, my board meetings, I want to be asked the right question. That's why sometimes it's quite good to be asked difficult questions, not in an aggressive way.

Because you go, ooh, that's a really good question. I really didn't want to be asked that. So Tim and I, the CFO, we have to scuttle off. Well, Tim does all the work and I sort of pretend I do, but no. and think about that and answer those questions. And I think for me, asking questions and having the confidence in my team to go and do that is is what you do. And I think people get reassured by allowing them to do that and it follows through. So we've got really great succession, you know. You know, we've got a fantastic acquisitions director in our business now. We've got

You know, working for Katie, we've got some amazing you know, she's got some amazing people, number twos, number threes in in her team and brand, you know, that are allowed. They're taking big decisions, these people. They really are, but we're encouraging that. So I think that is important. And I think often people say they do that and then they don't do that, you know? And the pressure's on your butt. I'm but having said that, I'm always on.

So you know, you could text me and that this isn't for everyone, but I will always be on it. I would always I think WhatsApp's a thing of genius. So I'm sure my team don't. But no, I don't hassle them like that. I think the other thing from a leadership point of view is handling pressure. Or for me, that's very important. People talk about lots of different aspects of leadership and they're all important. But I think, you know, handling pressure is really important. And I you know, I a long time ago I spent a bit of time

00:49:40

SPEAKER

In the army, and we had a couple of incidents, you know, when went to war. And that really does teach you about, I think, handling pressure. And, you know, other people understandably quite rightly haven't been through that. So my view is the sun will always rise in the morning. So yeah, it's bad. Yeah, it's really not good. But actually, the sun does rise. And that when you sleep on it and you wake up on it, it's not as bad. And don't make you know crisis out of a drama.

you know, just think. Y you know, think and give yourself time to think and reflect and act on it. Doesn't mean you're not gonna act decisively and quickly enough, but and be agile enough, but don't overreact and you know, be calm and y y you know, carry that pressure. And I think I can carry that reasonably lightly. You know, I sleep well, I don't struggle.

Trickles down to the team. If they see that you're able to handle that, then everyone can handle it, right? Well, I'm sure they'll they'll be lifting this podcast getting took you off sleep rubbish. Yeah, nice. so looking forward for the business. great people in in in place, good plans to grow, I potentially thirty thirty units. what opportunities do you see it? And then flip side, what kind of risks or threats do you see for the business? I think you know, the consumers

the the the most important you know the most important sort of stakeholder and I think we've got to keep our eye on the consumer and what the consumer wants that insight and you know what does that what does that insight drive from service point of view from a product point of view from an operational point of view etc so I think that's important and there is no doubt at the moment that the consumer is slightly you know nervous. I I don't think the budget from a a consumer's point of view was nearly as bad

as everyone had thought. So I am, you know, I'm always optimistic. But I think you know, I'm reasonably optimistic for the consumer. You know, just gradually, I think interest rates will fall again. I don't think they're gonna fall now, but in a month or two they will. You have a bit they'll have a bit people will have a bit more money in their pocket than they think. And I think that consumer will go out. So I think the consumers you know really important are

00:51:57

SPEAKER

You know, commodity price rises are always very challenging or or at the rate that we've seen, I would hope that they're they're gonna flatten off. I think there's still an opportunity because whilst it's difficult for people, that gives opportunities for growth. When it's really hard, that's when businesses can grow. and I think i y you know, out of adversity comes opportunity. and so I think there's opportunities out there as well. But you know, that requires bravery.

And yeah. But you know, as you said earlier, you know, there are ways we we kind of go up and down, but we're very focused on like for like sales growth. We've managed to do that quite successfully since twenty eighteen. You know, we far outperformed the year after COVID than we did in COVID and we had a very good COVID as it was. So, you know, we're focused long term on driving like for like sales growth. And I think that's a combination of everything. And if you can get that, you can cure most known ills. Nice, really nice.

So moving to our next segment, the quick turn. So it's rapid rapid fire questions. Right. as I say, rapid fire means different things to different people. I've had five minute answers and five second answers. So you want five second answers. Whatever whatever you feel is the best way to answer the question. Delivery, a net positive or a net negative for the industry? Massive positive. What's one operational metric you track that most QSO operators ignore? Fun.

Happiness is one of our values. Nice, I like that. the biggest mistake franchise systems make when working with large corporate partners. Well, I think it goes both ways. I'm gonna dodge this question, but I I think you, as a franchise or have really got to work out that your franchisees need to make money, and I think the thing about us both being a franchisee and a franchise or is we've got skin in that game. so when you get questioned about decisions, you've got to answer it so.

You've got to let your franchisees make money and you want your franchisees to be well capitalized. Those are two key things. Really good advice. What's the best supplying chain decision you've made as CEO? I would say we touched on it earlier. In your key lines, have two suppliers. If you're of any scale, have two suppliers. You like the tension, you know, it's a constructive tension, and also you love the food security. There's nothing worse than running out, if you're a pizza business and we're not.

00:54:20

SPEAKER

Running out of pizza boxes. That would be the worst thing you could do. You've got no business. So make sure you have two key suppliers. If you were starting a new QSR brand today from scratch, what would you build or do differently than a status quo? I think you've got a massive advantage if you come in as a new QSR brand in in one area, and that's around tech. We've all got these legacy point of sale systems. We're all trying to change them. We're all innovating. And you've got layer upon layer of different bits of software all talking to each other. That will be very different. And I envy them.

Nice. Well look Alistair, appreciate the time. Thank thanks so much for being on the show. thank you. Thanks very much. A few things really stood out from that conversation with Alistair. First, the structural impact of delivery. This wasn't just about adding a new channel, it fundamentally changed consumer behavior and created a wedge between QSOR and casual dining that might be permanent. The traditional high street pattern of going out for an early evening meal is largely gone. People order in instead.

For casual dining with high fixed costs, that's been devastating. For large QSOR brands with the right price point and infrastructure, it's been a massive opportunity. The economics are interesting too. The delivery margin percentage isn't great, but cash margin is strong because basket values are higher when people order for groups at home. Second, portfolio rationalization. Alistair was refreshingly direct about closing underperforming sites. He calls it washing your estate.

Most operators don't like to admit this publicly, but it's essential portfolio management. If you're going to open 30 new sites a year, you should also be closing the ones that will never work. That discipline keeps the estate healthy and protects franchisee economics across the system. Third, the regulatory pressure. Alistair's business is 10 to 15% larger than a year ago, but employs a thousand people fewer. That's a direct response to regulatory changes and

making it harder to generate returns. It's also why Alistair thinks it's nearly impossible for small independents because they don't have the scale, they don't have the negotiating leverage, and they don't have the capital to invest in automation and efficiency the way that large QSR systems can. Finally, the franchise model with corporate travel partners. The vast majority of Burger King UK's franchisees aren't small independent operators. They're large, sophisticated organizations like SSP,

00:56:45

SPEAKER

Welcome, Break and Moto. These partners are good at running brands and good at running Burger King specifically. But there's also space for smaller multi-site operators opening in towns where brands like this wouldn't typically go. So there's different franchisee types to serve different strategic purposes in the portfolio. Thanks for listening. If you found this useful, please share it with someone who needs to hear it. And if you've got any thoughts on delivery economics or franchise portfolio management, then send them my way.

See you next time.

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