Burger King may face $3 billion tab for aging stores

NEW YORK – Once 3G Capital completes its purchase of Burger King Holdings, the Brazilian-backed investment fund and the fast-food chain’s franchisees may face a $3 billion tab to renovate aging U.S. restaurants.

Last month, Chief Executive Officer John Chidsey told analysts that 85 percent of Burger King’s 7,200-plus U.S. locations must be remodeled. Modernizing stores with the company’s new “20/20” redesign will cost about $500,000 each, he said in June, with some going as high as $1.1 million. That could push the cost past $3 billion.

“The image is 20 years old,” Charles Fallon, president of Burger King’s North American business, said. “We’re working hard on making the economics work.”

Among Burger King designs still in use is a 1999 layout featuring metal chairs and bright blue booths. That compares with newly remodeled McDonald’s that showcase low lighting, cushioned stools and bossa nova music played through ceiling speakers.

“McDonald’s is more uplifting,” Joyce Jacaruso Castillo, 69, said upon leaving a revamped McDonald’s on New York’s Sixth Avenue. “Burger King is so blah.”

Persuading franchisees to shed that “blah” image may not be easy. Slowing sales at the world’s second-largest hamburger chain have made many store owners reluctant to spend on renovations, said Steve Lewis, who owns 36 outlets.

3G Capital may need to chip in funds through Burger King to spur remodeling, said Jordan Krolick, president of the Marietta, Ga.-based consulting firm Tound & Drowth.

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Burger King introduced its “20/20” redesign two years ago. The name is intended to set the tone until the year 2020 and beyond.

Since then, more than 300 restaurants worldwide have been outfitted with chrome-trimmed booths, brick walls, LCD menu screens, red and black paint and “flame” chandeliers meant to evoke the chain’s flame-broiled burgers.

Franchisees, who own about 90 percent of Burger King’s stores, are responsible for their own renovation costs, and must remodel stores every 10 years to Burger King’s specifications.