Every day, more than 11 million customers visit a Burger King Worldwide (NYSE: BKW ) location. While most people are familiar with the story behind McDonald's (NYSE: MCD ) and its founder Ray Kroc, as well as the story with Wendy's (NASDAQ: WEN ) and its founder Dave Thomas, many don't know the story behind Burger King and how it grew to become the second-largest hamburger chain in the world.
This Fool thinks you'll be surprised at what you find out and it might get you to look at Burger King for your portfolio as well.
1. Started in 1953
The first location was called Insta-Burger King and opened in 1953 in Jacksonville, Fla. After the business experienced some financial difficulties, David Edgerton and and James McLamore from Miami purchased the company and renamed it Burger King. In 1957, Burger King introduced the Whopper, which would go on to become the company's signature product.
2. The Pillsbury Doughboy owned Burger King
In the 1967, Pillsbury purchased Burger King. At this time, the chain had grown to about 250 locations. It was during Pillsbury's ownership that the infamous "Burger Wars" started among the hamburger chains.
It really started when Burger King hired McDonald's executive Donald Smith to run Burger King. After Smith left for PepsiCo, Pillsbury appointed Norman Brinker to run the chain. Brinker initiated a negative advertising campaign attacking McDonald's and the size of its burgers. Wendy's sought to capitalize on this with its famous "where's the beef?" commercials. Brinker later left Burger King to take over Chili's, which is now part of Brinker International.
3. A succession of owners
British conglomerate Grand Metropolitan acquired Pillsbury in 1989. During the 1990s, Burger King pretty much stagnated, especially after Grand Metropolitan merged with Guinness and became Diageo. The company's focus was on its drinks and spirits business and not on Burger King.
In 2002, investment firm TPG Capital purchased Burger King from Diageo for $1.5 billion. TPG Capital took Burger King public in 2006, right before the financial crisis. In 2010, 3G Capital from Brazil purchased Burger King for $3.6 billion.
4. The new majority owner is bigger than you think
3G Capital took Burger King public again in 2012 with 3G retaining a majority stake.3G Capital owns more than just Burger King.
Its founder is Jorge Paulo Lemann and he is Brazil's richest man with a fortune of almost $18 billion. Besides Burger King, he's also a major shareholder in Anheuser-Busch InBev. Last year, with Warren Buffett's Berkshire Hathaway, 3G Capital purchased H.J. Heinz.
5. Burger Wars starting again
McDonald's announced last month that Heinz will no longer be its ketchup supplier. This comes about as former Burger King CEO Bernardo Hees will become the new CEO of Heinz. For McDonald's, the close relationship between Burger King and Heinz was too much to bear.
Burger King has been making changes to its menu and is in many ways copying McDonald's playbook. Burger King just announced that it's bringing back the "Big King" sandwich to take on the "Big Mac." The new "Big King" will even have a bun in the middle. To go up against the McRib, Burger King now has a new BBQ Rib sandwich.
One area though that Burger King is ahead of McDonald's is with its fries. Burger King's new "Satisfries" are considered to have 40% less fat and 30% less calories than McDonald's fries.
6. The picture today
Burger King Worldwide's focus is on franchising. About 99% of all Burger King locations are owned and operated by independent franchisees. Today, there are more than 13,000 Burger King restaurants in 91 countries and territories worldwide.
In the third quarter, global comparable-store sales increased 0.9%. McDonald's posted a 0.9% rise as well. Wendy's doesn't report global sales, but in its North American segment, the company posted a 3.2% increase in comparable-store sales.
Since almost all of Burger King's locations are franchised, the company has the highest margins among the three. Its gross margin of 63% and operating margin of 45% beats both McDonald's and Wendy's. McDonald's has the lowest P/E ratio among the three at 17.
Besides billionaire Jorge Paulo Lemann owning shares in Burger King, billionaire Bill Ackman's Pershing Square has a 10% stake as well. It's safe to say that some smart money managers have a vested stake in the chain's success.
As the company innovates its menu offerings and remodels its stores, Burger King looks to give both McDonald's and Wendy's a run for their money. It certainly looks like the "Burger Wars" are back and it's going to be interesting to see how it plays out. The good news is that it will likely result in a better menu, nicer restaurants, and better customer service.
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