When Burger King (NYSE: BKC) released its 2010 fiscal earnings, the results reinforced a familiar trend: Burger King is going increasingly international. Although the U.S. and Canada still account for the majority of its store base, more than 94% of new stores now come from abroad. The Latin American operations, in particular, may be a sustainably bright opportunity.
When the company went public in 2006, it was already flaunting the encouraging signs from that region. Burger King was the market leader in 13 of its 26 Latin American markets, in terms of number of restaurants outstanding. Operations in Latin America were consistently showing the highest margins (approximately 26.8%) of BK's segments. In fact, margins were nearly double that from its other geographic segments. The business had also begun expansion into Brazil, where initial indications were promising.
In the four years since, net restaurant count in the region has risen by 41%. Latin American operations still have the best margins, and Brazil has finished 2010 with 93 stores, averaging $1.8 million in annual store sales. To put that in perspective, Chipotle Mexican Grill's (NYSE: CMG) U.S. stores average $1.76 million. The second-largest burger chain in the world is making it clear that it is thriving internationally, with plans to open 500 stores in Latin America over the next five years.
Of course, Burger King will face stiff competition in these emerging economies. McDonald's (NYSE: MCD) is a Latin American king, and Yum! Brands (NYSE: YUM) also has a formidable operating presence. But if current trends continue, the company will certainly flourish in at least some of these newer markets.
Now that private-equity investors have bought out the shares, they're interested in expanding BK's Latin American operations. With its strong position in rapidly growing countries, plus a lucrative franchise model, the company may finally have its investors thinking that it's good to be the King.
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