Delivery

Burger King delivery: A new front in the fast-food wars?

December 5, 2012: 1:31 PM ET

The burger chain is testing the waters for home delivery as part of a larger push to go from fast food straggler to industry frontrunner. burger-king-delivers

By Chip Lebovitz

FORTUNE – It's hard to imagine fast food getting much simpler than it is today. But Burger King is looking to put some of its customers just a call or click away from a Whopper.

The burger chain's recent push into home delivery is part of a larger effort to move from fast-food straggler to industry frontrunner. In March, Wendy's snagged second place from Burger King (BKW) in the fast food hamburger market, according to research group Technomic's analysis of the chains' 2011 U.S. sales (McDonald's is, by far, the industry leader.).

A successful domestic home delivery business -- fast food hamburger delivery is common outside the U.S. -- would open yet another battlefront among the highly competitive burger chains. Delivery is an underutilized but potentially lucrative opportunity. Across the entire restaurant industry, delivery checks are on average 20% greater then their dine- in counterparts, according to Piper Jaffray analyst Nicole Miller Regan.

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Burger King has found that the consumer interest is there: Company data show that in the restaurant's original Washington D.C home delivery test, 90% of customers said that they liked BK delivery and would order again. The burger chain launched a home delivery pilot in south Florida in October, and in November, they moved into Houston and New York, bringing the tally of delivery locations to 71.

There are so many methods of ordering from a fast-food restaurant -- dine in, drive-thru, and take out -- that it's almost surprising that some chains don't do delivery. Restaurant analysts note delivery is now an expectation among customers, not a bonus.

Delivery, however, doesn't come as easily to burger chains as it does to your average pizzeria, for two primary reasons: operational complexity and soggy French fries. Running a fast food chain is already a complex enterprise. Dine-in and drive-thru are two separate businesses, and adding a third -- delivery – could easily slow down service. Slower fast food chains serve fewer customers and see smaller profits.

More importantly, fast-food burger delivery aspirations often collide with the fact that French fries simply don't travel well. "Everyone's main concern is, 'How do the French fries hold?'" says Alex Macedo, senior vice president and general manager of U.S. franchise business for Burger King.

Burger King is well aware of the premium on crisp French fries. The fries' to-go boxes have vents to keep the food from getting soggy and are put into a package last to ensure that they are as warm as possible on arrival.

The packaging of a delivery Whopper is also unique, harkening back to the McDonald's (MCD) McDLT -- with the lettuce and tomato part of the bun kept separate from the burger half. On top of the specialized food prep, each company delivery car is outfitted with cold compartments and heating bags to ensure that the food stays at the right temperature.

Delivery is just one part of Burger King's attempt at modernization in the face of surging competition. The chain has gone on a market-wide charm offensive targeting women, children, and baby boomers, Piper Jaffray's Regan says. The restaurant's menu has been updated and expanded. In August, Burger King introduced eight chicken items, ostensibly healthier than their Whopper counterparts.

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Even the company's advertising has become less male-centric. The King, Burger King's iconic mascot, has been absent from commercials for months, replaced by a "Taste is King" motto.

The company says it'll judge its delivery tests on customer satisfaction and profitability. Those two aspects will be important, but WD Partners food industry analyst Dennis Lombardi believes the most important factor will be whether franchise owners, or franchisees, whole-heartedly embrace delivery. That's perhaps one reason why Burger King chose south Florida for its second test area. Burger King's central headquarters are located in Miami-Dade County and a majority of the region's franchises are centrally owned. "The next step is to see the response of franchisees in general, which will be a real reflection of the costs and benefits of delivery," Lombardi says.

Franchisees might not want to spend capital introducing a whole new element to their operations in pursuit of what may ultimately be a small sales bump. Still, in the end, if home delivery is wildly successful, both franchisees and Burger King's competitors may have no choice but to embrace the format, Lombardi says.

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