Simulation Modeling Improves Operations Planning and Productivity of Fast Food Restaurants

Simulation Modeling Improves Operations, Planning, and Productivity of Fast Food
Restaurants
Author(s): William Swart and Luca Donno
Source: Interfaces, Vol. 11, No. 6, Special Practice Issue (Dec., 1981), pp. 35-47
Published by: INFORMS
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INTERFACES Copyright ? 1981, The Institute of Management Sciences
Vol. 11, No. 6, December 1981 0092-2102/81/1106/0035S01.25
SIMULATION MODELING IMPROVES

OPERATIONS, PLANNING, AND
PRODUCTIVITY OF FAST FOOD
RESTAURANTS
William Swart and Luca Donno
Burger King Corporation, 7360 North Kendall Drive, Miami, Florida 33152
Abstract. This paper describes how a major fast food restaurant system uses simu
lation to dramatically improve efficiency, productivity, and sales in its more than 3,000
restaurants worldwide. With a capacity to project and solve business problems, Burger
King Corporation has been able to upgrade and streamline restaurant operations, contribut
ing significantly to the continued growth of what is now the second largest restaurant
system in the world. Among the substantial changes in the last five years, the introduction
of drive-thru service and new menu items has transformed a once simple operation into a
sophisticated production process. Consequently, management turned increasingly to Oper
ations Research for answers to operational questions ranging from the most efficient re
staurant design to the optimum number of employees needed to serve customers as sales
vary. The impact of simulation models has produced millions of dollars in savings, or
profits, in a number of operational, design, and procurement areas.
James McLamore opened the first Burger King restaurant inMiami in 1954 with
a simple concept; he served a few variations of the basic hamburger, and did not need
a traditional kitchen. Because small businessmen could operate such a restaurant
even without previous food experience, McLamore began to franchise the units.
Growth was deliberate and controlled. In less than 15 years McLamore went
from running a restaurant grossing under $100 a day to heading a company with $66
million in annual sales. The chain grew to 274 units by 1967, when it was acquired
by The Pillsbury Company. Today the restaurant chain has systems sales worldwide
of more than $2 billion. Average unit sales went from $254,000 in 1967 to $700,000
plus in 1980. Annual system sales have increased an average of 36% since Burger
King's acquisition by Pillsbury.
There are now 3,000 Burger King restaurants across the United States and in
many other nations, and new units open at the rate of 300 annually. Eighty percent of
the units are owned and operated by independent businessmen. They must adhere to a
strict set of company policies but are otherwise free to run their business as they see
fit.
The Corporation develops new products, systems, and procedures, but must in
turn persuade franchisees to adopt them on a cost-to-benefit basis. Any change or
new procedure developed for the system must demonstrate its validity to franchisees
on the basis of increased sales and profits, and provide more than an
adequate return
on investment.
SIMULATION, EFFICIENCY;FOOD INDUSTRY
INTERFACES December 1981 35

Burger King Corporation now employs more than 1,000 at itsMiami headquar
ters, and in excess of 130,000 are employed in company and franchised restaurants
around the world. The company's growth has been attained not just by superior
management and infusion of expansion capital but also, to a large degree, through a
series of ongoing modifications to the original concept.
In the company's early stages, management focus was on expansion and de
velopment of the Burger King System. The original restaurant concept consisting of a
single sandwich preparation board with a single, cafeteria-type line to serve custom
ers was maintained. By definition this service system limited sales because of a
limited delivery capacity.
The first major restaurant concept change was to go to a multichannel service, or
"hospitality system." This system allowed for greatly increased sales delivery. To
match this, additional production capacity was required. This was obtained by ex
panding the building backwards, and placing the sandwich prep board perpendicular
to the counter, allowing more sandwich prep employees to work simultaneously.
These changes allowed reduced service time which created higher sales capacity to
better accommodate peak hour business. An example of one of the restaurant config
urations is shown in Figure 1. Numbers indicate the order in which employees are
assigned to handle customer load increases.
FIGURE 1. POSITIONING CHARTS ? "T" LAYOUT.
D D D D M
17 9 15 7 13 4 11 i
36 INTERFACES December 1981

As the take-out business increased substantially, Burger King was the first fast
food hamburger system to introduce the drive-thru service lane. The impact on sales
and operations was immediate and dramatic. Today, virtually 50% of the food sold in
Burger King restaurants is through drive-thru service lanes. The drive-thru concept
transformed the original single service system into two separate systems, and re
quired rearrangement of equipment and product so the counter crew and drive-thru
service areas both had access to them.
Other variables impacted on the continuing growth of the Burger King system.
In 1973, to gain a marketing edge, the "Have It Your Way" concept was intro
duced.* The success of this concept was dramatic, but it did change the kitchen
operations from mass production of similar items to a job-shop environment where
product was prepared to individual customer specifications. The combined effect of
increased average per store sales and the added complexity of kitchen operation
required that, in many cases, additional production capacity be added to a very
confined kitchen. In 1978 the Burger King system decided to significantly expand its
product line through the introduction of Specialty Sandwiches, which now account
for 20% of sales. The production of these sandwiches required different equipment
and procedures which were implemented through an additional sandwich prep line.
As result of this diversification, sales again rose but the all important speed-of
service time was threatened, especially in peak periods, and original kitchen designs
were no
longer adequate.
Burger King Corporation projections call for average unit sales to reach $1
million by 1983, with restaurant operating profit to rise another 4%. It was clear,
considering the increasing complexity of the production system and sophistication of
the customer, that these goals could only be realized if the efficiency and produc
tivity of the food delivery system was substantially increased for every restaurant in
the Burger King System.
THE ROLE OF OPERATIONS RESEARCH

With a dramatically changing fast food hamburger restaurant business, it be
came clear that corporate productivity had to be a top priority. For this reason the
Industrial Engineering and Operations Reasearch functions were synergistically in
corporated into one department at Burger King. That department is hereafter referred
to simply as "Operations Research"; its primary mission is to enhance productivity
throughout the system. The department established itself in a very short period of
time through a series of high impact studies, the first of which was the development
of a computer model for the purchase of meat.
In late 1977 and early 1978, meat prices began to fluctuate widely. Because beef
is the primary component of the food Burger King serves, cost pressure on margins
was severe. Operations Research therefore developed a computer model to determine
what kind of meat to buy from which supplier so as to have the correct hamburger
formluation at minimum cost. The result was a savings of almost %# per pound. In a
system that buys over three million pounds of hamburger meat a week, that %#
represents savings in excess of $22,000 each week.
*Burger King, Whppper, Specialty Sandwiches, and Have It Your Way are copyrighted trademarks of
Burger King Coporation (1981).
INTERFACES
December 1981 37

The computer model was subsequently expanded not only to determine least
cost formulations at each individual packing plant, but also the least-cost distribution
throughout the system. The new model optimized shipping and distribution costs
based on meat availability nationwide and on anticipated demand for processed meat
within the entire system. This expanded computer model saves Burger King Corpora
tion at least $2 million annually.
But the impact of productivity improvement effort was most clearly demon
strated on the analysis of the drive-thru system. At first glance, the drive-thru con
cept is simple. The driver orders at the outside menu board. He then joins a waiting
line (or stack) until it is his turn to pick up and pay for his order at the pick-up
window. Staffing the drive-thru was originally determined by the restaurant man
ager. In most units, the drive-thru team usually consisted of one or two cashiers who
would take the order, run to the sandwich chutes and drinks stations, assemble the
order, bag it, and hand it to the customer.
Burger King established a standard transaction time of 30 seconds for the drive
thru window, but most units had service times in excess of that. During peak periods
it simply was no longer possible for drivers wishing to use the drive-thru to even join
the end of the car line. Sales were clearly being lost due to this problem. A system
initially devised to provide customers convenience had become an inconvenience.
Analysis at a number of units showed drive-thru transaction times were averaging 45
seconds. With a 45-second transaction time, the restaurant could handle a maximum
of 80 cars an hour. With an average check of $2.44 per order, drive-thru sales were
limited to a maximum of $195.00 per hour.
If the transaction to 30 seconds, cars served per hour
time could be shortened
could increase by 50%, and maximum sales would rise by almost $100 to $292 an
hour. That represents an annual capacity benefit (or sales increase) of over $35,000
per restaurant. Working with franchisees, Operations Research devised a plan to
improve speed of service at the drive-thru. The heart of the new system is the
separation of drive-thru work into a series of distinct tasks.
One does but take orders. The order taker the order to a
employee nothing gives
runner/bagger who assembles the order and places it on an assembly shelf. The third
member of the drive-thru team, the cashier, simply makes change and hands the
order to a customer. The system allows for additional staffing when demand exceeds
the ability of the three-person crew to maintain speed of service standards.
The Operations Research Department also recognized that customers waited an
average of 11 seconds at the order station before being acknowledged. The rubber
bell hose was therefore moved ahead of the order station so that the order taker was
alerted arrival prior to the car reaching the order station.
to the customer's
Today, all Burger King restaurants with a drive-thru have adopted the efficiency
package. These restaurants have increased their annual sales capacity by over
$35,000. If each restaurant in the system gained only 50% of this, or $18,000 per
unit in annual sales increases, the Burger King system would enjoy additional sales
of $52 million annually.
most of the studies mentioned did involve the use of either simulation,
Although
optimization, or statistical models, these models were developed to solve specific
problems. However, it soon became apparent that the increasing demands placed on
the OR department by management would require the development of a comprehen
sive general purpose restaurant model which could be used to address a wide variety
of issues.

Top management's demands on the department increased because of the demon
strated success of the approach, and the recognition that the current Burger King
System is vastly more complex than it was when they were actively involved in
day-to-day restaurant operations. The addition of drive-thru's, the increase in menu
items, and the changes in building and equipment all contributed to making manage
ment's experience base, obtained in the original system, not suitable for decision
making in today's environment. The only alternative to making decisions from an
empirical base is through an analytical approach such as that provided by Operations
Research.
Whilemanagement was finding it increasingly difficult to set a firm strategy for
the future,the key cost variables that impact on the ability of the restaurant to run
profitably began to rise. These cost escalations were most severe in food and labor,
which are the single largest cost components in operating a Burger King restaurant,
accounting for nearly 40% of every sales dollar.
Faced with this situation, Burger King management in 1979 committed itself to
develop a Productivity Improvement Program for both company and franchised res
taurants. This program would clearly have great impact on the Burger King system.
The success of the program would, to a large degree, determine the future success of
the company itself. A continuing improvement in productivity would be required for
each operator to maintain a satisfactory return on investment. In addition, restaurant
productivity improvements are needed tomaintain return on investment levels which,
in turn, can be used to demonstrate to potential franchisees that a franchise is a sound
investment. New franchised restaurants account for 15% of the system's growth
annually.
Management's decision to entrust the development of this program to Opera
tions Research provided the motivation and rationale to incorporate all knowledge
gained previously and integrate it through the development of a comprehensive
general purpose restaurant model.
MODEL DEVELOPMENT
In order to develop a general purpose restaurant model, it was decided to view
the restaurant as an system of three inter-related
operating composed subsystems:
The Customer System, The Production System, and The Delivery System.
In a typical store, a customer order is generated in the customer system (in-store
and/or drive-thru). This order is transmitted to the kitchen via a CRT device. The
four production areas in the kitchen (Drinks, Fryers, Main Sandwich Preparation
Line, and Specialty Sandwich Preparation Line) respond if the order contains a
product made in that area. The production action can be to replenish inventory of
standard product, or to prepare a custom sandwich (special order) for a waiting
customer. Simultaneously, in-process inventories of fries, preassembled hambur
gers, drinks, fish, chicken, lettuce, mayonnaise, etc., have to be checked to deter
mine whether a replenishment action must take place.
Concurrent with the production activity, the delivery system is active in process
ing the customer by making change and assembling the order from inventories,
whenever possible. The amount of time a customer waits, referred to as speed of
service, is held to a minimum by using inventories whenever possible and by
maximizing the lead time the kitchen has to produce special orders.

Although the above description has many analogies with typical manufacturing
facilities, there are also some distinguishing characteristics: (1) the Burger King
system is composed of 3000 relatively small plants (stores) which
manufacturing
together form a relatively large manufacturing organization; (2) sales volumes can
vary by as much as 1000% within a 30-minute interval; (3) shelf life of most products
is 10 minutes. This prevents the accumulation of inventory during slow periods to
handle peak period demands and also creates the need for an extremely flexible
production and manning strategy; (4) production, inventory, distribution, and a sub
stantial percentage of consumption takes place under one roof.
Jim McLamore's original concept in founding Burger King was to serve quality
?
food quickly and courteously. Speed of service remains the keystone of the fast
food hamburger restaurant. As shown in Figure 2, the peak service hour is noon
luncheon business. For a given facility at a given location, the luncheon business
usually can be increased in proportion to the increase in speed of service. Typically,
a hamburger restaurant gains four times as much business a day as it gains for the
lunch hour. So, if a Burger King restaurant is to raise sales but cannot, due to
competitive pressures, increase prices substantially, itmust increase the number of
consumers served. And, to do that, the restaurant must increase its speed of service.
FIGURE 2. PERCENTAGEOF SALES BY HOUR OF DAY.
1-2 2-3
11-12
12-1 3-4 4-? S-6 6-7 8-*
7-810-11
9-10
equation is simple. The faster the service, the more people that can be
The
served; therefore, the higher the restaurant's potential sales volume. For this reason
the impact of suggested changes on speed of service is the principal criterion for
com
operational decision making not only at Burger King but at most fast food
panies.
initial modeling
The efforts yielded a comprehensive linear programming
model. Although valuable, it did not permit the analysis of the dynamic aspects of the
operation, nor the consideration of the multiple inter-related queueing situations that
arise in the customer, delivery, and production areas. Consequently, a simulation
approach was selected.
Any general purpose restaurant model for the Burger King System must have the
capability of representing any restaurant type currently in the system as well as any
potential design for a new restaurant. In addition to the different configurations, the
manufacturing system is subject to change during the course of any given day. Some
production areas are closed down as demand lags and others that remain in operation
are manned differently than at other sales hours.

The simulation model was built, therefore, using a modular approach. Each
logical entity in the restaurant was defined and programmed in as self-contained a
manner as possible. The modular model has maximum flexibility and efficiency in
adapting to change, and readily accommodates the various new products service
concepts that are currently being tested or developed. Data collection for the program
began with prototype studies in company-owned R&D restaurants, and meas
urements were then taken in more than 40 restaurants in 10 different regions of the
country.
As the initial modeling efforts neared completion, it became essential to con
vince corporate management that the model actually predicted the behavior of real
restaurants. Top management and selected franchisees were invited to witness and
cooperate in a live calibration of the model. In this calibration, the manufacturing
and service system of a typical unit was physically assembled in a warehouse. The
"restaurant" was staffed with actual crew members from nearby units. Over the
course of two days, the "restaurant" was subjected to a variety of customer arrival
patterns matrixed against specific manning levels. The results were videotaped so
that actual "restaurant" operations could be compared to the computer projections.
In this manner, the reliability and accuracy of the model was established.
By allowing corporate management and franchisees to be actively involved in
the calibration test, credibility was established beyond any doubt. Today virtually no
operational decision at Burger King is made without having been subject to model
analysis. The model currently averages 300 runs per month. (A typical application
consists of 2,500 GPSS blocks and runs approximately 60 seconds of CPU time on an
IBM 370/3032.) Management's confidence in the model has been rewarded as its
accuracy has been confirmed repeatedly in actual restaurant operation.
APPLICATIONS
Existing Restaurants
The prime motivation for the Productivity Improvement Program was to allow
restaurants to handle current sales and future sales increases efficiently and profit
ably. The restaurant simulation models provided the analytical capability that allowed
for the processing and evaluation of suggestions and alternatives from a Joint
Franchise/Corporate Productivity Task Force. This resulted in the development of
the Productivity Planning for Profit Kit (PPP), a two-phase process developed ex
pressly for restaurant operators. Phase One allows them to recognize if productivity
problems are limiting sales potential, specifically define those productivity prob
lems, and indicate how these problems can be resolved.
After completion of Phase One, the PPP kit allows restaurant operators to
project the achievable sales growth that could be reached in an individual restaurant.
The kit then determines what changes must be effected in order to reach these goals.
Finally, the kit allows the restaurant operator to project the return on investment and
payback period of each of these productivity improvements.
At the conclusion of the PPP process, the operator has a five-year plan for the
productivity upgrade of his restaurant. The PPP program is an on-going process
which is evaluated annually by the restaurant operator in conjunction with his fran
chise district manager. It begins with speed of service evaluations of both front
counter and drive-thru. After work stations causing delays, if any, are identified,
delay analyses examine each problem area to identify the specific bottleneck.
INTERFACESDecember 1981 41

To cure these bottlenecks, the restaurant refers to one of over
operator simply
100 Improvement Resource Cards. Each card indicates the maximum sales potential
that can accrue from alleviating the productivity bottleneck. The restaurant operator,
using the PPP kit, can project any combination of real and inflationary growth. Then,
entering the Improvement Decision Path at current sales levels, the specific produc
tivity improvements are clearly indicated.
The PPP kit allows the operator to predict his return on investment for each
productivity upgrade, and by repeating the process, a complete five-year sales and
productivity plan is assembled. The successful use of the kit spurred the use of the
model to evaluate on-going operations management decisions. Each change in
facilities, procedures, equipment, and labor has to be justified in terms of its impact
on the restaurant as a whole. This represented a fundamental change in the operating
philosophy of the company. In the past year, over 20 changes have been evaluated
with the model. Descriptions of several major changes follow:
In an on-going analysis of the drive-thru, Operations Research recognized

that in many restaurants the stack size, or distance between the order station and the
pick-up window, was too short and accommodated only two or three vehicles. The
simulation models were used to determine what stack size gave the optimal lead time
so that when a car reached the window its likelihood of waiting was minimized.
The longer stack, by drastically reducing waiting time, allows an additional 12
to 13 customers to be served in an hour. This adds $30 per hour in sales during the
peak lunch hour, for an annual benefit of over $10,000 per restaurant. This change
has been implemented throughout the system. Taking a conservative estimate of
1500 restaurants in which this change has been implemented, this would provide an
additional $15 million in annual sales capacity.
The second drive-thru window (placed in series to the first as opposed to a

two-lane drive-thru), has been proposed as a means of expanding the sales capacity
of the drive-thru during peak hours. The simulation model evaluating this modifica
tion projected a sales benefit of 15% during peak lunch hours. An experimental
second window unit was installed in company-owned R&D restaurants. The ob
served sales benefit in actual operation was 14%. Based on average restaurant sales
during the lunch hour and average drive-thru percentages, the second window adds
$36.40 in sales each day, or more than $13,000 per year per restaurant. This revision
has been introduced into the system. Estimating that 10% of the 300 new restaurants
built each year will be able to implement the second drive-thru window, that repre
sents an additional $390,000 in annual sales capacity.
The model has proven especially valuable in examining the operational im

pact of the introduction of new products. For example, small specialty sandwiches
were considered for introduction to supplement sales of the larger sandwiches. The
computer simulation showed the introduction of these sandwiches would generate an
average delay of 8 seconds per customer. On a yearly basis, this would represent a
$13,000 loss in sales capacity for an average restaurant. On this basis, itwas recom
mended that these sandwiches not be introduced. This resulted in the avoidance of a
$39 million loss in capacity to the entire system.
New Restaurants
While the restaurant simulation model is based on experience in existing re
staurants, itwas designed to aid in the development of new restaurant configurations.
As more and more fast food chains compete for fewer and fewer quality locations, it

became clear that the size of the restaurant would have to be tailored to the trading
area.
Positioning the correct size building in a specific location can substantially

increase potential returns. Using the simulation model, the restaurant universe was
segmented into three distinct segments: (1) the BK-500, (2) the BK-700, the new
workhorse of the system, and (3) the much larger BK-900.
Traditional evaluations such as sales potential, kitchen capacity, et al., were not
neglected, but increased emphasis was placed on designing the kitchen for human
engineering to reach maximum efficiency for any given capacity with minimum
labor. The computer model allowed speed of service to be plotted against sales,
establishing a distinct operating range for the restaurants as currently configured.
For example, the BK-500, which is designed for trading areas of 5,000-10,000
people, breaks even at just over $500,000. An average BK-500 easily handles sales
of $675,000 a year with an hourly sales capacity of $550/hour. As sales reach
three-quarters of a million, the BK-500 can no longer maintain our speed of service
standards. At $820,000, sales are limited and real growth is no longer possible. The
model, therefore, defines an operating range, from $500,000 to $800,000 plus. With
this data, it is also possible to establish a distinct decision point at which the choice is
made to build a BK-500 or another unit (Figure 3).
FIGURE 3. PRODUCTIVITY PERFORMANCE COMPARISON: YEARLY

SALESARE IN $X103 AND HOURLY SALESARE IN $. CALCULATIONS FOR
THE DECISION POINT ARE MADE FOR 5% REAL GROWTH AND FOUR
YEARS OPERATING LIFE BEFORE NEED TO UPGRADE KITCHEN TO
HANDLE VOLUME.
000R TODOOR
SERVICETIMES
(SECONDS) K-500
310
300 i
280 /
260-1
/
240
/
220
/
210
200
lu .
cue.
SPEED
OFSERVICE
STANDARD
180
170
160
150
i in r i im i
YEARLY
SALES 500 600 700 800 900 1000110012001300
HOURLY
SALES 467 557 637 716 796 876 9551034
This decision must allow for sufficient growth before it becomes necessary to
remodel and expand the restaurant to maintain speed of service.
In the case of the BK-500, this decision point allows sales volumes to achieve a
real growth of 5% annually for four years before the $820,000 limit is reached.
Projecting backwards gives a decision point pf $675,000.
Because the restaurant can be profitable at low volumes, the BK-500 is targeted
to offer Burger King new opportunities in markets of a size which cannot sustain
current restaurant designs.

Completion of similar analyses for the BK-700 and BK-900 allowed operators to
more clearly match sales and service capacities to the needs of specific locations.
More importantly, both the computer-designed BK-500 and the BK-700 offer sub
stantial labor savings. Whatever the sales volume, low, normal, or peak, both
designs offer savings in excess of 1.5-2% in labor over today's designs. Completion
of such analyses enables restaurant operators to select the most efficient restaurant
configuration for each site and trading area.
Applications for Both New and Existing Restaurants

As stated earlier, labor is a major cost component in restaurant operation ? one
that is increasing rapidly due to federally mandated boosts in the minimum wage.
From 1976 to 1981, the minimum wage increased 46% ? from $2.30 to $3.35 per
hour.
Although a restaurant operator cannot control the price of labor, he can control
the amount of labor used to operate his restaurant. In establishing staffing levels, the
operator has, in the past, been guided by the uniform Burger King Labor Standard,
applied to all units.
The Operations Research Department realized that major bottom-line benefits
could be achieved by tailoring the amount of labor restaurants required at various
sales volumes to the restaurant configuration, product mix, and drive-thru percent
age.
Through the use of the model it was possible for the first time to accurately
project not only how many crew members were needed, but also the most effective
positioning and division of labor within the restaurant.
The results of the simulation modeling are a series of staffing and crew position
ing charts. Because staffing and work responsibilities are tailored to individual units,
labor savings over the old standard are substantial. For instance, for a standard T
restaurant with drive-thru, the savings occur at both peak and low volume hours
(Figure 4), and are in excess of 1.5% of sales. For a typical restaurant with annual
sales of three quarters of a million dollars, this represents an additional profit of
$11,250.00.
FIGURE 4. LABOR SAVINGS FOR THE "T" LAYOUT.
EMPLOYEES
(DIRECT
LABOR)
20
18-1 - g^
50 100 150 200 250 300 350 400 450 500 550 600 650 700 750
HOURLYSALES
44 INTERFACESDecember 1981

IMPLEMENTATION AND BENEFITS
Lou Neeb, Chairman and Chief Executive Officer of Burger King Corporation,
in a letter to the Chairman of the CPMS Competition, stated that:
The role of Burger King Corporation is not simply to operate restaurants, but to
provide individualbusinessmen with an enterprise that offers an above-average chance of

success. Providing this success requires that our restaurants achieve a more than adequate
return on investment.
The Operations Research activities the company has undertaken in the past few years
are the primary means we have at our disposal to directly improve the profitability of each
individual restaurant. Though the results of these efforts can total millions and millions of
dollars for franchisees and the company, the real measure of success of these efforts is the
continued fiscal
vitality of the Burger King System itself. As our fast food competitors
close literally hundreds of restaurants thoughout the nation, Burger King restaurants con
to operate profitably ... in
tinue large part due to the savings generated by improved
productivity.
The primary means of achieving the productivity gains referred to for the 3,000
existing restaurants in the Burger King System is the PPP kit. The corporation can
only mandate productivity upgrades in the 400-plus company restaurants it owns.
Participation among the franchise community is encouraged, however, by making
the formulation of a productivity plan a mandatory item in each restaurant's annual
franchise review. As part of this review, a franchisee must submit a minimum of a
two-year productivity plan for each restaurant that has been in existence for more
than two years. In this way, the corporation assures that all restaurants, both com
pany and franchise, are participating in an on-going productivity improvement pro
gram.
Because the productivity upgrades required by each restaurant depend on the
unit's existing facilities, sales volume, and product mix, it is almost impossible to
document a hard dollar benefit from the program. There is, however, every indica
tion that the benefits to franchisees and the corporation are substantial.
In an earlier operational improvement program, called Grand Slam, franchisees
invested an average of $40,000 per restaurant over the course of two years. Average
restaurant sales as a result increased by approximately $200,000. Systemwide among
the 2,200 units then in operation, this represented a sales increase of $440 million.
These sales increases returned royalty payments alone to Burger King of
Corporation
$15,400,000.
At the same time, company restaurant operating profits increased by more than
75%. If franchisees achieved the same percentage profit increases, the program
generated almost $100 million, in additional profits systemwide.
Similar benefits are without a doubt being achieved through the implementation
of the PPP kit. In the first year of the PPP process most restaurants upgraded their
microwave capacity and installed an auxiliary drink station, converted current drinks
to automatic dispensing and front access, provided access to the shake machine from
the front corner, and adopted the drive-thru efficiency package. The sales capacity
benefits are in excess of $170,000 ? in line with those achieved during Grand Slam.
Hence similar profit and sales increases can be anticipated.
In fact, there is every indication that the Productivity Improvement Program has
substantially bolstered Burger King sales throughout the current economic downturn.

Until the last quarter Burger King has consistently outperformed the industry, while
both major competitors have posted negative gains in each of the last two years.
Between August of 1979 and May of 1980 Burger King, according to Bernstein
Research, posted real growth of 2.2% while McDonald's declined by 2.8% in real
terms.
In the last two years, Burger King restaurants have gained market share at the
rate of almost 1.0% a year ? and each percentage point of market share represents
more than $200 million. More importantly, on an individual restaurant basis, in the
last three years, discounting the effects of the introduction of breakfast into the
McDonald's menu, Burger King has halved the gap in individual restaurant sales. At
this rate, Burger King restaurant sales will match those of the industry leader on a
per-restaurant basis within the next five years.
All the new restaurants opened by Burger King today use kitchens designed
according to the simulation model, and therefore enjoy substantial labor savings from
the moment they open. These 1.5% savings in labor are passed directly to the bottom
line as incremental profit.
The use of the new simulation model in the design of the kitchens for the 300
new units opened each year provides an incremental profit of $3,375,000 annually.
Over the 25-year life of the franchise agreement, this equals to a net present value of
$84,375,000 (assuming that the real growth plus inflationary growth is equal to the
corporate cost of money).
More importantly, Jerry Winter, Burger King Corporation Senior Vice Presi
dent, Operations Systems, notes that
Using the model to tailor the restaurants to particular markets opens up many trading
areas which the company could not previously target for expansion. The development of
the BK-500 alone opens up over 2,000 potential new trading areas for development.
Without the development of this smaller 50-seat restaurant and its highly productive
kitchen, our expansion efforts would be significantly curtailed.
Perhaps the single greatest impact of the simulation models is the establishment
of the new labor standards. Initial were that these standards would pro
projections
duce a 1.5% of sales savings in labor costs. Actual field experience suggest that the
? in excess of 2%. However, even using the
savings may be substantially higher
this represents a systemwide ? or additional ? of
lower percentage, savings profit
$32,625,000 annually. These savings are today reality as the system adopts the labor
standards worldwide.
CONCLUSION
More and more individual franchisees, as the Corporation did earlier, are realiz
ing that Operations Research and the restaurant simulation models provide the com
petitive advantage that leads to success.
Wally Crawford, who operates three franchised restaurants inDes Moines, Iowa,
with his brother Dave, says
In the past, there were two ways of being successful in the fast food industry. One,
you were lucky enough to open in just the right location and there was nothing you could do
but succeed. If you weren't lucky enough to select exactly the right location, you had to
work extra hard ... constantly trying new ideas to build the restaurant into a success. But
there was no way to judge these ideas except by our own experience; experience and
knowledge that as a newer franchisee you simply didn't possess. Now, with the restaurant
models, for the first time we have a tool that can evaluate new concepts as well as or better
than even the most experienced operators. Operations Research increases the viability of
each individual restaurant and in doing so assures that we will be around not just next year
but 10 and 20 years from now.

Wally Crawford's thoughts are echoed by Mike Simmonds, who operates a
group of highly successful Burger King restaurants in Omaha, Nebraska:
To maintain the success of a restaurant, even units with sales in excess of $1,250,000,
you must constantly modify the restaurant to allow you to capture rather than cap your sales
potential.
Seat of the pants judgment is hardly the best means of managing a $1 million plus
investment... even if one has worked in fast food restaurants most of one's life. Yet, until
the introduction of the Productivity ...
Improvement program sophisticated guesswork
was the only tool we had available.
Operations Research today provides the means of evaluating the change before it is
made ... and your return on investment.
predicting
No other tool yet developed in the fast food industry ... contributes so much to
assuring a franchisee's peace of mind as he contemplates additional investments in existing

or new restaurants.
Jerry Ruenheck, president of Burger King US, which is the largest of the
Corporation's three decentralized operating divisions, says
Our business has undergone dramatic changes. The importance of the simulation
modeling program to all areas of operational and productivity planning is almost incalcula
ble. The analytical knowledge and sophistication that simulation modeling gives Burger
King, therefore, provides annual savings, or profits, in the millions of dollars for the
system of company-owned and franchised restaurants.
ACKNOWLEDGEMENTS
The authors wish to thank Dr. Douglas Hutchinson from the University of
Tennessee at Knoxville for his contributions during the early stages of the model's
development. In addition, special thanks are due to Jerry Winter, Senior Vice Presi
dent for Operations Systems at Burger King Corporation and Mike Guido, formerly
with Burger King Corporation, for their early support of the modeling efforts.


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