Thinking of Buying a Fast-Casual Franchise? Read this report first.
Web Exclusive
A Second Offering
After releasing strong first-quarter numbers, Burger King is experiencing a 23 million-share offering by shareholders.
Burger King's strong Q1 performance darkened by news of a second stock offering.

In light of its strong international expansion, Burger King announced a 5.9 percent increase in worldwide sales for its first quarter in 2008, ended September 30. What cast a dark shadow on Monday’s announcement, however, was the news that three large private equity funds would be selling a portion of the company’s common stock in an underwritten offer.

The company’s holdings report showed Burger King in its 15th consecutive quarter of worldwide sales increases and revenue up $602 million or 10 percent.

A statement released only about 20 minutes after the initial report, however, sent stocks down 91 cents or 3.3 percent. The company announced that shareholders TPG Capital, Bain Capital Partners, and the Goldman Sachs Fund were making a secondary offering of 23 million shares of the company’s common stock. In addition, underwriters will be granted an option to purchase up to an additional 3.45 million shares to cover orders that are not confirmed.

According to Investopedia, a Forbes Media Company, this kind of offer does not increase the number of available shares nor dilute the owner’s holdings. Investopedia reports that secondary offerings are common in the years following an initial public offering (IPO) and usually signify that the companies do not want to send share prices plummeting.

TPG Capital, Bain Capital Partners, and the Goldman Sachs Fund helped take Burger King public in February of last year. The sale will leave the sponsors with about 41 percent of the company’s common stock, down from its original holding of 58 percent.

Despite the announcement, the Miami-based quick-serve stayed positive. In its earnings call later that afternoon it attributed its strong 2008 fiscal debut to new menu additions such as its Tendercrisp Chicken Sandwich, The Spicy Chick’N Crisp sandwich, and its BK Breakfast Value Meal.

“Our evolving menu architecture and the worldwide strength of our marketing alliances drove significant revenue increases,” said CEO John Chidsey in a statement Monday.

He went on to share credit with The Simpsons Movie promotions for driving sales of the quick-serve’s Ultimate Double Whopper.

The sale will leave the sponsors with about 41 percent of the company’s common stock, down from its original holding of 58 percent.

In addition to menu and marketing, growth also drove the company to such a strong financial showing. “Our pipeline in the U.S. is growing as potential and current franchisees recognize the success of our business model and seek development opportunities,” Chidsey said of the 90 new units that had opened in the U.S. and Canada during the last year.

“I am even more excited about our international growth plans. Opening restaurants in existing and new strategic markets continues to be a top priority and focus of the entire Burger King team worldwide” he said. In the last 12 months Burger King has opened 90 locations in Latin America alone and 260 other locations around the world, bringing its total unit count to more than 11,000 stores worldwide.

Burger King spokesman, Keva Silversmith, says that the sponsors' sale will not have an impact on future growth for the company. "Restaurant development will continue to be a performance driver, with 80 percent of the growth coming internationally over the next several years," he says. "The sponsors’ sale provides additional liquidity for the stock. More investors will be able to buy shares of the company and take a stake in the Burger King story."

The company’s presence currently stretches 69 countries and U.S. territories with 90 percent of its restaurants owned by franchisees.