Have you ever heard of Burger Chef? If you are a fan of Mad Men, you may have seen the episode where Dom and Peggy use the "family-oriented" pitch in order to land the account https://vimeo.com/123768934. If you are under the age of 40, then probably not. Burger Chef was considered to be one of the most innovative fast-food restaurant chains that challenged McDonald's back in the 1960's. The founding brothers, Dave and Frank Thomas while designing a custom broiler for Burger King, decided they could compete directly instead of supplying them. They began to franchise Burger Chef locations, beginning in Indianapolis in 1954. By 1968, Burger Chef had over 900 locations (#2 to McDonald's) and General Foods acquired them. In 1971, that number jumped to 2400 locations!
I had the privilege of creating the Burger Chef Forecasting Model that determined the marketing investments that would be needed to earn a significant ROI for General Foods.
It is important to note that innovation was the key ingredient to Burger Chef's success. Many people do not know they were the FIRST to:
Develop the Flame-Broiled Burger (not Burger King)
Create the "Value Combo"(not McDonald's) of a soda, fries and a hamburger for 45 cents
Create the "Self-Serve Works Bar" (not Fuddruckers)
Create the "Funmeal" (not McDonald's version called the Happy Meal)
With the financial resources of General Foods and cutting-edge innovation, it seemed Burger Chef was poised to take-over McDonald's foothold in the industry.
What happened? Many historians will cite that it was too much, too soon for General Foods to handle. Others will say that General Foods wanted to refocus its energy on it core competency of packaged foods.
While both contributed to its demise, do you want to know the real reason Burger Chef failed?
The royalties that General Foods negotiated with Burger Chef franchise owners was too low! While franchise owners were becoming millionaires, General Foods was seeing a fraction of those revenues. It become cost-prohibitive for General Foods and they eventually sold the business to a Canadian company that operated Hardees and took a $75 million write-off.
Lessons that still hold true and are relevant today. Just ask Mr. Wonderful from the Shark Tank about royalty negotiation!