Why Burger King Should Resist Offers to Go Private

The restaurant rumor mill switched into overdrive this week with the news that Burger King Holdings (BKC) is entertaining buyout offers from private-equity firms. If history is any guide, going private would be a mistake for the nation's number-two fast-food chain -- and one the company has made before. More than once.

For those unacquainted, let's take a quick trip down BK memory lane. It's a winding road with many fallow periods in the company's evolution, during which Burger King was owned by:

Pillsbury
Grand Metropolitan
Diageo (DEO)
TPG Capital/Bain Capital/Goldman Sachs Capital Partners
all of the above

If you picked "e," buy yourself a Whopper. Part of Burger King's core problem through the decades has been its revolving door of corporate masters with various degrees of foodservice experience and interest in meddling with the business. The results included confusion, squabbles with franchise owners, and generally not a lot of brilliant menu development. BK kept expanding right along, but it's arguably still number-two because of the lack of stability in its ownership. By contrast, McDonald's (MCD) has been publicly traded right along.

That group of private-equity owners in (d) still own roughly one-third of Burger King, and they're apparently ready to unload it. But Burger King benefits from being a publicly traded company owned by many shareholders who mostly leave it alone to try to run a 12,000-unit burger chain. The one prospective buyer that's been named -- 3G Capital Management, employer of new Clinton family in-law Marc Mezvinsky -- doesn't appear to bring any restaurant-industry expertise.

Since the buyout rumors surfaced, BK's stock shot up. Investors looking for a quick premium on their stock are apparently excited by the idea that a private buyer might emerge. But unless it's an owner with some relevant expertise or synergies from other restaurant brands to offer, Burger King is better off staying publicly traded, toughing out the downturn, and boosting its value the old-fashioned way -- by growing sales.

It won't benefit Burger King or its franchisees to be dragged through yet another ownership change right now. Better to just let them flame-broil burgers and work on improving execution.

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Photo via Flickr user bfishadow

Carol Tice

Carol Tice is a longtime business reporter whose work has appeared in Entrepreneur, The Seattle Times, and Nation's Restaurant News, among others. Online sites she's written for include Allbusiness.com and Yahoo!Hotjobs. She blogs about the business of writing at Make a Living Writing.

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