Former Burger King CEO John Chidsey on Change and Why Results Trump the “Beauty of Strategy”Published: September 08, 2011 in Knowledge@Emory
John Chidsey, now co-chairman of Burger King Corporation, knows something about good leadership in challenging situations. When he joined the hamburger chain as president and CFO in 2004, sales were in a seven-year slide and a third of the company’s restaurants were struggling. He quickly assembled a team to tackle the problem and for four years experienced a rise in sales. During that time, Chidsey was appointed chairman and CEO in 2006. In 2008, the recession hit and quick-serve restaurants, historically recession-proof, were not spared. With well over 12,000 restaurants in 76 countries and U.S. territories worldwide, Burger King is currently a top 100 global brand, thanks in large part to its global expansion and its advertising and social media campaigns (“The King” and the subservient chicken among them). In October 2010 Burger King Corporation was purchased by 3G Capital, a Brazilian-backed private equity firm, for a reported $4 billion. To help with the transition, Chidsey will stay on board through April of this year.
Chidsey, who has an MBA from Emory University's Goizueta Business School and a law degree from Emory’s School of Law, recently visited Goizueta to deliver the keynote address at the 12th annual Undergraduate Business School Leadership Conference. In his address he explained that when it comes to leadership, he’s more interested in “doing things right” than in making everyone happy. Chidsey also sat down with Knowledge@Emory to talk about his tenure as Burger King’s CEO, the power of social media, and what it’s like to manage a multinational corporation in globally turbulent times.
Knowledge@Emory: The last time we talked was in fall 2007. You'd been Burger King’s CEO for a year. Then the economy tanked. Unlike past downturns, quick-serve restaurants suffered along with other businesses.
Chidsey: In 2009, a year after the recession, people were trading down, so for the first four quarters of the recession we were positive, but the quick-service restaurant industry definitely suffered. We were the last to launch a $1 double cheeseburger, and that impacted our average check. Once we did, it drove more customers through the door and that led to positive traffic—a 3 percent increase.
What this recession showed is that this industry is not recession-proof. But it is recession resistant.
Knowledge@Emory: Managing through tough times isn’t new to you.
Chidsey: When I arrived at Burger King in 2004, 30 to 35 percent of the stores were in bankruptcy. It was a triage situation. When the recession hit, management was used to performing in crisis mode, where you need to be quick and if you screw up, say so and move on. We had a good team and were ready to deal with it.
Knowledge@Emory: You mentioned that Burger King was the last to launch a $1 double cheeseburger. The delay was because the move was unpopular with franchisees, correct?
Chidsey: Managing franchisees is difficult. A lot of the decisions we made, like the $1 double cheeseburger, were extraordinarily unpopular. Leadership is about making decisions that are right, and you live and die by them. It’s not a popularity contest.
A lot of [McDonald’s] franchisees were upset at McDonald’s leadership around that company’s $1 menu. We live in a competitive world. The fact of the matter is that in the last eight quarters, value was king. Grocery stores were squeezed. Even Walmart was getting squeezed. There is a difference between the way the world is and the way we’d like the world to be. As a management team, you have to do what you think is right in the long run.
Knowledge@Emory: You mentioned in your talk that you think tension can produce positive results. Can you expand on this?
Chidsey: Nothing tugs like tension. I think you have to always encourage tension and healthy debate, but not personal attacks. In meetings or interactions, remind people constantly that tension and/or debate is positive and constructive when done well. As an example, there is inevitably tension between certain objectives that franchisees and a franchisor may want. This natural tension helps both parties ultimately reach a better decision.
Knowledge@Emory: Burger King has franchises in 76 different countries. How did the recession affect stores abroad compared to in the U.S.?
Chidsey: Asia bounced back so fast. China, Korea, Singapore, Taiwan—they bounced back almost over night. Brazil, Argentina, and Chile are on fire, growing rapidly. Half the world is phenomenal. It’s going great. The U.S. and Europe are a different story.
Knowledge@Emory: 3G Capital, the company that bought Burger King, is Brazilian. Were you surprised the company bought in when it did?
Chidsey: I found it validating. 3G paid a 50 percent premium over what the stock was trading. I wasn’t surprised. 3G realized the discounted value of the business versus what the market was saying.
Knowledge@Emory: What do you think drove the purchase of Burger King?
Chidsey: It’s a global brand. 3G bought Anheuser Busch in 2008 for the same reason. It takes decades to create a global brand. And like beer, fast food is a less recession-sensitive industry. And there’s huge international growth potential. Think about what the brand could be like in Argentina, Brazil, and Asia.
As Brazil has emerged onto the world stage, there’s been a lot of liquidity in the country. It helps that U.S. interest rates are low. Rates in Brazil are 10 to 12 percent. That makes the whole U.S. market ripe for opportunity.
Knowledge@Emory: A lot of Burger King’s success can be attributed to its use of social media. Social media is still considered risky by some companies, but back when Burger King began using it, it was unchartered territory.
Chidsey: Social media is really critical to keeping your brand relevant and in front of people. The Subservient Chicken viral ad campaign cost us $35,000, and we got 650 million hits to our website. There are clearly a lot of things a company can do. Burger King ran the “Whopper Sacrifice” campaign, where if you deleted 10 of your Facebook friends you got a free Whopper; the Whopper Freakout campaign; movies for iPods . . . if you work in brand equities, you can find unique ways to keep your brand in front of people that most people wouldn’t think of. Microsoft programmers built the King into an Xbox game and sold 2.5 million copies over the holidays. It tied with the third best Xbox game of all time.
One of the keys to our success is how we’ve embraced social media. It’s also a good reason to have younger generations critically involved in the marketing group.
Knowledge@Emory: Has social media changed the way you lead?
Chidsey: Command and control are now more dispersed. In marketing, there are far more people making the pie. You can’t control all that. There are so many opportunities that come at the marketing group. You establish guardrails and have trust in your team.
Knowledge@Emory: You were here to speak to a group of undergraduate business leaders about managing through turbulent times. What are some of your big lessons for leading in times like these?
Chidsey: In terms of decision making, I’m 60 percent. I get most of the facts, make decisions, and move on. If I screw up, if I get the idea wrong, I fix it. You need to fail fast, course correct, and succeed fast. As I mentioned earlier, I think tension is a good thing. I’ll take provocative over pleasant. It’s important to shed skin frequently. A lot of organizations get stale. You have to change gears. If you become good at that, then when a recession comes along you’ll be used to responding quickly and to jumping through hoops.
To quote Winston Churchill, “However beautiful the strategy, you should occasionally look at the results.” I also believe that strategy is sacrifice. That you go for more, not less. Yes, the risk of failure is higher, but eight out of ten times, you’ll end up better off.
Knowledge@Emory: As a leader, you’re a big fan of listening.
Chidsey: I’ve worked for a lot of people who don’t listen at all. It’s amazing how few people listen well. If you’re in the corporate world, you learn so much more from people in the field, on the front lines. The ones who are renting cars, selling Whoppers—those in the field listening to customers.
You also learn from your critics. They have information your friends are withholding from you.
Knowledge@Emory: You told the students, “Long-term plans are measured by short-term performance.” Can you clarify?
Chidsey: You want to make sure you’re going in the right direction. You don’t want to wait five years to find out. Always balance the short term with the long term.
Knowledge@Emory: Any advice for future leaders?
Chidsey: Take chances. Don’t always go for jobs at the American Expresses and the GEs. They’re great companies, but it’s more fun to go to a troubled corporation. You’ll make an impact more quickly. Get experience. Be more willing to fail and take a risk.
Knowledge@Emory: What’s next for you?
Chidsey: I’m going to take six months to a year off and consider my next opportunity. Maybe another corporate job. Maybe private equity, perhaps something more philanthropic. I live in Miami, so I’m going to spend more time on my boat. While I’m out on the boat, I’m happy. My problems disappear.