Burger King sinks teeth into juicy Asia

HONG KONG (Reuters) - Burger King (BKC.N), now making up for years of soggy growth and a decaying global business, is plotting an expansion into Asia in the coming half-decade to narrow the gap with arch-foe McDonald's (MCD.N).

Chief Executive John Chidsey told Reuters on Thursday that the world's top hamburger chain after McDonald's is confident of beating its target of 15 percent net profit growth in fiscal 2008, riding a resurgent brand and a nascent international drive.

The Miami-based firm hopes to open as many as 300 outlets across China in five years as part of a regional expansion that would help the company rake in half its revenue from non-U.S. markets in four to five years, he said in an interview.

Indeed, Burger King is finally returning to markets such as Japan, from which it withdrew years ago, pummeled by heated competition from the likes of Yum Brands's (YUM.N) KFC.

"Asia, certainly in the next two to three years, will become the most important and fastest-growing piece of our business," Chidsey said in Hong Kong.

"In five years, China will be a big part of Asia, but so will Japan, so will Hong Kong and so will Indonesia," he said after crossing Hong Kong's Victoria Harbour in a traditional junk flying the fast-food chain's logo.

Burger King Holdings Inc operated 11,290 outlets worldwide as of September 30 but with 200 restaurants in Asia it remains a bit player in a fast-food arena dominated by McDonald's and KFC.

Non-U.S. markets contribute just a third of global revenue -- US$602 million in the first quarter of 2007 -- for the company that invented the Whopper hamburger but is a perennial runner-up to McDonald's.

Now it intends to accelerate its expansion aggressively, especially into China, where its 10 outlets are vastly outnumbered by 800 for McDonald's.

Burger King will rely on franchises to help it take its Whopper beyond its Shanghai base to Beijing, Tianjin, Guangzhou and other top-tier cities across the world's fourth largest economy, and has an agreement with a franchisee for the southeastern region of Fujian.

"We should be able to grow there (in China) for five, 10 years. I want the company's restaurant presence to get bigger and bigger and bigger," Chidsey said.

RESURGENT BRAND

Lehman Brothers reckons Burger King will enjoy a revitalization of its brand, driven by a renewed focus on international growth after years of "lackluster performance due to brand mismanagement".

Thus, its shares have risen more than 50 percent since they debuted in May 2006, and more than a third in 2007.

Investors now cheer Burger King and its consistent growth since listing in 2006, when the firm revamped its menu, designed smaller outlets and adjusted its restaurant format to cut costs.

Analysts polled by Reuters Estimates expect its net profit to grow 18 percent to $177 million in the year to June.

"We will certainly do better than that. We are very comfortable with the guidance we have given for the year," Chidsey said, referring to a target of 15 percent profit growth.

Last month, Burger King reported a 23 percent rise in quarterly profit, helped by new menu items and promotions featuring the Simpsons and Transformers.

Burger King has said it was on track to open about 300 net restaurants globally this fiscal year, 80 percent of which would be outside the United States.

"Asia will be the fastest," Chidsey said. "Not only the fastest growing part of Burger King, but where we will be building most restaurants."

(Writing by Edwin Chan; Editing by Tom Miles, Paul Bolding)