Ken Hoffman digs into the juiciest questions after Whataburger's shocking sale
The headline induced heart palpations in drive-thru burger fans across Texas and neighboring states … “Texas-based Whataburger sells to new owner amid expansion plans.” While that sounds unsettling, the real concern is:
What does this mean to Whataburger’s everyday (sometimes twice-a-day) customer in Texas?
In the immediate future — like tomorrow, next week, next year — probably very little. But in the long run, all bets are off. Most likely, there will be significant changes at your local Whataburger over the next three to five years.
Whataburger is now owned by a merchant bank (Chicago’s BDT Capital Partners), which may not know a Chop House Cheddar Burger from a Whatacatch Sandwich — and doesn’t understand that when you’re stuck in morning traffic on I-45, nothing beats a Honey Butter Chicken Biscuit.
That investment company bought Whataburger for only one reason: to make money. Shocking, that’s what investment companies do. They are not fast-food philanthropists. They’re financial killers who want to see a return on their investment.
So don’t be surprised if they take Whataburger national. That’s my big takeaway. It may mean Whataburger may have less Texas on its menu in the future.
The new owners are buying a very successful or stagnant company, depending on how you crunch the numbers. According to QSR Magazine, the bible of the fast-food industry, Whataburger is only the No. 22 fast food chain in the U.S. — with total sales of $2.2 billion for its 821 restaurants across 10 states.
But, more important, Whataburger has the second highest sales per store, $2.7 million. That beats the average McDonald’s, Taco Bell, Burger King, Wendy’s, etc. — the whole bunch of national biggies. Only Chick-fil-A has higher sales per store, a printing press $4 million.
What a deal?
If Whataburger is so successful on a per-store basis, why did the owners sell? Two factors, one probably, one definitely. In Godfather terms, the investment company probably made them an offer they couldn’t refuse. While Whataburger has phenomenal sales per unit, it was growing at a very slow rate — only 15 new restaurants in 2017. That same year, Chick-fil-A opened 140 new restaurants. Taco Bell opened 168 new units. Domino’s expanded by 216 locations. Popeyes popped the lid on 147 places.
Maybe the former owners wanted out because fast food has become an insanely competitive, complicated, and difficult industry. You may have noticed that many fast food restaurants have a “Help Wanted” sign in their window. The U.S. unemployment rate is at a 50-year low. It’s difficult to find good workers who can do the job, who are the backbone of the fast-food industry.
Finding quality products is a challenge, too. A bad winter in the U.S. can have a chain scrambling to buy tomatoes in Mexico and South America. Right now, there is an African Swine Flu outbreak in China that has wiped out a large percentage of China’s pork exports.
That will put pressure on U.S. burger chains who seem determined to slap bacon on every sandwich they sell. Beef prices in the U.S. are expected to hit their highest level in several years. Bottom line, customers may see higher burger prices and more chicken options at the drive-thru window in 2020.
And here's a Texas-sized question: Do the new owners understand how important 24-hour drive-thru service is?