Burger King Corporation, 7360 Nortb Kendall Drive. Miami. Florida 33152. ABSTRACT. This paper describes how a major fast food restaurant system uses simu-.
INTERFACES Vol. I I . No. 6. December 1981
Copyright © 1981, The Institute of Management Sciences 0O92-2I02/8I/1106/0035$01.25
SIMULATION MODELING IMPROVES OPERATIONS, PLANNING, AND PRODUCTIVITY OF FAST FOOD RESTAURANTS William Swart and Luca Donno Burger King Corporation, 7360 Nortb Kendall Drive. Miami. Florida 33152
ABSTRACT. This paper describes how a major fast food restaurant system uses simulation to dramatically improve efficiency, productivity, and sales in its more than 3.000 restaurants worldwide. With a capacity to project and solve business problems. Burger King Corporation has been able to upgrade and streamline restaurant operationj., contributing significantly to the continued growth of what is now the second largest restaurant system in the world. Among the substantial changes In the last five years, the introduction of drive-thru service and new menu items has transformed a once simple operation into a sophisticated production process. Consequently, management turned increasingly to Operations Research for answers to operational questions ranging from the most efficient restaurant de.sign to the optimum number of employees needed to serve customers as sales vary. The impact of simulation mixlels has produced millions of dollars in savings, or profits, in a number of operational, design, and procurement areas.
James McLamore opened the first Burger King restaurant in Miami in 1954 with a simple concept; be served a few variations ofthe basic hamburger, and did not need a traditional kitchen. Because small businessmen could operate such a restaurant even without previous food experience, McLamore began to franchise the units. Growth was deliberate and controlled. In less than 15 years McLamore went from running a restaurant grossing under SlOO a day to heading a company witb $66 million in annual sales. The chain grew to 274 units by 1967, wben it was acquired by The Pillsbury Company. Today the restaurant chain has systems sales worldwide of more than $2 billion. Average unit sales went from $254,000 in 1967 to $700,000 plus in 1980. Annual system sales have increased an average of 36% since Burger King's acquisition by Pillsbury. There are now 3.000 Burger King restaurants across the United States and in many other nations, and new units open at the rate of 300 annually. Eighty percent of the units are owned and operated by independent businessmen. They must adhere to a strict set of company policies but are otherwise free to run their business as they see fit. Tbe Corporation develops new products, systems, and procedures, but must in turn persuade franchisees to adopt them on a cost-to-benefit basis. Any change or new procedure developed for the system must demonstrate its validity to franchisees on the basis of increased sales and profits, and provide more than an adequate return on investment.
SIMULATION. EFFICIENCY; FOOD INDUSTRY
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Burger King Corporation now employs more than 1.000 at its Miami headquarters, and in excess of 130,000 are employed in company and franchised restaurants around the world. The company's growth has been attained not just by superior management and infusion of expansion capital but also, to a large degree, through a series of ongoing modifications to the original concept. In the company's early stages, management focus was on expansion and development ofthe Burger King System. The original restaurant concept consisting ofa single sandwich preparation board with a single, cafeteria-type line to serve customers was maintained. By definition this service system limited sales because of a limited delivery capacity. The first major restaurant concept cbange was to go to a multichannel service, or "hospitality system." This system allowed for greatly increased sales delivery. To match this, additional production capacity was required. Tbis was obtained by expanding the building backwards, and placing the sandwich prep board perpendicular to the counter, allowing more sandwich prep employees to work simultaneously. These cbanges allowed reduced service time which created higher sales capacity lo better accommodate peak hour business. An example of one of the restaurant configurations is shown in Figure 1. Numbers indicate the order in which employees are assigned to handle customer load increases. FIGURE I. POSITIONING CHARTS — " T " LAYOUT.
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As the take-out business increased substantially. Burger King was the first fast food hamburger system to introduce the drive-thru service lane. The impact on sales and operations was immediate and dramatic. Today, virtually 50% of the food sold in Burger King restaurants is through drive-thru serviee lanes. The drive-thru concept transformed the original single service system into two separate systems, and required rearrangement of equipment and product so the counter erew and drive-thru service areas both had access to them. Other variables impacted on the continuing growth of the Burger King system. In 1973, to gain a marketing edge, the "Have It Your Way" concept was introduced.* The success of this concept was dramatic, but it did change the kitchen operations from mass production of similar items to a job-shop environment where product was prepared to individual customer specifications. The combined effect of increased average per store sales and the added complexity of kitchen operation required that, in many cases, additional production capacity be added to a very confined kitchen. In 1978 the Burger King system decided to significantly expand its product line through the introduction of Specialty Sandwiches, which now account for 20% of sales. The production of these sandwiches required different equipment and procedures which were implemented through an additional sandwich prep line. As result of this diversification, sales again rose but the all important speed-ofservice time was threatened, especially in peak periods, and original kitchen designs were no longer adequate. Burger King Corporation projections call for average unit sales to reach $1 million by 1983, with restaurant operating profit to rise another 4%. It was clear, considering the increasing complexity ofthe production system and sophistication of the customer, that these goals could only be realized if the efficiency and productivity ofthe food delivery system was substantially increased for every restaurant in the Burger King System. THE ROLE OF OPERATIONS RESEARCH With a dramatically changing fast food hamburger restaurant business, it became clear that corporate productivity had to be a top priority. For this reason tbe Industrial Engineering and Operations Reasearch functions were synergistlcally incorporated into one department at Burger King. That department is hereafter referred to simply as "Operations Research": its primary mission is to enhance productivity throughout the system. The department established itself in a very short period of time through a series of high impact studies, the first of which was the development of a computer model for the purchase of meat. In late 1977 and early 1978. meat prices began to fluctuate widely. Because beef is the primary component of the food Burger King serves, cost pressure on margins was severe. Operations Research therefore developed a computer model to determine what kind of meat to buy from which supplier so as to have the correct hamburger formluation at minimum cost. Tbe result was a savings of almost %(! per pound. In a system that buys over three million pounds of hamburger meat a week, tbat Jiitf represents savings in excess of $22,000 each week.
*Burficr King. Whopper. Specialty Sandwiches, and Have ti Your Way are copyrighted tradetnarksof Burger King Coporation (1981).
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The computer model was subsequently expanded not only to determine leastcost formulations at eaeh individual packing plant, but also the least-cost distribution throughout the system. The new model optimized shipping and distribution costs based on meat availability nationwide and on anticipated demand for processed meat within the entire .system. This expanded computer model saves Burger King Corporation at least $2 million annually. But the impact of productivity improvement effort was most clearly demonstrated on the analysis of the drive-thru system. At first glance, the drive-thru concept is simple. The driver orders at the outside menu board. He then joins a waiting line {or stack) until it is his turn to pick up and pay for his order at the pick-up window. Staffing the drive-thru was originally determined by the restaurant manager. In most units, the drive-thru team usually consisted of one or two cashiers who would take the order, run to the sandwich chutes and drinks stations, assemble the order, bag it. and hand it to the customer. Burger King established a standard transaction time of 30 seconds for the drivethru window, but most units had service times in excess ot that. During peak periods it simply was no longer possible for drivers wishing to use the drive-thru to even join the end of the car line. Sales were elearly being lost due to this problem. A system initially devised to provide customers convenience had become an inconvenience. Analysis at a number of units showed drive-thru transaction times were averaging 45 seconds. With a 45-second transaction time, the restaurant could handle a maximum of 80 cars an hour. With an average check of $2.44 per order, drive-thru sales were limited to a maximum of $195.00 per hour. If the transaction time could be shortened to 30 seconds, cars served per hour could increase by 50%, and maximum sales would rise by almost $100 to $292 an hour. That represents an annual capacity benefit (or sales increase) of over $35,000 per restaurant. Working with franchisees. Operations Research devised a plan to improve speed of service at the drive-thru. The heart of the new system is the separation of drive-thru work into a series of distinct tasks. One employee does nothing but take orders, The order taker gives the order to a runner/bagger who assembles the order and places it on an assembly shelf. The third member of the drive-thru team, the cashier, simply makes change and hands the order to a customer. The system allows for additional staffing when demand exceeds the ability of the three-person crew to maintain speed of service standards. The Operations Research Department also recognized that customers waited an average of 11 seconds at the order station before being acknowledged. The rubber bell hose was therefore moved ahead of the order station so that the order taker was alerted to the customer's arrival prior to the car reaching the order station. Today, all Burger King restaurants with a drive-thru have adopted the efficiency package. These restaurants have increased their annual sales capacity by over $35,000. If each restaurant in the system gained only 50% of this, or $18,000 per unit in annual sales increases, the Burger King system would enjoy additional sales of $52 million annually. Although most of the studies mentioned did involve the use of either simulation, optimization, or statistical models, these models were developed to solve specific problems. However, it soon became apparent that the increasing demands placed on the OR department by management would require the development of a comprehensive general purpose restaurant model which could be used to address a wide variety of issues.
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Top management's demands on the department increased because ofthe demonstrated success of the approach, and the recognition that the current Burger King System is vastly more complex than it was when they were actively involved in day-to-day restaurant operations. The addition of drive-thru's. the increase in menu items, and the changes in building and equipment all contributed to making management's experience base, obtained in Ihe original system, not suitable for decision making in today's environment. The only alternative to making decisions from an empirical base is through an analytical approach such as that provided by Operations Research. While management was finding it increasingly difficult to set a firm strategy for the future, the key cost variables that impact on the ability of the restaurant to run profitably began to rise. These cost escalations were most severe in food and labor, which are the single largest cost components in operating a Burger King restaurant, accounting for nearly 40% of every sales dollar. Faced with this situation. Burger King management in 1979 committed itself to develop a Productivity Improvement Program for both company and franchised restaurants. This program would clearly have great impact on the Burger King system. The success of the program would, to a large degree, determine the future success of the company itself. A continuing improvement in productivity would be required for each operator to maintain a satisfactory return on investment. In addition, restaurant productivity improvements are needed to maintain return on investment levels which, in turn, can be used to demonstrate to potential franchisees that a franchise is a sound investment. New francbised restaurants account for 15% of the system's growth annually. Management's decision to entrust the development of this program to Operations Research provided the motivation and rationale to incorporate all knowledge gained previously and integrate it through the development of a comprehensive general purpose restaurant model. MODEL DEVELOPMENT In order to develop a general purpose restaurant model, it was decided to view the restaurant as an operating system composed of three inter-related subsystems: The Customer System. The Production System, and The Delivery System. In a typical store, a customer order is generated in the customer system (in-store and/or drive-thru). This order is transmitted to the kitchen via a CRT device. The four production areas in the kitchen (Drinks, Fryers, Main Sandwich Preparation Line, and Specialty Sandwich Preparation Line) respond if the order contains a product made in that area. The production action can be to replenish inventory of standard product, or to prepare a custom sandwich (special order) for a waiting customer. Simultaneously, in-process inventories of fries, preassembled hamburgers, drinks, fish, chicken, lettuce, mayonnaise, etc., have to be checked to determine whether a replenishment action must take place. Concurrent with the production activity, the delivery system is active in processing the customer by making change and assembling the order from inventories, whenever possible. The amount of time a customer waits, referred to as speed of service, is held to a minimum by using inventories whenever possible and by maximizing the lead time the kitchen has to produce special orders.
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Although the above description has many analogies with typical tnanufacturing facilities, there are also some distinguishing characteristics: (1) the Burger King system is composed of 3000 relatively small manufacturing plants (stores) which together form a relatively large manufacturing organization; (2) sales volumes can vary hy as much as 1000% within a 30-minute interval; (3) shelf life of most products is 10 minutes. This prevents the accumulation of inventory during slow periods to handle peak period demands and also creates the need for an extremely flexible production and manning strategy; (4) production, inventory, distribution, and a substantial percentage of consumption takes place under one roof. Jim McLamore's original concept in founding Burger King was to serve quality food — quickly and courteously. Speed of service remains the keystone of the fast food hamburger restaurant. As shown in Figure 2, the peak service hour is noon luncheon business. For a given facility at a given location, the luncheon business usually can be increased in proportion to the increase in speed of service. Typically, a hamburger restaurant gains four times as much business a day as it gains for the lunch hour. So. if a Burger King restaurant is to raise sales but cannot, due to competitive pressures, increase prices substantially, it must increase the number of consumers served. And. to do that, the restaurant must increase its speed of service. FIGURE 2, PERCENTAGE OF SALES BY HOUR OF DAY.
The equation is simple. The faster the service, the more people that can be served; therefore, the higher the restaurant's potential sales volume. For this reason the impact of suggested changes on speed of service is the principal criterion for operational decision making not only at Burger King but at most fast food companies. The initial modeling efforts yielded a comprehensive linear programming model. Although valuable, it did not permit the analysis ofthe dynamic aspects of the operation, nor the consideration of the multiple inter-related queueing situations that arise in the customer, delivery, and production areas. Consequently, a simulation approach was selected. Any general purpose restaurant model for the Burger King System must have the capability of representing any restaurant type currently in the system as well as any potential design for a new restaurant. In addition to the different configurations, the manufacturing system is subject to change during the course of any given day. Some production areas are closed down as demand lags and others that remain in operation are manned differently than at other sales hours.
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