Burger King CEO and chairman resigning ahead of IPO

Friday, April 7th 2006, 9:59 am

By: News On 6

MIAMI (AP) _ Burger King Corp. said Friday that its chairman and chief executive is resigning, continuing the company's history of short-tenure CEOs and raising questions about the anticipated initial public offering for the No. 2 hamburger restaurant chain.

Greg Brenneman said he is returning to the private equity firm TurnWorks Inc. to pursue business turnarounds. He joined the chain in August 2004 to lead a turnaround after a period of slumping sales. The company says it's now had eight consecutive quarters of sales growth at stores open at least a year and profits are growing.

Burger King said that John Chidsey, 43, the company's president and chief financial officer, has been named chief executive, effective immediately. He is the ninth CEO in the past 11 years. The Miami-based company's board also announced that Brian Swette, an independent director, would serve as non-executive chairman.

The management shake-up comes as the chain's parent, Burger King Holdings Inc., is preparing for the IPO, announced in February. The company hopes to raise up to $400 million, but has released few other details, such as the price per share, what percentage of the company would be offered or when the sale would happen.

Chidsey is ``very capable executive'' with significant experience, but this move still raises questions, restaurant industry analyst Allan Hickok said.

``It is not good timing. That is not the type of development in normal cases that would inflate investors' enthusiasms for this transaction. Because it just begs the question of 'Why?''' he said.

``As the company enters this important next phase, the board and I discussed the commitment necessary for any CEO in a public environment and my career and family goals,'' Brenneman said in a statement. ``As a result, together we decided that the best time to transition leadership was prior to Burger King's initial public offering.''

In a statement, the Burger King's board said: ``We are extremely pleased with the progress Burger King has made under Greg's leadership. He told us when he came that he wanted to transition the leadership of the company to John Chidsey at some point.''

But in the Feb. 16 IPO filing, the company listed as one possible risk factor to potential investors the loss of Brenneman, Chidsey, Chief Marketing Officer Russ Klein and other key personnel.

``The success of our business to date has been, and our continuing success will be, dependent to a large degree on the continued services of our executive officers. ... If we lost the services of any of these key personnel and fail to manage a smooth transition to new personnel, our business would suffer,'' the filing said.

Burger King spokeswoman Edna Johnson declined further comment. The chain is second only to McDonald's Corp. among hamburger restaurant chains.

The head of the chain's largest franchisee said the move was a surprise to him, but he thought the brand's progress would continue because it wasn't all due to Brenneman.

``Sure it's a loss, but losses are funny things, when thing are going well, any piece that drops out of the equation seems like a loss. But things often work out,'' said Alan Vituli, CEO of Carrols Corp., which has about 350 restaurants. About 90 percent of Burger King restaurants are owned by franchisees.

Owen Blicksilver, a spokesman for Burger King Holdings' owners, declined to comment. Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners bought the chain in 2002. The three private equity firms own 95 percent of Burger King Holdings and Brenneman owns just over 1 percent. Brenneman earned $900,000 in salary and $2.25 million in bonuses in the fiscal year ended June 30.

Chidsey joined Burger King in March 2004 as North American president. Before that, Chidsey was chairman and CEO for two divisions at Cendant Corp.: one that includes Avis Rent A Car and Budget Rent A Car Systems, and one that includes tax preparer Jackson Hewitt.

Swette has served on Burger King's board since April 2003. From 1998 to 2002, Swette was chief operating officer of online auction site eBay Inc.

Burger King reported net income of $49 million on revenues of $1.02 billion in the last six months of 2005, compared to $45 million on revenues of $969 million in the same period a year earlier. Before Brenneman, the company had posted losses for several years.