Restaurant Brands International Inc. is layering in new digital offerings for its brands and turning an eye toward breakfast menus as mobility begins to increase in the COVID-19 pandemic, executives said Friday.
The Toronto-based owner of the Tim Hortons and Popeyes Louisiana Kitchen quick-service brands, which reported earnings for the first quarter ended March 31, cited breakfast as a long-term growth opportunity for its Burger King brand in the United States.
“It's already a decent size part of the Burger King business contributing roughly 13% of our overall sales with much of that tied to our delicious Croissan'wich,” said José Cil, RBI CEO, said in a first-quarter earnings call Friday.
“The Burger King U.S. team now has this breakfast opportunity square in their sites and are working closely with a group of talented franchisees to build a long-term plan with quality food and beverage offerings at its core and with the ambition to make Burger King the preferred breakfast destination in our space,” Cil said.
Competitor McDonald’s Corp. has long maintained a strong breakfast daypart and The Wendy’s Co. in March 2020 introduced its morning daypart menu systemwide.
But Cil said Burger King introduced a French toast sandwich in the last week of the quarter that shows promise.
“We also have plans to make our iconic Croissan'wich an even more powerful anchor of the breakfast business with product quality upgrades that we'll introduce later this year,” Cil said.
Cil said RBI also intended to increase its focus on Burger King’s digital offerings, including a loyalty program that went into test earlier this year.
“You'll see us increase our digital focus at Burger King in the coming quarters with the benefit of everything we're learning from the Tim Hortons experience in Canada,” he said.
The Tim Hortons brand recently introduced a new dark roast coffee and fresh-cracked-egg breakfast items, but the predominantly Canadian brand was still impacted by COVID-19 pandemic restrictions.
“There is no doubt that the biggest factor affecting our performance at Tim's is the continued lockdown of a large majority of the country significantly affecting mobility,” Cil said.
“Americans are experiencing a very different path out of COVID than Canadians today,” he said. “Canada continues to face strict lockdowns in much of the country with mobility severely restricted. As we sit here today Ontario, which is where nearly 40% of Canadians live and where nearly 50% of our restaurants exist, is under a mandatory stay-at-home order until at least May 20, and there is a real possibility of that being extended. Offices are closed. Retail is restricted to curbside pickup and 25% capacity limitations at essential locations.”
Cil said transit mobility, which provides a strong consumer base for Tim Hortons, is down 60% from pre-COVID levels.
“We're clearly seeing that where Canadians are permitted to have more normal routines, they're coming back to Tim Hortons,” he said. “The comparable sales performance in restaurants in rural, and suburban areas was flat to slightly positive year-over-year during the first quarter. The mobility restrictions continue to affect our morning day parts the most, with the single largest drag in our sales coming from our regular routine morning coffee guest.”
Tim Hortons does have a network of 2,700 drive-thru locations, which have been a strategic advantage during the pandemic, he said. In the first quarter, drive-thru sales were up 23% year-over-year, Cil noted.
Cil said the development of Tim Hortons in China, where the first restaurant opened in in the first quarter of 2019 and has grown to about 200 locations now, is exciting for the company.
“Interestingly enough,” he explained, “the Chinese consumer connects well with the Canadian brand, not Tim's necessarily, but take Canada as a broader concept.
“Obviously things like hockey players aren't going to be highly relevant in China,” Cil noted, “but there is a lot more to Canada than hockey players, and so, and to the brand as well, so we've been able to build on those.”
Research indicates the Tim Hortons digital experience resonates with Chinese customers, he said.
Joshua Kobza, RBI’s chief operating officer, said all three brands are focused on improving the digital experience.
“We want to be part of the smartphone in their hand and be one of apps that they return to frequently,” Kobza said. “This is an important point, we spent decades to develop and protect our iconic brands. We want to design every step of the guest journey with our brand, and we can best do that on our digital platforms, in our own applications whether on desktop, mobile, kiosks, digital menu boards or any device where we interact with our guest.”
Cil said the Popeyes brand, which has had success with the introduction of a new chicken sandwich a year and a half ago, is continuing its innovations. The brand added a Cajun Flounder Sandwich in the first quarter.
“With guest adding on the sandwich to their orders,” he said, “and both new and existing guest creating an additional visit to Popeyes for this lunch-driven sandwich innovation. We believe there is plenty of room to innovate in the broader chicken category, which we're excited to get into later this year.”
For the first quarter ended March 31, RBI’s net income rose to $271 million, or 58 cents a share, from $224 million, or 48 cents a share, in the same period last year. Revenues rose 2.8% to $1.260 billion from $1.225 billion in the prior-year-quarter.
Same-store sales in the quarter were up 0.7% at Burger King (up 6.6% in the U.S.), up 1.5% at Popeyes (up 0.9% in the U.S.) and down 2.3% at Tim Hortons.
As of March 31, RBI had 27,173 restaurants, including 18,691 Burger Kings, 4,987 Tim Hortons and 3,495 Popeyes, in more than 100 countries.
Contact Ron Ruggless at [email protected]
Follow him on Twitter: @RonRuggless
