Burger King parent Restaurant Brands International Inc., which has seen some units close amid bankruptcy proceedings this year, expects to bleed some low-volume restaurants out of the U.S. system, executives said Tuesday.
Executives at the Toronto-based company, which also owns the quick-service Tim Hortons, Popeyes Louisiana Kitchen and Firehouse Subs brands, have seen two large
Burger King franchisees — TOMS King Holdings LLC of Palantine, Ill., and Meridian Restaurants Unlimited LC of South Ogden, Utah of South Ogden, Utah — file for bankruptcy protection this year.
“We have had a few recent insolvencies in the U.S.,” said Josh Kobza, RBI CEO, in a first-quarter analyst call. “Historically we've closed a couple 100 units at Burger King U.S. each year and had a couple of years in the 300-to-400 range, such as 2020. We currently expect gross closures in that 300-to-400 range here for the full year.”
Kobza emphasized that exact numbers of closures were uncertain and “will depend to some extent on the pace of recovery in the business, which we've already begun to see. Most of these units will be low volume with some sales recapture so we believe the impact of systemwide sales will be much lower than the percent reduction in restaurant count.”
Kobza said he did “expect a bit more short-term noise as we transition some portfolios into the hands of top local operators.” The company also continues its two-year $400 million “Reclaim the Flame” investment in the U.S. Burger King system, which was announced in September.
Patrick Doyle, RBI’s chairman emeritus, added that the company would work with franchisees who want to leave the system.
“We're working to find partners who are all-in,” he said. “We want partners who take an ownership and an operator mentality, partners who set the culture, visit their restaurants regularly, get to know their team members and customers and who are hands-on as an operator, whether they have one restaurant or hundreds. I've seen first-hand the benefits of having locally engaged operators, and we have many fantastic franchisees at each of our brands.”
RBI’s consolidated same-store sales increased 10.3% in the quarter and net restaurants grew 4.2% vs. the prior-year period. Same-store sales in the quarter were up 13.8% at Tim Hortons, up 10.8% at Burger King, up 5.6% at Popeyes and up 6.1% at Firehouse Subs.
For the first quarter ended March 31, RBI reported net income of $277 million, or 61 cents a share, up from $270 million, or 59 cents a share, in the same period last year. Revenues rose to $1.59 billion from $1.451 billion in the prior-year quarter.
Kobza said RBI recently altered its franchisee-expansion policy. “In general,” he said, “only A&B operators will be allowed to build or acquire existing restaurants with an emphasis on concentrating portfolios to be fewer than 50 units contiguous geographically and with local ownership.”
International development continues to be a target for all four brands, Kobza said.
“We have plenty of runway to continue growing Burger King international, while Tim Hortons and Popeyes accelerate in key markets like the U.K., India and China,” he said.
“While we're still not where we want to be with Burger King in China, realizing our full potential here is one of our top priorities,” Kobza said. “We did fall behind our peers and growth during the past three years of COVID, primarily due to weakening unit economics and financial constraints, but our focus is on charting a path to resuming the growth that Burger King deserves and the market demands.”
Burger King U.S. posted systemwide sales growth of 8.1% percent, Kobza noted, and the “total net restaurants declined 1.7% year over year as we work to make important progress improving the overall all health of the franchisee base.”
He said the company spent about $7 million of the $150 million “Fuel the Flame” advertising and digital investment. “Our top-line performance this quarter was driven by communication of Burger King's most important equity: the Whopper,” he said, as well as value initiatives like the $5 Your Way Meal.
As of March 31, RBI had 29,956 restaurants, including 18,911 Burger Kings, 5,620 Tim Hortons, 4,178 Popeyes and 1,247 Firehouse Subs.
Contact Ron Ruggless at [email protected]
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